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navigatingYour divorceA road map to prepare for the divorce process. All of your questi ons answered in this basic guide on the legal, fi nancial and emoti onal do’s and don’ts when beginning your divorce.
Karen McMahon, Divorce Coach and contributi ng authors
©Copyright 2011
About this Book
Welcome to “Navigating Your Divorce”. This guide is designed to equip
you with information that will enable you to enter into the divorce
process with an essential road map of what paths to consider and where
to turn. You will have many decisions to make before you begin: choos-
ing the right attorney, deciding on what an acceptable financial settle-
ment might look like, and helping yourself and your family are just a
few. Along the way there is information that you need to gather and
questions you will want to have answered. As well, you are bound to
feel a range of emotions from anger and resentment to fear, sadness
and frustration. It is our hope that this guide provides you with some of
the questions, information and strategies that will help you along your
journey.
Table of Contents
Chapter 1Navigating the Emotional Aspects...................................................3 Five Essential Emotional Guidelines Educate Yourself Create Your Support Network Witness Your Thoughts Stay in the Moment Make a Daily Gratitude List
Chapter 2 Navigating the Financial Considerations.........................................17 Common Financial Mistakes Assess Your Financial Situation 50/50 is Not Always Fair Maintenance and Child Support Evaluate Retirement Plans Properly Understand the Short and Long Range Effect of Your Decisions Develop a Financial Plan for Your New Life
Chapter 3Navigating the Legal Decisions.......................................................27 Dispute Resolution Choices Jurisdiction Contested or Uncontested Division of Assets and Debts Under NY Law Child Support Spousal Support – Temporary Maintenance
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Karen McMahon is a Certified Divorce Coach and the Founder of Journey Beyond Divorce, a team of divorce coaches dedicated to help you through this process.
Karen’s passion is to offer men and women support, encouragement, guidance and clarification of their desires. Having thrived after a tumultuous marriage and painful divorce, Karen understands first-hand the pain and the pitfalls one might experience; the gifts and the gratitude one can receive with the right outlook.
Karen’s deepest desire is to help you to navigate the legal process with grace and patience; to see you emerge with strength and wisdom. You can not only survive but thrive as you progress from your divorce into your new life.
Services offered through Journey Beyond Divorce include: • Healthy ideas for staying strong and positive • Tips on riding the emotional waves of your divorce • A complimentary session to see if coaching is for you • Weekly support groups, conducted in person and virtually • Private Phone or In Person Coaching Sessions
How to connect with Karen:
Join me on Facebook
Connect with Karen McMahon on Linked In
Connect on [email protected]
JourneyBeyondDivorce.com
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516.992.0828karen@journeybeyonddivorce.comwww.JourneyBeyondDivorce.com
Feel encouraged. Become empowered. dare to dream.
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Chapter 1
Navigati ng the Emoti onalAspects
Navigating the Emotional Aspects
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For those of you who are considering or going through a divorce, it will be no surprise that divorce is the second most devastat-ing emotional experience—second only to the death of a loved one. If you are considering separation or divorce, are in the midst of the divorce process, or even have completed your divorce and still feeling shell shocked, you understand the severe emotional impact it can have on your life. This section of “Navigating Your Divorce” is designed to touch on some of the natural pitfalls, red flag the dangerous behaviors, and guide you toward healthy attitudes that can help to calm the inevi-tably choppy waters of this stormy season of divorce.
No matter how long your marital problems have been developing or if you were completely caught by surprise, divorce brings with it strong feelings of fear, anger, guilt, shame, sadness and anxiety. Your entire world is about to change and for many it means a change in the finan-cial, social, emotional and perhaps professional aspects of your life. The feeling that the proverbial rug is being pulled out from beneath you is a natural one. In divorce pain is inevitable, but suffering is optional. How you choose to deal with your emotions will determine whether your pain is temporary and short lived or your suffering is intense and exten-sive. This chapter offers you insights and reveals choices available to you that will determine the extent of your pain and/or suffering.
You also need support at a time like this and so you will naturally share your situation with those who love you most: your family, friends and colleagues. Of course everyone will have an opinion on what is best; what you should and shouldn’t do and say. This support can be over-whelming and while well intentioned, it often leads to more confusion
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as you receive conflicting advice and are having difficulty seeing through the fog of your own feelings to figure it all out. The truth is that only you have lived with your spouse and know your true heart. While it is help-ful to use others as a sounding board, it is equally important to surround yourself with healthy supportive people that enable you to come to your own conclusions and move at a pace and in a direction that honors your intuition. You need emotionally healthy, patient loved ones who will give you the time and space to figure out what is best for you.
Five Essential Emotional Guidelines
Educate YourselfGetting divorced is like being drop shipped into a foreign country. Few people would just jump on a plane without learning the lay of the land, the language spoken and with out having created an itinerary. The first thing you want to do is gather information on what you need to know to begin to move forward through this process.
The first section of this book is about handling your emotional reactions to all that you are going through. Perhaps you have experienced many emotional traumas in your lifetime; you have been through therapy, understand your emotional blueprint and your internal struggles or are adept at reading self help books and working on your own personal growth. For others, this is the first time you are feeling the rug pulled out from below you, your are feeling lost and in need of a beacon to show you the way.
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This chapter is about shifting your perspective, looking at your situa-tion through new eyes, and proceeding through this stormy season with strategies and tools to help you learn and grow in ways that will greatly benefit you and enhance your life as you move forward.
The second section of this book is about your finances. Finances always create fear for people. There are many fallacies about what is and is not likely to happen to you financially. Consult with a financial professional specializing in divorce. Find out what information and documents you need to gather so that you have a clear picture of your financial situa-tion. Simply gathering your financial information is a great place to start and will bring a sense of comfort in having completed a critical first step. Finally, there are many legal options you can choose. Speaking to an attorney and finding out about the different options such as mediation, collaborative law, how to hire an attorney and protect your children and their future is a good start. The more questions you ask the less fright-ening the entire process will become. Much like a foreign country, you will begin to hear terms and see a road map for moving forward within the legal system.
Create Your Support Network
Your Professional Support TeamFor the business aspect of your divorce, you will want to have trusted advisors. Make sure you feel comfortable with your attorney. The divorce process is stressful enough without doubting that your lawyer has your best interests at heart or feeling that you are not being heard.
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You need to know that your attorney is responsive to your needs – and you need to be realistic about the role an attorney plays in your divorce. He or she is not a therapist and should not be your go-to person for your emotional struggles. The financial cost of dumping your emotional burdens on your lawyer will be steep. Make sure to focus on the legali-ties of your divorce when spending your money and save your need for emotional support for someone more skilled (and significantly less expensive) in that area. You might also want an accountant or analyst specializing in divorce who can help you figure out the financial landscape: what your financial picture currently looks like; what information you need to gather; what steps you need to take to protect yourself and how you can begin to create a plan that protects you and your children in both the short term and long term.
Many people also opt to work with a divorce coach or therapist to help with their emotional strife. What is the difference? Therapy helps you understand how your broken marriage is connected to your past, what emotional baggage you brought to the marriage and how to begin heal-ing the pain. Many find this a critical part of understanding and moving through their grief.
Coaching also touches on your past and your pain, however the focus is more strategic, helping you gain clarity about your current situation, overcoming fears and obstacles that are keeping you stuck, and devel-oping a plan for moving through the myriad of decisions involved in the divorce process. Ultimately a divorce coach helps you to strategically
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navigate your way through the roadblocks of divorce and to begin to discover your passions and dreams enabling you to create a new and fulfilling life.
Your Personal Support TeamOn a more personal level, you need to create a healthy support team of friends and family. Not everyone who loves you should necessarily make it onto your team. It is important that you have emotionally healthy people who are not bringing their emotional load onto yourboat (and inadvertently rocking it all the more). Your family members love you and mean well but each has their own thoughts and opinions about what you are doing or going through. If they are positive and supportive, then you are in luck, sign them onto your team. But if they increase your angst, you need to turn elsewhere for support.Here are some questions to ask yourself:
• Who keeps the focus on you and your needs and who bashes the soon-to-be ex? Which is more helpful in the long run? • Who focuses on the positive steps that you can take, the solution to your current circumstance and who dwells on the problem and creates negative energy? If the conversation is more about your spouse, about blaming or criticizing him or her, ask yourself how they are serving you and helping you meet your needs. They might not be the best person to go to for support. No matter what is going on, there are those who will help you focus on YOU. • How can you do things differently to take care of yourself?
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• What is your part in the problem and how can you work to change yourself…not for your spouse, but for your own growth?• How can you shift your thinking to feel better, be better, get stronger, move on?
If you don’t have any friends or family who can do this for you, find a Divorce Coach and a Divorce Support Group. There are divorce support groups in your area. You can look on meetup.com or go to your local houses of worship. You can also join our Cyber Support Group and at-tend from the comfort of your home. If your spouse has issues with drug use, alcoholism or abuse, there are 12-step programs such as Al-anon and Narconon for the loved ones of such people where you are bound to find healthy support and encouragement.
Take advantage of these resources; they will prove to be invaluable to you in the long run. There will be plenty of things that can pull the en-ergy from you. Make sure that your support team members are energy-bolstering and not black holes that leave you feeling worse after you speak to them. Again, they may love you and want what is best for you, but that doesn’t mean that their help is the help that you need.
Witness Your ThoughtsThere are a lot of feelings surging through you during this turbulent time. So how do you keep it all together? How do you get through your day without being overcome by the feelings of anger and resentment or shame and guilt? The key is to mind your thoughts. What you think
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affects how you feel and how you feel affects how you act. Let me state that again, it is the key to your peace. Your thoughts affect your feel-ings and your feelings affect your actions. Change your thoughts and you will change how you feel; feel better and you will act in a way that benefits you.Many of us think that we cannot control our feelings; “I just feel that way!” It is true that whatever you feel is real and feelings are not right or wrong, they just are. However, we do have control over what we feel. That control comes in the form of being aware of our thoughts and changing them when they do not serve us. For instance, it can be a decent sunny day and you are feeling pretty good. Then you begin to think about that argument with your spouse that you had this morn-ing. You begin to play it over and over in your head, arguing your point and getting agitated all over again. Before you know it, your mood has completely plummeted and you are in full emotional angst. Outwardly nothing has changed. The only change is what you chose to focus your attention on.
By choosing to focus on an upsetting event, you are choosing to be up-set. Similarly you can consciously choose to focus on a positive thought, and find yourself feeling hopeful or peaceful. Let’s say this upcoming weekend will be spent with your best friend in the country. What will you do? How will it help you unwind? Just the thought of the much needed down-time brings a sense of calm and release.
Witness your mood swings and what you are focusing your attention on when your mood drops. With practice you can shift your attention to
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thoughts that better serve you. By doing so, you can avoid much of the suffering brought on by stinking thinking. This is a process.
At first you might not be aware of your thoughts until you are in full-blown angst and only then realize that you caused your own upset.
Then with practice you will realize in the midst of your thoughts what you are focusing your attention on, still having already gotten upset. Finally, as time goes on you will catch yourself just as you begin to think thoughts that do not serve you, and you will consciously choose not to go there thus saving yourself from a bad mood. The exciting news is that as you perfect this awareness, you will find yourself experiencing more peace and joy and feeling more in control of your emotions. This is a great tool to teach your children as well. It is the gift of peace and calm.
Stay in the MomentIt is important to be gentle with yourself and to realize that you are under unusual emotional stress. This is no time to beat yourself up (I’m sure there is someone else taking care of that for you). Nonetheless, there are things that you can do to keep yourself in a stronger state of mind. Keeping your mind from wandering into the past or future is a practice that will serve you well. You may be inclined to ruminate about the past... what you did, what he/she did; the good, the bad, the ugly. It will most likely lead to negative feelings and serve no constructive purpose. The next time you find yourself living in the past, ask yourself “how is this serving me”?
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Likewise, worrying and fretting about the what ifs of tomorrow can drive you into fear and anxiety. Of course, you must consider your options and create plans, that is an essential part of moving forward, but make sure to put a time limit on it. Think about what you might need to deal with and how you will handle the various scenarios that you come up with and then STOP and come back to the present moment. The other reason that this is so important is that divorce creates such a monumental change in your life circumstances that looking at the big picture all at once is bound to be overwhelming. Fretting over where you will live, how you will make ends meet, how you will handle parent-ing, how you will find a job or juggle your job within your new situation, how will you ever find love again, what will happen to your friendships with your mutual friends, and so on is enough to send anyone into a tail spin.
You will have to face each of these issues eventually but never all at once. Your new life will unfold little by little, one day at a time. Don’t try to figure it all out at once, you cannot and it will not serve you well to try.
Another danger of living in the past and future is that you miss out on the gifts of today. You might think that there is nothing in the present worth focusing on. The truth is that by staying present you begin to see the gifts around you. Perhaps the new relationship that develops with a neighbor or friend; or the positive shift in a relationship with your child; or the support and encouragement you receive from your employer. If
Make a Daily Gratitude ListIt is more difficult to be gloomy when you are grateful. No matter how bad things are, there is always something to be grateful for. On a bad day you can be grateful for being alive, having your friends and family or even just grateful that the sun has risen. On good days you can list a vast array of people, experiences and things to be grateful for. Having an attitude of gratitude can change your day.
As you get emotionally stronger, take your gratitude to the next level. It is easier to be thankful for the good things…those who love and support you, gifts and monies that have come your way, your good health and material possessions that you have accumulated. But what of the diffi-cult people and situations you face? Why should you be grateful for your trials and tribulations? Why be grateful for those that push your buttons and cause you angst and upset? How can you be grateful for your ex or your divorce experience?
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you are fully present, you will consciously interact with others in a differ-ent way and hidden in the struggles you will also find golden nuggets of wisdom and growth. Ultimately you will begin to see your present dif-ficulties as a crucible, refining you into a stronger, healthier person. This will, of course, lead to a better future for you and your children. NOW is all we really have. Be completely present in each moment --- tomorrow will take care of itself.
Your tribulations are in fact the rough within which the diamonds are found; the crucible through which your spirit is transformed. It is not in the easy times that your character strengthens and grows, but rather the challenging ones. I once heard say that we are napping during our happiest days…delightfully resting with little value to our growth. How-ever, when tossed around by the stormy seasons of our lives, we bear the fruit of personal development. Look at your life through the lens of gratitude for all that you have become. Wherein lies your greatest growth? With each difficulty, what did you learn? What opportunities arose from the ashes of a dream that was lost? Rejoice with a grateful heart each day whether you are in the fire of refinement or the restful ease of a quiet moment.
A great quote on attitude: “The longer I live, the more I realize the im-pact of attitude on life. Attitude, to me, is more important than facts. It is more important than the past, the education, the money, than circum-stances, than failure, than successes, than what other people think or say or do. The remarkable thing is we have a choice everyday regarding the attitude we will embrace for that day. We cannot change our past... we cannot change the fact that people will act in a certain way. We can-not change the inevitable. The only thing we can do is play on the one string we have, and that is our attitude. I am convinced that life is 10% what happens to me and 90% of how I react to it. And so it is with you... we are in charge of our Attitudes.”---Charles Swindoll
Navigating the Emotional Aspects
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And so I encourage you to have an attitude of gratitude through this and every season of your life.
If you need support, check out our Cyber Support Group. For more tips and healthy perspectives check out JourneyBeyondDivorce.com
Karen McMahon
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FAMILY WEALTH PLANNING PARTNERSFinding Harmony in the Economics of DivorceIvy H. Menchel, CFP®, CDFA™1359 Broadway - Suite 820New York, NY [email protected] www.familywealthpp.com
Ivy Menchel, President of Family Wealth Planning Partners, began her financial services career more than 18 years ago at a premier full-service brokerage firm. She currently works with divorce clients, matrimonial attorneys and mediators to address the financial issues of divorce and assess options for fair and equitable settlements. Ivy supports and educates her clients, and their advisors, through the entire divorce process. She is trained in mediation and though she does not practice mediation, she uses these skills in collaborative, litigated and mediated cases. She has been a guest speaker on television and radio talk shows and has been a presenter at many workshops. Ivy’s mission is to educate clients to empower sound financial decisions today and in the future for themselves and their families.
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Chapter 2
Navigati ng the Financial Considerati ons
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Navigating the Financial Considerations
It certainly doesn’t take the 18 plus years of experience I have as a financial professional to know divorce can be one of the most finan-cially devastating life events, if not managed properly. The process can be emotional and intense and the financial decisions you make during this time might be some of the most important economic decisions of your life. It is imperative to understand your complete financial situa-tion. Knowledge and preparation will be crucial to your creating a sound financial agreement.
There are common financial mistakes individuals make during the divorce process. Though not a complete list, the most typical errors include: • Negotiating to retain the marital home when one cannot afford it• Thinking retirement assets have the same value as an equal dollar amount of non-retirement assets • Failure to consider tax ramifications• Not looking at the long-term impact of a financial settlement Below are several considerations to help you avoid mistakes and over-sights. Consider alternative options such as collaborative divorce or if assets are moderate, mediation. These two divorce resolution models provide flexibility and strive for both spouses to work respectfully together to reach a fair settlement that meets the needs of both parties. Having a
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Ivy H. Menchel
“winner takes all” attitude and hiring a combative attorney can be costly from both a financial and emotional perspective. You can save thou-sands of dollars in legal fees with either of the above alternativemodels. And oh, by the way, the courts will not punish your spouse financially if he or she is a bad person. Keep in mind, litigation can be time consuming and can leave less money to live on. Retaliate by living well post-divorce!
Assess your current financial situation. If you are contemplating separa-tion and/or divorce gather all of your financial data.
• Take a comprehensive inventory of your assets (real estate, bank accounts, investments, retirement plans, life insurance policies, collectibles, etc.) along with a complete list of your liabilities (mortgage, credit card debt, automobile and student loans, etc). • Identify the ownership of everything you own and owe – is it titled in your name, your spouse’s name or held jointly between the two of you? After all, if you don’t know what you have, how will you determine what you should get? • Review all sources of income. This includes earned wages/ commissions, bonuses, Social Security and pension benefits, rental and investment income, etc. Make a copy of your tax returns for the prior 2 to 3 years. These documents will provide valuable information for the divorce financial professional to assess.
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Navigating the Financial Considerations
Construct an accurate budget. All too often couples do not recognize the cost of their lifestyle during their marriage, no less what each per-son’s expenses will be post-divorce. Individuals underestimate or omit expenses and struggle to meet their financial obligations down the road. Though some attorneys and mediators are financially savvy, many are not. It would be prudent to work with a financial professional that has the skills to help you produce a reasonable, realistic budget and the tools to project the outcome based on a thorough cash flow analysis. The goal is for both parties to maintain a post-divorce lifestyle compa-rable to the marital lifestyle.
Emotional attachment to property can be fiscally damaging. The marital or vacation home, the retirement plan you slaved for years to accumulate, the antique vase you received as a wedding gift from your best friend may have strong meaning to both spouses. A dispute for any one of these assets becomes an emotional, not a financial decision. Consider if you can afford the mortgage and ongoing maintenance as-sociated with the house; determine the illiquid consequences tied to the profit sharing plan; is any one thing really worth jeopardizing your future financial security?
50/50 is not always fair. Equal division of assets based on monetary value does not necessarily mean an equitable division of assets. There are many factors to think of when splitting property. What you paid, including additional expenses and capital improvements, for the house, business, mutual fund, etc. need to be examined. An asset might
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Ivy H. Menchel
generate ordinary, dividend, passive or tax-exempt income; each source of income is taxed differently. There could be expenditures associated to a particular asset. Growth rates for each asset will probably vary and should be analyzed. Every asset type has its own distinct tax ramification. For example, a $100,000 IRA grows tax deferred but withdrawals from the account will be considered taxable income (and excluding some exceptions, a 10% penalty will be assessed on any withdrawals prior to age 59 ½); on the other hand, the interest on a $100,000 savings ac-count will be taxed each year but taxes or penalties aren’t assessed on withdrawals . Future earning potential for each spouse could also be an additional component that may impact the split. Other factors will play a role in determining the division of property. So equitable does not always mean equal… it is, however, supposed to mean fair!
There is a link between the duration of spousal maintenance (alimony) and child support. Typically alimony is tax deductible by the payer and taxable income for the payee in the year it is received. If maintenance is reduced 6 months before or after a child reaches age of emancipation (emancipation is state specific and varies) the IRS will consider the entire amount of alimony, from the beginning, as child support. This might not be tax deductible and might trigger tax recapture - the method by which the IRS seeks to prevent non-taxable property settlements from being disguised as taxable alimony in order to shift income to a lower tax bracket. A recapture analysis can prevent unintended consequences.
Evaluate Retirement Plans Properly. A defined contribution plan, such as a 401K, 403B and profit sharing plan, is under your control today. Participants contribute to an account from their paycheck and choose how to invest the funds. Some employers match a portion of the em-ployees contribution. The contribution is defined – either by a fixed dollar amount or a percentage of compensation. A defined benefit plan, on the other hand, provides a payout, either monthly or a lump sum, at retirement. The amount of this future payout is based on a formula that factors the length of employment and amount earned. Here, the benefit is defined. Though a defined benefit plan won’t pay a stream of income until a later date, it does have a value today. In order to work towards an equitable resolution, you must know the current value.
Spending retirement assets before age 59 ½ will not always result in a 10% penalty during the divorce process. Even if the non-employee spouse has not reached the age of 59 ½, the IRS will allow a withdrawal from a qualified retirement plan without incurring the 10% penalty. The rule is very specific and you need to follow the steps exactly. If done correctly, you will pay income tax on the withdrawal but will avoid the penalty. Uncle Sam can sometimes be sympathetic during divorce.
Understand the short and long range effect of your decisions. Many divorcing couples want to rush the process and move quickly. The urgency to “get it over with” – to divide assets and secure alimony and child support becomes the main focus. Again and again, one, if not both spouses neglect to take into account the short term and long
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Navigating the Financial Considerations
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Ivy H. Menchel
term impact of their financial decisions. Empower yourself by know-ing what it will look like 5, 10, 15, even 20 years down the road. Those who understand what their lives will look like post-divorce tend to be more confident and find the divorce process more palatable. A certified divorce financial analyst has the tools and resources to construct these economic models. It can be detrimental to your financial success if you don’t properly assess the settlement options. Adequately insure the divorce settlement. Incapacity or premature death can be devastating on many levels. Maintenance, child support, property settlement or college tuition could unexpectedly disappear. Protect the stream of income if you are the payee and protect the obligation to pay if you are the payer. Life and disability insurance will guarantee the payments and safeguard your family’s security. Update estate documents and beneficiary designations. Often people forget to create new wills or change the beneficiaries on their life insur-ance policies and retirement accounts. This results in the former spouse inheriting the estate. Chances are the decedent would have preferred these assets to pass to their children, new partner or a charity of their choice. Neglecting to draft a new Health Care Proxy or Durable Power of Attorney could leave these important decisions in the hands of their former spouse. Again, be clear on your intentions and back them up with proper documentation.
Develop a financial plan for your new life. Start the next phase of your life on the right foot as you transition from married to single lifestyle. Work with a professional to define and prioritize financial objectives. Create a written plan, set realistic expectations and allocate financial resources. One indisputable fact of divorce is it cost more to maintain two households than one and chances are the income remains the same. You will need to adapt and should plan. What will be your pros-perity strategy?
Let’s face it – marriage is about love; divorce is about money. This is not the time to go it alone. Surround yourself with a team of experienced divorce professionals (to include an attorney or mediator, certified divorce financial analyst, coach and child specialist, depending on your circumstances). They will guide and educate you.
This advice will help you make sound financial decisions as you negotiate your future financial security and success!
Navigating the Financial Considerations
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Ivy H. Menchel
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Deborah HrbekHrbek Law LLC100 Church Street, 8th FloorNew York, NY [email protected]://www.hrbeklaw.com
Deborah Hrbek is an attorney who has practiced in New York City since 1993. She focuses her practice on matrimonial law, entertainment and business law. In keeping with Hrbek’s philosophy that all matters, particularly family matters, are best resolved amicably wherever possible, Hrbek Law offers mediation and collaborative law alternative dispute resolution services to clients with matrimonial and other disputes. Deborah Hrbek obtained her law degree from Kings College Cambridge University in 1988, and practiced as a barrister in London before moving to New York.
Note: Divorce laws vary from state to state. The legal issues addressed in this article are
applicable in New York State only. If you are planning to file an action in a state other than
New York, you should consult an attorney qualified to practice in that state to find out
about the different local laws, guidelines and practices that may apply.
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Chapter 3
Navigati ng the LegalDecisions
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This article provides a basic overview of New York law and practice relating to financial issues for parties who are contemplating separation or divorce, and of the dispute resolution avenues available to divorcing couples. Issues relating to custody and visitation of children, domestic violence, exclusive occupancy of the marital residence, and other issues not strictly bearing on the finances of the parties are beyond the scope of this article. Dispute Resolution Choices One of the first decisions to be made when contemplating divorce is the forum to be used for addressing the issues that need to be resolved as part of the divorce proceeding. Litigating a divorce case in a courtroom before a judge is the most familiar and frequent forum used for the resolution of matrimonial and family disputes. It is, however, worth considering the alternative modalities for dispute resolution, in particular mediation and collaborative law. These procedures seek to use professionals to help the couple address the relevant issues in a civilized manner, in a way that addresses the concerns of the entire family and treats both parties with dignity and respect. A mediator does not represent either party, but rather helps the parties communicate with one another and shape their own agreement. In the collaborative law model, each party has an attorney who is trained in mediation techniques, so that the parties can actively participate in
Navigating the Legal Decisions
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the shaping of their settlement agreement while having their attorney involved to ensure the party is aware of their legal rights. The primary advantage of using mediation or the collaborative law process in fashioning a divorce settlement is that the parties keep control of the process and actively participate at every stage of the negotiations. While settlements are traditionally arrived at through attorney negotiations, it can be frustrating for parties to have all the information filtered through their lawyers. Collaborative lawyers work with the parties to help them find a resolution that meets each party’s concerns and takes account of the interests and well-being of the entire family. Particularly in cases where there are children, since the parties will need to work together to co-parent after the divorce, fashioning an amicable, out-of-court resolution can be a boon for the entire family. In many cases, however, litigation is necessary to move the case forward. In any divorce action, some or all of the following will need to be addressed in connection with the financial issues:
1. Jurisdiction
2. Grounds (cause of action)
3. Contested or Uncontested?
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4. Division of Marital Property
5. Allocation of Responsibility for Marital Debt
6. Spousal Support / Maintenance
7. Child Support
Jurisdiction A divorce action has to be started in a county and state that is willing and able to hear the case. In order for an action for divorce to be started in any court, the plaintiff (who files the summons and begins the action) has to demonstrate that the court has jurisdiction to hear the divorce case. Generally, jurisdiction is based on residency, with the length of time in which a party (or both parties) must reside in the state before commencing the action varying from state to state; see New York jurisdiction requirements. Even if the court has jurisdiction over the parties to an action, the court frequently declines to handle matters where the marital residence (if ownership of the real property is in dispute) are located in a different county from that in which the court is located. Grounds for Divorce (cause of action) The plaintiff has to show a basis for the divorce proceeding. For example, you cannot file a divorce action against someone to whom you are not married, so you need to allege the facts of the marriage
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(marriage date, place etc.) In New York, grounds for divorce must also be alleged. The least contentious ground for divorce in New York is “irretrievable breakdown,” (for at least 6 months, the marriage relationship has been broken beyond repair.) Available only for cases commenced after October 2010. “Irreconcilable differences” and other non-contentious grounds are available in most other states. Speak to a locally qualified attorney for details. Contested or Uncontested? In New York, if a divorce is uncontested then it can be resolved by the filing of the necessary paperwork. Neither party has to step foot inside of a courtroom. Many people think that if both you and your spouse want to get divorced, then the divorce is (or should be) uncontested. In fact, even when you both do want to get divorced, if you have not reached agreement on the grounds for divorce, the way that the assets and debts should be divided between spouses in the divorce, who should live in or own the marital residence, whether/when the house should be sold, who will have custody of the children, whether and how much spousal support and/or child support should be paid – etc. etc. – then you have a contested divorce on your hands. If the goal is to keep matters amicable, then it is generally a good idea to sit down with your spouse and discuss each of the issues that have to be dealt with in connection with a divorce, to see whether these issues can be resolved by agreement. If you can come to an agreement on all of
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the relevant issues in your case, then you will be able to proceed with an uncontested divorce. You may need the assistance of a mediator or counsel to reach agreement, but if you are able to negotiate these issues without court intervention, this will save you time, money and a great deal of stress and anxiety that goes with litigation. It will also enable you and your spouse to keep control over the decisions that are made with regard to your family and your property, rather than letting a judge decide these important personal matters. Division of Assets and Debts under New York Law In New York State, “marital property” means all income, assets and liabilities that were acquired by either spouse during the marriage, regardless of whose name the property or debt is titled. The only exceptions are gifts to one spouse, inheritances and the pain and suffering portion of a personal injury award. Marital property has to be “equitably distributed”– which means divided fairly between the parties - before the divorce can go through. “Equitable” is not necessarily “equal” – what is fair and equitable depends on the circumstances of each case. Property that was yours before the marriage, that has stayed in your name alone, is called “separate property” and does not need to be shared with your spouse in a divorce proceeding. All property needs to be dealt with – not just houses and jewelry and cars, but also bank accounts, retirement benefits earned during the marriage, credit card debts and investment portfolios.
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Bear in mind that it is critical to address issues of outstanding debts as well as assets. In other words, the parties to a divorce proceeding have to agree on (or a judge will decide for them) which debts will have to be borne by which party. All debts acquired during a marriage are marital (with some exceptions) and need to be divided fairly. These might be allocated in accordance with the parties’ relative income, or with reference to which party benefited from the debt (e.g. the party who keeps the leased car may be solely obligated on the lease,) etc. Note that agreements for sole responsibility for debts by one spouse or the other are binding as between the parties, but not as against third party creditors. In theory, a creditor can go after either spouse in connection with any debt incurred during the marriage, even if the debt was incurred in the sole name of the other party, and without their spouse’s actual knowledge. Child Support In New York, there are statutory guidelines that set out the minimum level of child support that is permitted, namely the Child Support Standards Act (CSSA) Guidelines. Where there are un-emancipated children of the marriage, the court will not grant a divorce judgment without provisions for the financial support of the children being addressed in the divorce judgment.
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The “non-custodial” parent is the parent obligated to pay child support. This is generally the parent who does not have physical custody of the child. In true joint physical custody situations (i.e. where the children live with each parent approximately 50% of the time), then for the purposes of calculating child support, the parent with the higher income is the parent obligated to pay child support. While the courts rarely approve a child support amount that is less than the applicable CSSA guideline minimum, a true 50-50 child custody arrangement is one of the few instances where some deviation from the guidelines may be permitted. In order to calculate the “basic” child support amount, the parent’s “adjusted gross incomes” are used as the starting point. In most cases, the adjusted gross income equals the gross income minus FICA contributions (i.e. social security and Medicare taxes paid) and local taxes paid, minus existing court ordered child support obligations. Note that state and federal taxes payments are not deducted from the gross for the purpose of calculating child support. According to the CSSA, the minimum child support is the following percentage of the parents’ combined adjusted gross income, up to a combined adjusted gross of $130,000: • 1 child 17% • 2 children 25% • 3 children 29% • 4 children 31% • 5+ children 35%
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Where the combined adjusted gross of the income of the parents is greater than $130,000, child support on the combined income over $130,000 is discretionary. In New York City, the applicable CSSA percentage is usually applied to the entire income of the paying parent for the first $250,000 to $300,000 of annual income. Once a child is emancipated, there is no further child support obligation. This is because parents are only required as a matter of law to support their children while they continue to be legal dependants. In New York, a child becomes emancipated at the age of 21, except: • emancipation is at age 22 if the child is a full time college student. • emancipation is at age 18 if the child marries, no longer lives with the parents (except for college), or joins the military. The CSSA guidelines also call for “add-ons” to be paid by the non-custodial parent. Basic child support is intended to cover food, shelter, clothing and incidentals. Items that are deemed not to be covered by the basic support are childcare expenses (to enable the custodial parent to work or attend school,) unreimbursed medical expenses (e.g. co-pays on doctor visits and prescriptions, orthodontia,) and private school tuition (where appropriate.) The parents are expected to contribute to these “add-on” expenses on a pro rata basis, i.e. in proportion to their respective incomes. For example, a parent who earns 2x the other parent will be required to pay 2/3 of the add-ons.
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If the parents are able to agree on the amount of child support that is appropriate, the court will approve this agreement provided that the child support amount falls within the CSSA guidelines. This is a key factor in a divorce case that needs to be resolved by agreement if the case is to be uncontested. Child support cannot be waived by the custodial parent. Spousal Support; Temporary Maintenance Spousal support (also called “maintenance,” and traditionally called “alimony”) is awarded at the discretion of the court. Factors taken into account by the court in making a determination about the appropriate amount of spousal support include the length of the marriage, the relative earning capacity of the parties, the extent to which either party has compromised their earning capacity based on marital obligations (e.g. to be the primary caretaker of a child,) etc. The goal of a spousal support award is to enable both parties to be able to continue to enjoy the standard of living that they enjoyed during the marriage, to the extent that that is possible based on the earning capacity of the parties. A longer term goal is to provide financial assistance to the lesser earning spouse until they are able to become self-supporting. To the extent that the parties are able to agree to a fair and appropriate level and duration of spousal support, this is another key factor in enabling the case to be uncontested. The courts will generally approve whatever arrangement the parties agree is fair. If appropriate based on the all of the circumstances, including the global terms of the settlement
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agreement (e.g. if property transfers are significant) then spousal support may be waived by the lesser earning spouse. Effective October 2010, the New York legislature introduced the concept of temporary maintenance income, and issued temporary maintenance guidelines. The guidelines are as follows: The spouse with lower income entitled to temporary maintenance per the following formula: the LESSER of: (1) 30% of the payer’s income minus 20% of the payee’s income, OR (2) 40% of the combined income of the two spouses; LESS the payee’s income. For the purposes of applying this formula, a cap of $500K is applied to the payer’s income. Discretionary awards in excess of cap based on traditional criteria: non-economic contributions; earning capacity; pre-separation lifestyle. Note that temporary maintenance is generally inapplicable in uncontested divorce situations. It only applies in situations where the case is being litigated and the lesser earning spouse needs an interim support order while the court case is ongoing. However, the guidelines may be a starting point for settlement discussions.
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