Answering Your Questions About Divorce – Part 1

By Elaine Kiernan, Certified Divorce Financial Analyst.
Answering your questions about divorce
QUESTION: What is the difference between a litigating attorney and a Mediator?
ANSWER: A Mediator is an attorney who works with couples to reach an out-of-court settlement that is fair to both spouses. A mediator does not go to court, and does not handle litigated matters. If you are unable to reach settlement in an equitable manner, you will need to find a litigation attorney who will prepare your case for hearing or trial before a judge. A Certified Family Law Specialist is an attorney who has additional education and expertise in the field of family law, and may be the best person to take your case to trial.

QUESTION: What is Collaborative Law?
ANSWER: Collaborative Law uses the team approach. A “team” usually includes two attorneys (one for each person), two mental health coaches, and a financial advisor to assist with determining an equitable settlement. All members of the team sign an agreement stating that they will work together to avoid going to court and to arrive at an equitable settlement that is fair for both parties.

QUESTION: What is a typical retainer amount set by attorneys in a divorce proceedings case?
ANSWER: If you are planning to go to court and litigate, it is only the start of your case; your ultimate fees may be very high, in the tens of thousands. Statistics show that a mediated case costs only about ten percent as compared to a litigated case.

QUESTION: What does community property mean?
ANSWER: Th e community property system exists in California and in many other states. In community property states, all income earned during the marriage, by either spouse, is community property, and is owned by the spouses as equal partners. Anything purchased with community property funds is owned by the parties equally, and in the event of dissolution of marriage, such assets are divided between the parties.

QUESTION: What states recognize community property?
ANSWER: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Oregon and Washington.

QUESTION: If I get divorced and I live in a community property state, does that mean I automatically get one-half of everything my spouse and I owned?

ANSWER: If you own property you and your spouse must reach agreement regarding the property division, or you must go to trial and have a judge make the orders for division of your property. Community Property means an equal division of any asset acquired during marriage. “Equal” may not mean “equitable”. The division that you seek should be the best one for both spouses; you may decide on something other than strict 50-50 if that is better for the family as a whole.

QUESTION: What happens to our retirement accounts when we get divorced?
ANSWER: Retirement accounts can be kept by the party in whose name the account appears, or if the parties prefer, these accounts can be split between both parties. If pensions or 401’s are to be divided, a court order called a “QDRO” (Qualified Domestic Relations Order) must be signed by the judge and filed with the Trustee. IRA accounts will be transferred by your bank without the need for a QDRO.

QUESTION: How is child support determined?
ANSWER: California has a child support guideline, which can be determined by using one of the official certified support calculation software programs. The primary factors taken into consideration in determining support are the income of both parents, the percentage of time spent with the children, as well as state and federal taxes of each and the amount of health insurance costs for each.

QUESTION: How is alimony or spousal support calculated?
ANSWER: Spousal support takes into consideration the needs of the supported party and the ability to pay of the other party. Computer calculations do not provide a ready answer for spousal support as they do in child support, but rather, several important factors are to be considered.

QUESTION: How are taxes affected by child support and alimony (also called spousal support)?
ANSWER: Child Support is not tax deductible to the payer, nor taxable to the recipient. Alimony or spousal support is tax deductible to the payer and must be included as taxable income on the recipient’s tax return. If you agree to a combined payment known as family support, it is treated the same as spousal support.

QUESTION: How can child support and/or alimony be affected by the fact that my spouse has been self-employed?
ANSWER: A person who is self-employed often has greater control in reporting income and expenses than an employee has. If there is any doubt, the courts may look at the past few years earnings and business overhead to establish the income available for support.

QUESTION: Can I keep the house we’ve lived in until our children finish school?
ANSWER: Depending upon the number of years until your children finish school, the judge has the power to allow you to stay in the house and to sell it after your youngest reaches age of majority. Proceeds would be split between the parties in an equitable way at the time of sale.

QUESTION: If my former spouse who is paying child support and/or alimony dies before the agreed payment time has concluded, is there a way to have payments continue after death?
ANSWER: I always recommend obtaining a life insurance policy on the life of both spouses to insure the continuation of support should a parent die prior to the completion of his or her support or parenting obligation.

QUESTION: Is my Social Security income at retirement affected by my divorce?
ANSWER: At the time of your retirement, if you are unmarried, and if you had been married ten years, you will have the choice of your entire Social Security account or half of the your ex-spouse’s account, whichever is greater. This only applies if you have been married more than ten years prior to your divorce.

Elaine Kiernan, CDFA®, CFP©, CSA is a Certified Divorce Financial Analyst™, Certified Financial Planner™ and Certified Senior Advisor. She has her own practice, Financial Resource Associates and is located in Santa Cruz, CA. The following are excerpts from her book, “Financial Self Defense for Women”
www.FRAssociates.com