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Making Cent$ of Divorce; CT Group Resolves Top 5 Financial Issues

Emotions run high when an unhappy couple finally comes to the point of divorce. But as most of them quickly learn, it often comes down to the money when they decide to split. Financial issues are handled equally alongside legal and psychological issues by the Connecticut Collaborative Divorce Group (CCDG).

“The division of assets can be an extremely complex and contentious part of the divorce,” said Financial Advisor and CCDG Member Ed Goldberg.  “When a couple determines their own financial division through the collaborative process, both parties are usually happier in the end.”

Goldberg notes that in addition to helping both spouses move on and be financially secure after the divorce, the collaborative team often saves money on legal fees. “All attorneys, mental health professionals and financial advisors in the group work together to have a settlement completely ironed out, so the court appearance simply makes it official.  There isn’t a need for additional court battles.”

Fellow CCDG member and financial advisor Jim Russell shares the top five financial issues faced by all couples going through a divorce:

A FAIR DIVISION OF MARITAL FINANCIAL ASSETS

The division of property can be a difficult issue.  Connecticut is an “equitable division” state, which allows the Court broad discretion in determining what is “fair”.  Although the range is most often in a range of twenty percent (from sixty percent to one party to sixty percent to the other party), the determination of what is “marital property” as opposed to “non-marital” property is often a contentious matter.  Assets owned prior to the marriage, inheritances, etc. are often subjects in dispute – and there are cases where a Judge has divided a premarital home as part of its decision.

“Clearly, the state wants fairness for all parties, but what constitutes fairness is so undefined. Parties who use the collaborative approach are still each represented by their own attorney to make sure he or she is not being run over by the other spouse,” said Russell.

CASH FLOW POST-DIVORCE

The issue of “alimony” or “spousal support” is often the most difficult issue in a divorce case. There must be a determination as to both the amount and how long alimony will be paid.  Connecticut statutes require a judge to consider more than a dozen statutory factors but only the judge decides how much weight to accord any of these factors. But there can be no doubt that actual earnings and earning capacity play heavily into the court’s decision.

If one spouse is the homemaker, she may need more money initially but the court will consider the desirability of immediately returning to work. Other factors, such as the children’s age, if the non-working spouse has skills, advanced degrees, work experience, etc. will be considered by the judge in determining both the amount and duration of alimony.

THE FAMILY HOME

One issue that is both financial AND emotional is whether one party keeps the family home or it is to be sold. The decision may be influenced by the age of their children and the affordability of not only the home’s mortgage but maintenance and taxes as well.

“Each couple has unique circumstances and how the proceeds from the sale of the home are divided, or if one spouse buys out the other, affects the entire financial agreement,” said Russell.

CHILD SUPPORT AND FUTURE COLLEGE COST ISSUES

Connecticut’s child support guidelines provide child support calculations based on the net income of the parents — the resulting number is presumptively correct. However, argument can be made that there should be a deviation based on different specified criteria, such as significant visitation expenses or shared parenting and where the children spend their time. The number of scenarios is endless.

Also important is the issue of who takes the dependency tax exemption.  “While couples may argue over who should claim the children, respective tax brackets need to be considered.  It can get complicated, and up-to-date divorce software can do side-by-side comparisons of where the greatest benefit lies,” explains Russell.

TAX IMPLICATIONS

The parties’ new financial situation and changed marital status creates complex tax considerations. With the implementation of the Affordable Healthcare Act on January 1, 2015, failure to obtain and maintain health insurance subjects the taxpayer to tax penalties that increase over the next few years.  Thus divorcing spouses must pay close attention to ensure each is covered following the divorce to avoid the tax penalty.

Alimony is another post-divorce reality with tax implications.  Since alimony is generally taxable to the recipient and deductible by the payor, consideration should be given to how this income/deduction impacts the parties.

“Unfortunately, there are many fine details that must be addressed, so it’s best to have qualified financial advisors guiding you through the process from the very beginning and every step of the way,” concludes Goldberg. “The input of the attorneys and psychologists are invaluable to an equitable outcome for both spouses.”

CCDG is a group of experienced divorce professionals, including divorce and family lawyers, financial and mental health professionals who have been specifically trained in the collaborative process.  Visit: www.ctcollabrorativedivorce.com for more information.

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