For many families, the future cost of a college education for their children will overshadow all other childhood expenses. So this is an important conversation for parents whether they are married or divorcing. In the circumstance of divorce mediation, my role is to place the topic front and center for discussion.
In the circumstance of divorce mediation, my role is to place the topic of financing your children’s college education front and center for discussion.
In my view, financial decision-making involving college education costs centers around three topics.
Saving for Future College Expenses
According to U.S. News & World Report, the average cost for tuition and fees alone for the 2020-21 academic year was $41,411 at private colleges and $11,171 for in-state residents at public colleges. This does not include room and board and other expenses, such as travel and books. For a four-year education, the price tag is substantial.
Where resources allow, many families will commit to a savings strategy for college. Many take advantage of 529 college savings plans, which allow for the earnings on savings to be tax-free as long as these funds are used for qualified educational expenses. For families who expect to qualify for financial aid, maintaining a 529 account may result in a small reduction in a future financial aid package.
Divorce mediation involves planning for the future of two separate households, so a college savings plan—when feasible in light of other expenses—will form an important component of the overall parental financial plan.
Parental vs. Student Financial Responsibility
Each family is faced with a decision that revolves around how much of college should be paid for by parents and how much by the child who is attending college. In my experience, there are many factors that may influence these decisions:
Allocating the Parental Contribution to College Costs
Once parents have determined how much they are willing/able to spend for college education, they must also decide how to split the cost. This may create discomfort, as there can be uncertainty about future resources that makes parents reluctant to commit to future expenses at the time of their divorce. When parents are able to make the commitment, other issues that need to be addressed will include how existing parental savings will factor into this split and how income and resources will affect the split.
Watch for the next post, where I will share alternative methods within mediation for approaching these important decisions about financing a college education.
As the tax filing deadlines approach, many of us are encouraged to think about tax planning for the year ahead. No matter what time of year it is when you are facing divorce, it’s the right time to think about taxes.
Your filing status will change in the year of your divorce, and this change will affect the entire year. So even if your divorce isn’t finalized until later this year (for example, in September), your new filing status will be in effect for all of 2021, and this will be your filing status when you file your taxes next year for 2021.
While you are married and filing joint returns, it’s very possible that a lot of taxes are withheld from one spouse’s paycheck but much less from the other’s pay. Since this is all added up at tax time, the net result may be fine, in that no taxes are owed or there may even be a big refund. But what happens now, if you are the person who did not have much taken out of your paycheck?
Here is an example:
John and Susan are getting divorced. John’s gross income is $100,000 per year ($3,846 biweekly). John has federal taxes withheld based on being married with two children claimed as dependents.
Based on the IRS Federal Tax Withholding Tables, John would have $175 in taxes withheld from each bi-weekly paycheck for a total of $4,550.
When John files his taxes for 2021, he is now filing as a single taxpayer, and he and Susan have agreed to each claim one child as a dependent.
John takes the standard deduction, since Susan is keeping the house and paying the mortgage, so he doesn’t have enough deductions to itemize.
And based on the tax rates for single taxpayers, and even with an increased child tax credit for 2021, John’s federal taxes will be $12,067, meaning that he will owe the IRS $7,517!
It’s essential to plan for the tax changes that will happen when you are getting divorced.
Now, this may be an extreme example, as perhaps John was having extra money withheld voluntarily from his paycheck. But the lesson to be learned here is that it’s essential to plan for the changes that will happen when you are getting divorced.
If you are getting divorced, this is what you can do NOW:
Using my skills as both a divorce mediator and experienced finance professional, I will help you think through what lies ahead, including how your tax situation may change and what steps to take to prepare.
Divorce mediation clients sometimes come to me believing they already have complete agreement on the issues that need to be resolved for them to move forward with divorce.
More often, however, the mediation process helps them to make mutually acceptable decisions they were unable to agree on themselves. By exploring these issues fully we can come to the best agreement for both parties.
Some clients don’t consider mediation at first, believing they must be substantially in agreement on all the issues for mediation to work. A new client recently called me to say that she and her husband had decided not to come to mediation, since they hadn’t worked through all the issues that they wanted to resolve for their uncontested divorce. That left me to wonder about this misconception: how many couples think they can’t come to mediation until they already agree on how they are going to live apart?
Mediation is the opportunity to use my training and experience to help you work through the many important issues and decisions that you face. Of course, it is always good when we begin mediation with some common understandings, but it is certainly NOT a requirement to have reached agreement on every issue.
As I explained to this new client, mediation is the opportunity to use my training and experience to help you work through the many important issues and decisions that you face. Of course, it is always good when we begin mediation with some common understandings, but it is certainly NOT a requirement to have reached agreement on every issue.
Separation and divorce carry uncertainty and fear that can often interfere with our ability to “be on the same page.” Whether you feel you have discussed every option or you are not sure where to begin, an experienced mediator can help you both gain the focus to think clearly and speak freely in a safe environment. As mediator I am not the judge, but, rather, I am your trusted host in the conversation, turning your contested issues into a mutually agreed-upon understanding that will lead to an uncontested divorce.
In an effort to address the economic impacts of the Coronavirus pandemic, Congress has approved and President Biden has signed the American Rescue Plan Act of 2021.
Among the many provisions of this act, there are some that are particularly relevant for divorce mediation clients who are negotiating taxes.
What You Should Know
Some of these changes will only be in effect for 2021, unless extended by Congress.
Overall, for many divorcing couples with children who are facing the economic challenges of transitioning from one household to two, the American Rescue Plan Act of 2021 should provide significant short-term economic relief.
Overall, for many divorcing couples with children who are facing the economic challenges of transitioning from one household to two, the American Rescue Plan Act of 2021 should provide significant short-term economic relief.
As with all decisions involving taxes, consulting a tax professional is encouraged.
Divorce can be a tough and trying emotional experience. There are no easy ways of coping with that anguish, uncertainty and emotional turmoil. Mediation, as a process, is designed to keep a challenging transition from being even more stressful. But what else can be done on a daily basis to deal with the stress of divorce?
In researching the topic of depression, I came across a behavioral therapy acronym called “GRAPES”. Embedded in this simple word are some helpful daily tips that can be applied to everyone’s life, especially those in the midst of divorce.
G stands for Gentleness
R stands for Relaxation
A stands for Accomplishment
P stands for Pleasure
E stands for Exercise
S stands for Socializing
Let’s explore how you can make GRAPES work for you in your daily life while going through a divorce:
Be gentle with yourself.
During difficult times, we can be very hard on ourselves. By doing just the opposite—being kind to ourselves—we can help ourselves move forward and not dwell on the disappointments of the past.
Even if we only spend a short time each day doing something relaxing, it can help us to find our own emotional equilibrium.
Find time for relaxation.
Yes, life is busy, but even if we only spend a short time each day doing something relaxing, it can help us to find our own emotional equilibrium. Pausing to read a fun article, listening to music, playing with a pet and enjoying a hobby are a few possibilities.
Accomplish something today.
This doesn’t have to be a big deal. When we look at something we’ve done (make a list of simple tasks and cross them off as completed), we are reminded that it is a symbol of progress. Even filing that stack of papers, deleting unwanted emails or putting away accumulated clutter is progress. Any small accomplishment is worthy of note.
Do something that gives you pleasure.
We are allowed to have fun even when we’re not at our best. Find something to do that you enjoy, from taking the time to enjoy a cup of coffee to connecting with friends.
Get some exercise.
This can be as simple as taking a walk. Exercise is good for our bodies and can stimulate our minds in a very positive way.
Socialize with others.
In the time of Covid-19, this goal can be a little harder to satisfy. But by spending some time with others on a socially distanced walk, on Zoom, by phone or perhaps through Meetup-com or other social platforms, we can overcome a sense of aloneness that is often present during divorce. This is a time to expand yourself socially as much as the current situation allows.
Gentleness, relaxation, accomplishment, pleasure, exercise, socializing—whether you are in the midst of divorce or just in the midst of life, these are tips that can make your days go better.
As I think about the mediation process—involving both my clients and me—the act of asking questions looms large.
For the mediator, asking questions is the gateway to understanding what the goals of each spouse are as they discuss the details of how to end their marriage.
I’ve also found that questions that are asked by one spouse of another can transform a history of ineffective communication into a constructive opportunity to understand.
On the other hand, a question that is asked in a self-serving way or which otherwise may cause someone to feel vulnerable or made to look bad can derail the conversation.
Several years ago, I participated in continuing education that addressed how we can use questions to better understand each other. The presenter, Sharon Strand Ellison, author of Taking the War Out of Our Words, focused on the dos and don’ts of asking questions.
My biggest takeaway on the “do” side of asking questions is to come from a place of curiosity. When we demonstrate curiosity, we are signaling to the other person in a conversation that we are interested in what the other has to say. And so for the one hearing that question, s/he can then think, “I am being invited to share.” That can be very freeing for someone who may be used to hearing questions that sound more like an interrogation—where controlling behavior has been a symptom of the marriage.
A good question, coming from genuine interest and curiosity, can often unlock a door behind which may lie many answers…[those answers] may build a foundation for learning where the other person is coming from…thereby furthering a conversation about options for meeting both spouses’ needs as they plan for separate lives.
A good question, coming from genuine interest and curiosity, can often unlock a door behind which may lie many answers:
Any of the above may build a foundation for learning where the other person is coming from, in terms of needs and interests, thereby furthering a conversation about options for meeting both spouses’ needs as they plan for separate lives.
As a mediator, using my curiosity to generate good questions allows my clients to express themselves and be heard. And together, we can use that dialogue to explore the future and create a path of promise and hope.
In the divorce mediation process, emotional readiness and financial information gathering may impact how fast or slow the process will proceed. In my work with clients I find that a typical financial issue that affects the pace of mediation is the question of the future of the couples’ house. Fortunately, there are steps to take and research that can be done by you to prepare for these discussions in advance.
For many divorce mediation clients, the marital residence becomes the center of the conversation, as it is often the asset with the highest value and most emotional attachment.
The house is also known as the “marital residence.” For many clients, the marital residence becomes the center of the conversation, as it is often the asset with the highest value and the most emotional attachment. This sense of attachment can be the case for one or the other spouse, for the children or for the whole family.
Two of the biggest concerns regarding the marital residence are these:
In many cases, addressing these concerns will require further research that can take some time to complete.
You have a number of options for establishing a value for your house, ranging from a mutual agreement on its value (recent appraisal in connection with a home equity loan, online sources like Zillow.com, Redfin, etc.) to hiring one or more professional appraisers to provide an expert opinion on value. Some couples may wait to decide in mediation how to implement their valuation strategy; others have this done before beginning mediation conversations.
Unfortunately, in some cases, an outstanding mortgage and home equity loans may reduce equity to a minimal or even negative amount.
Most clients who want to arrange for one spouse to be the sole owner and occupier of the marital residence will want to reconfigure the mortgage so that person is the sole borrower. In current economic conditions, banks are reluctant to allow a name to be removed from the mortgage. However, it is worth a try. Alternatively, refinancing the mortgage is an option. However, a bank’s willingness to lend will depend on the net equity of the house and the income of the borrower. Some clients arrange for refinancing by having a co-signer to bolster income.
In mediation, we will discuss all the options related to the marital residence, and you’ll get to make the final decision about what works best for your situation and future. It may take some time to explore possible refinancing options, but that research will contribute to a constructive discussion and a well-informed decision that will be worth the effort.
As a divorce mediator, my objective is to inform clients of all the tools and resources available to them. In that process, I am frequently asked, “If we choose divorce mediation, do we need attorneys?” The simplest answer to this question is “Yes.”
Unfortunately, a simple answer is not always a complete one. While the “Model for Standards of Practice for Family and Divorce Mediation” states that a mediator should recommend that participants obtain independent legal representation, it is also true that the standards support self-determination by participants. “Self-determination is the act of coming to a voluntary, uncoerced decision in which each party makes free and informed choices as to process and outcome.”
Because I am a firm believer in the right to self-determination, I will work with clients whether or not attorneys are involved. However, in my initial consultation with clients, we discuss the valuable role that attorneys can perform in the mediation process.
In short, clients have a choice. They may decide, in spite of what I (or any mediator) may recommend, that they do not want to obtain the services of an attorney. Some divorce mediators will not work with couples unless each spouse engages the services of an attorney. Because I am a firm believer in the right to self-determination, I will work with clients whether or not attorneys are involved. However, in my initial consultation with clients, we discuss the valuable role that attorneys can perform in the mediation process.
How Attorneys Can Assist the Mediation Process
A primary goal of my divorce mediation process is informed decision-making. Providing legal information to clients is a neutral step that I take at the beginning of any mediation. However, an experienced divorce attorney can assist a spouse in making informed decisions by offering legal advice that is based on full understanding of the law and how the spouse’s circumstances would be treated in court.
During the mediation process, some clients may desire to have their attorney(s) present to offer real-time support and advice. When mediations are “attorney-assisted,” the mediator continues to control the process, while the attorneys assist in promoting understanding. As a trained collaborative professional, I see attorney-assisted mediation as an opportunity to create an interdisciplinary team that promotes outcomes acceptable to all.
Another option that can be beneficial (and usually more economical) involves clients engaging an attorney in a “consulting” capacity, meaning that the client can receive feedback and advice about what has happened in mediation sessions to be better prepared to negotiate effectively with a spouse at the next session.
An Attorney’s Role at the Conclusion of Mediation
When the mediation process has concluded, and the mediator has prepared a written document that includes all of the mutually agreed upon decisions that have been made by the spouses, either or both may engage an attorney in the capacity of “review attorney.” In this role, the attorney can independently discuss these decisions and confirm with the client that s/he truly believes that the agreements reached in mediation are in her/his best interest.
In addition, since the granting of a divorce is a process that must include the court, the services of an attorney will often be engaged for purposes of preparing the legal documents to be submitted to the court. While some clients may decide to do this on their own, it can be a tricky undertaking and may be best given to a legal professional.
I am often asked for referrals to attorneys who may act in any or all of the roles listed above. Since divorce mediation is about two spouses developing their own plan to meet their needs in a life transition, I favor attorneys who understand mediation and support this concept of self- determination. Many of my referrals are made to collaboratively trained attorneys, as there are many parallels between the collaborative divorce process and the mediation process.
The divorce mediation process offers an opportunity for choices to be made freely, and this includes what resources are used to help create mutually acceptable plans. When it comes to thinking about the use of attorneys in the divorce mediation process, the answer is not as simple as “Yes” or “No”. The more pertinent question may be “Why?”
We’ve established, in the previous blog, that it’s a good idea as you consider divorce to put together a budget to begin planning for your separate financial futures. Now let’s talk about the tools you’ll need to accomplish that, and then look at some tips that can keep you from losing your mind in the process!
I. The Budget Worksheet
When I work with clients, I tell them to think of a budget as a list. There are two parts to this list:
The first part of the worksheet addresses sources of income, which may include the following:
Additional deductions from a paycheck are included in the expenses portion of the worksheet. Some deductions may be changing, and others may be optional (like retirement savings).
After taxes are deducted from gross income, you will have an estimate of the income available each month.
The second part of the worksheet covers expenses. These are the categories I use for adults:
The children’s budget—an important tool for discussion about how parents can meet the financial needs of their children while living in separate households—has its own set of categories.
II. What You Need to Fill Out a Worksheet
Your income: A paycheck (if you are paid a wage or salary) is the best source of information. If you receive other sources of income, look at the statements that detail that income.
Your expenses: Estimate expenses by looking at your bank records and credit card statements for the past year. This will give you a sense of your spending history. Many clients can access information online, as so much billing is done electronically. And in some cases, your memory may be your best friend. For example, in considering vehicle expenses, think about how often you fill up and how much it costs when you do.
The past is not the future.
Use the freedom of starting a new chapter to think ahead and adjust your priorities, estimating what it will cost to live the life you envision.
Use the freedom of starting a new chapter to think ahead and adjust your priorities, estimating what it will cost to live the life you envision. For example, if you know that your housing situation is going to change, do the research into what it will cost to rent a new place or what the mortgage might be on a new home.
Remember: expenses that applied to both of you or that applied only to your spouse will need to be adjusted to reflect your living in separate households.
Try to be accurate instead of precise.
Remember, this is a planning document, and it is also a starting point, so the numbers will change. Therefore, try to be realistic about your estimates while, at the same time, not overstressing about precision. You are not being asked to be an accountant. Just do your best.
Don’t be afraid to ask for help.
Not everyone likes to work with numbers, and my guess is most people don’t. But maybe you have a friend or financial planner or other professional who can help. There are Certified Divorce Financial Analysts (CDFAs) who specialize in this work. I am one of them, and I often help my mediation clients to develop their budgets.
Budgets are the start, not the finish.
If your future budget puts you in a hole, don’t panic—that is just a starting point. When I am working with clients, my aim is to help both understand each other’s financial futures, which may mean that one will need financial assistance from the other, either in the form of spousal maintenance (to assist a lower-earning spouse) or child support/cost sharing for children’s expenses (to make sure that children can live in two sustainable households).
Use the children’s budget to focus on their needs.
As you begin the journey ahead, use the children’s budget as a separate plan, independent of each of you individually. The children’s budget can be a valuable tool for parents to get on the same page about how to provide children with stability and to support their bright futures.
Budgeting is only part of the process of ending a marriage, but it can be an important step to begin to envision your separate lives and remove uncertainty around your own and your children’s futures. As an experienced divorce mediator as well as a Certified Divorce Financial Analyst, I can help. Contact me for a consultation.
For many of you, thinking about the word “budget” may be enough to give you a headache. Maybe that’s why, in a Gallup Poll conducted in 2013, only 30 percent of those surveyed said that they have a household budget.
If you don’t like working with numbers (and there are a lot of people like you out there), putting together a budget may seem like being asked to build a rocket ship. Fortunately, I do like working with numbers, and I’ve had many years of experience making sense of financial situations. I bring that expertise to my role as your divorce mediator.
What’s the problem?
In some households, not having a budget may not pose a problem. After all, if there is enough income to pay the bills, and no one is an extravagant spender, then no harm is done.
In other families, however, the lack of a budget can result in overspending, which usually translates into either drawing on savings or going into debt to make ends meet. Unfortunately, I find that most client debt arising from overspending goes on a credit card. That solution tends to inflict the highest interest rates.
Overspending may arise from lack of planning, and no plan may signify lack of communication. It’s little wonder that many marriages and relationships break down over money.
When households are spending more than what is earned, this creates a stressful environment. Overspending may arise from lack of planning, and no plan may signify lack of communication. It’s little wonder that many marriages and relationships break down over money.
Map out your financial future.
In divorce mediation, budgets can be crucial. The reason for this is very simple—as couples separate and transition from living in one household to living in two households, the combined expenses (particularly those related to housing) will increase significantly. And this is usually happening without the benefit of any additional income to cover the new expenses of a second living circumstance. Families that were challenged to cover expenses when living together are stretched out even more with the added dynamic of a second household.
As a mediator, I work with clients to help you talk about your transition from being together to living separately. And this requires planning, whether it relates to dividing assets and debts, parenting children in two homes, or coming up with financial support arrangements so that both partners can live as sustainably as possible in the future. As we look to the future, we use the budget as part of the plan that covers expected spending and the income available to each spouse/partner going forward. The budget is a starting point for mapping out each person’s financial future on a month-to-month basis.
Budget for your children’s needs.
In the case of parents, another important use of a budget is to allow you to determine, in a collaborative and cooperative fashion, what expenses are directly associated with your children. While some expenses are not easily allocated (housing costs and groceries), those that directly benefit children can be identified and estimated. This becomes a useful tool for crafting mutually acceptable plans for parents in providing for children’s needs going forward.
Finally, budgets can serve as a barometer to measure the outcome of direct payments of child support and spousal maintenance for those clients who opt to use state guidelines as a starting point for negotiating maintenance and child support. We look at each spouse’s/parent’s budget and then account for payments of child support and maintenance from one parent to the other. In this way the impact on each’s sustainability can be determined, which in turn can inform adjustments that are more likely to be seen as acceptable to both.
Avoid risk—Make a plan.
Divorce mediation is a series of facilitated conversations that entail a transitional journey into “uncharted waters.” Taking this trip without any kind of mapping is a risky choice. However, by doing the work of preparing a budget together, we can better identify the challenges of the future and discuss ways to manage them as best as possible.
Coming Soon: Part 2—Tools and Tips for Budgeting