What You Need To Know About Divorce – In a divorce, you need to consider what to negotiate and then how to negotiate it.
I have simplified the law in this blog to make it easier to understand. If you would like a more thorough explanation of what to negotiate, please click here to download my book Divorce Without Drama.
- 1 What You Need To Know About Divorce
- 2 Stress And High Conflict Divorce: What Do You Need To Know?
- 3 Financial Pro Reshell Smith: “5 Things You Need To Know To Survive And Thrive During And After A Divorce”
What You Need To Know About Divorce
Whenever I mediate a divorce, I mediate everything in the following order: children, support, assets and liabilities. Let’s discuss these topics in order.
Things To Do Before Filing For Divorce
Parenting time refers to time spent with your child. If you get your child 50% of the time, it is 50/50 parenting time, NOT joint custody. So, parenting time equals time with your child.
No matter what your coworkers tell you, there is no ‘standard parenting time’ in Oregon. The law requires a parenting schedule that is in your child’s best interest. The hard part is getting both parents to agree on what is best for the child.
Custody means the authority to make legal decisions over your child’s life, such as education, religion, medical care and residence.
Sole custody means that one parent holds decision-making power for education, health care, religion and residence. Joint custody means that both parents must agree on the child’s education, health care, religion and place of residence.
Amazon.com: The Divorce Organizer & Planner: 9780071429610: Sember, Brette
The court cannot force you into joint custody, which means that if both parents do not agree to joint custody, the court will order sole custody to one of the parents.
To illustrate the difference between parenting time and custody, parent A may be awarded sole custody and parent B may be awarded 100% of the parenting time. Really? Yes, really. These two concepts are mutually exclusive of each other.
Child support is calculated based on various factors, such as the parents’ income (including spousal support), the number of children, the number of nights spent with each child and the cost of health insurance. Click here to calculate your child support.
Spouse support isn’t calculation, it’s negotiation. Spousal support is often negotiated based on factors such as length of marriage, difference in income, earning capacity of the parties, and standard of living during the marriage.
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Marital assets include anything that has value. It doesn’t matter whose name is on the title of the asset. If it was acquired during the marriage, it should be valued and included in the divorce. How you value an asset is negotiable, but the asset must be included.
The formula for an asset is fairly simple: fair market value of the asset – any debt attached to the asset = value. Let’s look at an example of a house. The valuation formula looks like this: $750,000 – $450,000 = $300,000. So, if the house is valued on Zillow for $750,000 and you have a $450,000 mortgage, then the equity value for the divorce is $300,000.
Not to complicate our simple formula, but if the asset is brought into the marriage, such as a retirement plan, then the formula will also include a premarital discount as follows: fair market value – (liability + premarital discount) = value. For example, if your retirement plan is now worth $400,000, but it was worth $150,000 when you got married, and you have a $10,000 loan from your plan, then it looks like this: $400,000 – ($10,000 – $150 , 000) = $240, 000. So, the equity value is $240, 000.
The complex concepts of passive growth income, capital gains discount, future tax discount, present value discount, vested and non-vested shares, business or pension valuation, and valuation for commercial real estate are too complicated to cover in this blog. Please see my book Divorce Without Drama for more information.
Stress And High Conflict Divorce: What Do You Need To Know?
All liabilities must be taken into account in a divorce. It does not matter if the liability is in the name of one party. It doesn’t matter (for the most part) who creates the liability. If liability is established in marriage, then we calculate it.
A secured liability is a debt attached to an asset. Secured liabilities tend to be houses with mortgages, cars with loans, etc. In a divorce, we deal with a liability secured in the value of an asset, such as the house example in the Assets section above.
Just like assets, if a liability is brought into the marriage, then we deduct the liability for the amount before the marriage. For example, if the credit card balance was $10,000 after the marriage and only interest was paid monthly, but the card was used continuously during the marriage, and now has a balance of $26,000, then the marital balance is discounted by the pre-marital balance. It looks like this: $26,000 – $10,000 = $16,000. We used the remaining $16,000 in the divorce.
Student loans are a unique animal. They are awarded to the person whose name is borrowed, and often, but not always, their value is not included in the divorce. why? Because education is an intangible asset that cannot help others.
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Credit cards come in one of three flavors: (1) in the name of one party, (2) in the name of one party, but the other party is an authorized user, or (3) jointly held. Most people think their credit card is in their sole name, but in reality, they are either the authorized user of their spouse’s credit card, or it is a joint card that only one party uses.
How do you know that? Check your credit report, not your credit score. Click here to access your free federal credit report (no, it won’t drop your credit score by checking). Your credit report will show you credit held in your name and if it is also held in your spouse’s name.
Joint debt with a balance that cannot be fully settled, complicates divorce. For example, if you have a jointly held Capital One card, but there isn’t enough money to pay it off or you don’t qualify for additional credit to transfer the balance into your sole name, then we may need to sell assets to pay. the remaining Capital One together.
Now that you know what you need to negotiate, it’s time to learn how to negotiate a divorce. There are four different ways to negotiate a divorce. Each process has its own advantages and disadvantages.
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This is the safest option. Each of you is represented by an attorney whose sole job is to get you the best deal for you. It is also the most expensive option. As I write this blog, most couples who choose to hire two attorneys, will typically spend between $15,000 – $20,000 EACH for a total of $30,000 – $40,000! Yes, you read that right.
It saddens me to admit this, but most attorneys do not tell potential clients what the average client actually pays to settle a divorce. Instead, they tell potential clients they need a $2,500 retainer fee to get started and then the attorney says, “I’ll do my best to keep costs down.” They never cut costs and it was always over $2,500… more. Ask anyone who has used a lawyer for a divorce and they will back my claim.
This is a terrible choice. why? Only one party is represented by a lawyer. Why is this important? Keep in mind that lawyers’ ethical duties are ONLY to the parties they represent. They will draft documents in favor of their clients. That’s their job. This tends to cost about $5,000 – $7,000. So, yes, it’s cheaper than hiring two lawyers, but it damages one party.
In rare circumstances, some parties can get away with handling the paperwork properly themselves. If you don’t have any assets, any children, you both earn equal incomes, and you don’t owe any money, then you can probably do the paperwork without any worries. But if you have any of these, then you don’t know what you don’t know. This is a very cheap option and costs about $20 in document fees. You get what you pay for.
Financial Pro Reshell Smith: “5 Things You Need To Know To Survive And Thrive During And After A Divorce”
Yes, I am a mediator, and therefore, part of this option, but I talk people out of mediation several times per week.
You should consider mediation if you don’t want drama, if you don’t want to upset your partner, if you trust your partner to make decisions with your mutual interests in mind, if you want you and your partner to decide the matter. fair, and not a court, and if you want to save money, but also have everything done correctly.
If you try to mediate just to save money, but you can’t agree on the most disputed part, then you are wasting your money.
Scary fact: anyone in Oregon can call themselves a “broker” because there is no licensing or qualification for a “broker.” Your manicurist must be licensed, but an intermediary does not need to be licensed or certified.
Grey Divorce: What You Need To Know
I strongly recommend ONLY hiring a lawyer-mediator. why?
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