Thinking about filing for divorce? What you need to do first:

Are you thinking of filing for divorce?  Had it with your spouse?  Before you pull the trigger, so to speak, and file for divorce, do some investigating and some collecting.  You’ll be glad you did.  Specifically:

  1. Gather copies of financial documents, such as tax returns (at least the past three years), bank statements (go back several months to a year), investment accounts, and business records.  Print them out in case you lose access.
  2. Keep the copies in a secure location away from your home.  Try a friend or relative’s home or your workplace.
  3. Secure and possessions you’d be heartbroken to lose, especially anything breakable or very valuable. If your spouse “loses” your father’s antique watch, it’ll be up to you to prove it was your spouse’s fault.
  4. Learn your rights.  Listening to your friends, relatives and neighbors about what happened in their divorce will not help you one little bit as each divorce is individual to the circumstances of the couple.  Consult with a licensed lawyer or Family Law Coach in your area, and don’t feel pressured to hire someone at this point.  Do some fact-finding.  Read some books on divorce in your area.
  5. Learn your responsibilities.  Just as critical as rights, what you have to do as a member of a divorcing couple, and perhaps a parent, is as critical.  You don’t want to damage your children, your future, or your credit by not understanding what’s best for you to do.
  6. Consider counseling, like now.  Divorce is so difficult that it’s considered one of the five major life events/traumas.  The legal process is not designed to help you through the emotional aspects, and it won’t.  It will likely make them worse.  Find a counselor, find a divorce support group, talk to your church, or discover some way to deal with the emotional aspects.
  7. Learn the process.  Divorce, as I have mentioned before, takes far longer and is far more expensive then you ever anticipate.  If you’re not aware of this at the outset, then the delays, disappointments and cost can become quickly and repeatedly overwhelming.
  8. Open your own bank account, without your spouse’s name on it.  Just before you file, if you have money in a savings account, consider transferring HALF of the money – just half – into that account.  Check with a lawyer in your area first, however, to make sure you don’t get in trouble later for doing this, as every state has different rules.

The more prepared you are in advance, the easier the process will be.  Divorce is so difficult that it’s well worth your time and effort to make it easier, because when you’re going through it, you’ll appreciate each and every break you can manage.  And you could end up like this couple, whose divorce “rehearsal” actually saved their marriage.

What is a conservatorship?

I have been asked recently by a number of different sources to help them with a conservatorship, so it occurred to me that I should write a little bit about it.  A conservatorship occurs when you or your loved one is no longer able to manage their affairs, both the decisions about their financial affairs and the decisions regarding their personal affairs.  A conservator, often a family member, takes over these many decisions.

The problem with conservatorships is that they are court proceedings, can be lengthy, are public, can be expensive if you need an attorney (and many family members do), require filing, investigator and court fees (in addition to legal fees), require approval for certain transactions, and can require accountings of finances.  Conservatorships can be avoided altogether if the family member puts powers of attorney in place before there is an issue with capacity.  Unfortunately, not enough individuals do this in time.

There are two different kinds of conservatorships: conservatorships of the person, and conservatorship of the estate.  For a conservator of the person, decisions about food, clothing and residence are made.  For conservator of the estate, decisions regarding the financial affairs of the individual, such as paying bills, collecting income, and making investments.  Often, the conservator is the same person, though they can be two separate individuals or can be institutions.

Your best bet if you are worried that you or a loved one will become incapacitated is to execute powers of attorney for assets and health care.  These are simple documents that any estate planning attorney can prepare quickly and easily.  If it looks like it’s already too late, then you’re going to have to go down the conservatorship route.  You may want to start the proceedings before you think you need to, because the process can be lengthy.

A Family Law Coach can help to cut costs because I can walk you through the process, help you with documents, and make sure you are prepared for every step of the way…plus keep costs way down compared to traditional legal representation.

Trusts and debt payment

I am often asked whether creating a living trust will allow the creator to avoid their debts: their mortgage, their credit cards, their other loans and secured debt.  The short answer?  No.

Living trusts are generally created to avoid probate, estate taxes, and allow one generation to pass assets along to the next generation with a minimum of hassle and expense.  Once you pass away, your successor trustee still has to determine what your debts are, pay them from your estate, assess taxes, and then distribute your assets according to your wishes.

What my debt-averse clients may be thinking of is a spendthrift (or asset management) trust, which does in fact protect the assets in the trust from the beneficiary’s creditors.  Spendthrift trusts are used when an individual or couple want to leave money to someone, usually a child, but don’t want to leave a large amount outright, or all at once.  So, for example, the beneficiary gets a certain percentage or amount at regular intervals (or for specific expenses, like education or health or living expenses), but is not entitled to the entirety of the money until a certain time or age.  In this case, should a creditor come after the child and the money in the trust, so long as there are restrictions placed on the disbursements to the child, then the trust money will be protected against the creditor.  This can mean  a great deal when, for example, there are millions in the trust and the beneficiary gets into a serious car accident with large liability.

In general, however, living trusts do not let you get out of paying your debts. The only way to get out of paying your debts is to not leave enough estate to pay them…which I would not recommend to anyone!

Estate planning and California divorce: a checklist to avoid disaster

Often, after the time, expense, and emotional upheaval of California divorce (as well as moving, adjusting to life as a single person/parent, dealing with tightening finances…etc. etc.), the last thing on anyone’s mind is estate planning.  Yes, it’s one of the things on the list of things to do…later, when you have time.  When you’re emotionally ready to think about it.  Right?  Well, the reality is that just post-divorce IS the best time to do estate planning.  Why?

  1. Because it’s on your mind since you’re working to get the rest of your life in order.
  2. It’s critical to get your ex-spouse off of your accounts and as your beneficiary.  You really don’t want him/her inheriting from you, do you?
  3. It’s really not that hard, and in fact rather than being draining or difficult, can not only be empowering but help you to really feel like your life has restarted.

Here are the key estate planning items you need to take care of post-divorce (and note you probably can’t do these during your divorce due to the ATROs):

  1. Create a new (or initial) living trust and will to protect your assets and your beneficiaries.
  2. Cancel any old estate plans.
  3. Sign a new power of attorney for asset management.
  4. Sign a new health care advance directive power of attorney.
  5. Designate the guardian for your children should you pass away.
  6. Get new life insurance to meet your (and your children’s) needs.
  7. Update the beneficiary on your life insurance, retirement accounts (401Ks, IRAs, etc.) and other payable on death (POD) accounts.
  8. Make sure your assets are retitled in your name only.
  9. Let people know you’re no longer divorced, like banks, health care providers, and other trusted advisors so no one gives out personal or confidential information inadvertently.
  10. Talk to your parents about estate planning, the importance, and how it will help everyone if they create an estate plan (it helps them to leave a legacy and saves you the additional intense difficulty of probate).

Doing these simple tasks will help you to feel stronger, in control, and empowered to take on life’s next challenge.  What are you waiting for? Make an online appointment by clicking here.

Financial issues in California divorce

Since we’re talking about California divorce this week, I thought I’d add a note on finances, since they seem to be at least one of the top reasons for divorce. Untangling your financial lives can be really tough, even out of court.  Here are some things to consider:

During divorce:

Tax implications – what are the tax implications of your filing status as you go through divorce?  What are the implications of your asset division?

Expert fees – what are your attorney/accountant/child custody evaluator/financial advisor fees going to be?

Support – there are tax implications to paying and receiving child and spousal (or family) support in California. If you just take the highest/lowest amount because funds are tight, you may be in trouble later.

But the divorce process is just the beginning.  You also have to consider the financial aspects of your post-divorce life.  You need to consider these things as soon as possible, and not wait until it’s happened.

Post-Divorce:

Cost of living adjustment – here’s still the same bills, but only one of you is paying them.

Change in auto/home/health insurance costs

Increase in “combined” costs.  Did you share a Netflix account?

Lower savings and discretionary income due to the tightened financial belt.

Loss of assets in the divorce – that retirement home may be gone.

Needing/getting new employment – what do you do if you’ve never worked?

Reduced retirement income or savings – you may have thought you were set for retirement…now what?

The theme for this week seems to be planning.  Planning is you’re thinking of divorce, and planning if you’re in the process of divorce.  Don’t let the process or anything that happens in the process to take you by surprise.  It doesn’t have to if you know what to look for and where to look. Need more help? Click here to make an online appointment.

How to prepare for divorce

Is there anyone out there anymore who doesn’t know someone who is getting divorced or thinking about it?

The first question on anyone’s mind is what will happen? The most common concerns are about money – rent, bills and health insurance – as well as children. Where will they live? How will we share custody? What are my rights?

Basically, you want to know: what do I need to know NOW so that the process is easier, smoother, and I don’t get in trouble?

Sadly, it can seem nearly impossible to find out this information. If you go to see a lawyer, he or she will spend most of the time trying to convince you to pay out thousands of dollars in a retainer. Trying to find relevant, informative, accurate and current information on the internet is like trying to sort sand on the beach.

So, what can you do? One solution is to consult with an attorney, but say up front that you only want information and do not intend to retain. That can work sometimes, but not all lawyers are equal, and the information you get can be of varied usefulness. You can research on your own – for example, Nolo Press has some GREAT resources. Be sure you stick with state-specific information, however, since state divorce laws vary widely. You can check out my FREE 7-day divorce series on how to save money when getting divorced. Or, you can try family law coaching, which is what I do.

Here are some tips to get you started:

1. Scan or copy your important documents, like tax returns, bank and credit accounts, retirement and 401K statements, mortgage statements, house and car title deeds, etc.
2. Change your powers of attorney before you file. You may also consider severing your joint tenancy.
3. Get all the most sentimental items out of your house, particularly if they are breakable and/or you have a spouse prone to angry outbursts.
4. Courts like to continue the status quo, so if you plan to make a change (go back to school, change your children’s school, start medical treatment, get braces for your children), then start that before you file for divorce.
5. Talk to a lawyer so you know your rights in your specific situation.
6. Consider getting a post office box.
7. Understand what the date of separation means so you don’t hurt yourself by filing too early or too late.
8. Prepare mentally. Deciding on getting the divorce is not the hard part. It’s only the beginning. Consider going to therapy, even if you think you don’t need it. If insurance covers it, it couldn’t hurt.

Financial Advisors & CDFA in California divorce

I met with a financial advisor today, and he has the designation of being a CDFA, or “Certified Divorce Financial Analyst.” He is an expert with working with people who are divorced, getting a divorce, or thinking about it.

The more I think about it, the more I think that it’s critical for someone who is divorcing to have the support of a financial advisor. Take the situation when you’re dividing accounts. Say you have an account with Schwab and an account with another broker. They each have roughly the same amount of money in them, so you and your soon-to-be-ex decide to each take one account. But does anyone look at the projections for the accounts? What if one account is doing poorly and one is doing really well? Attorneys aren’t trained to make those kinds of evaluations. This is a reason to see a financial advisor – especially a CDFA – if you’re getting a divorce, or even thinking about it.

Another reason: Generally, I saw in my practice that in most couples, one spouse was ‘in charge’ of the money in the relationship. They handled the bills and expenses, did the taxes, and dealt with the CPA or financial advisor. Often, the other spouse had not a clue what the couple had, leaving the decisions up to the other. While this is (I think) a reasonable marital division of labor, it causes big problems for the spouse in the dark when the issue of divorce comes up. Suddenly the spouse who doesn’t know anything has to take a crash course in finances, household budgets, and the like. He or she also probably wants nothing to do with the couple’s advisors, as they’re likely to go with the person they’ve been dealing with all along. This is where a financial advisor can mean the difference between struggling and flourishing.

Finally, and you may know this about me, I am a planner. I do estate planning and feel it’s absolutely essential that EVERYONE has an estate plan – SOME kind of plan – and if they have children or a house, it becomes urgent. But that’s another story and another blog. The same is true for financial planning. Right now, you’re at Point A in your life. At some point, you want to get to Point B. How are you going to do that, financially? What if you don’t even know what your Point B looks like? You find these answers by utilizing the help that’s around you, and in this case, it’s a financial advisor.

I am spending some time in the next few weeks talking to several CDFAs, and I’ll pass along the pearls of wisdom I learn. I meet with them so that I can feel comfortable referring my clients to them.