As discussed in last week’s blog, divorcing parents face three important sets of decisions as they consider future college expenses, namely (1) saving for the future; (2) determining parental vs. student financial responsibility; and (3) allocating parental responsibility.

In divorce mediation, how parents address decisions about future college expenses for their children depends on the age of their children, the anticipated continuing resources available to the parents and attitudes toward future commitment.

In mediation, how parents address these decisions depends on the age of their children, the anticipated continuing resources available to the parents and attitudes toward future commitment.

Let’s explore three different approaches.

The Detailed Plan

This strategy works well for children of any age and usually requires parents to be able to plan realistically for future resources and be willing to make a commitment and stick to it. In this plan, parents have these options:

• Determine a periodic (monthly, annual) contribution to a dedicated college savings plan for each child by each parent (perhaps in proportion to income, or as otherwise agreed upon).
• Determine the parental contribution, whether as a percentage of the total college expenses, subject to an overall maximum (for example, tying the parental contribution to the cost of in-state tuition, fees, room and board), or specifying that only certain expenses will be covered by the parents (i.e., tuition). Some parents may include “accountability” provisions relating to a child maintaining a certain grade point average. It’s important to define how parental savings, other family member contributions, grants, scholarships and financial aid that is not in the form of a loan will count toward the parental contribution.
• Allocate the parental contribution, which could be in proportion to future income, shared equally or decided according to some other mutually agreed upon formula.

In some divorce mediation cases, parents create a plan that includes one or two of these options but not all three.

This strategy offers the benefit of certainty, while carrying the risk that unforeseen circumstances could affect the plan being followed by both parents. This could invite future conflict and misunderstanding.

The “Plan to Plan”

This strategy works better with younger children, where parents aren’t able to feel certain enough about the future to make a commitment now.  

Essentially, this involves the parents scheduling a future time (usually during a child’s enrollment in high school) to discuss the topics of parental vs. student contribution and the allocation of the parental contribution.  

This approach doesn’t force parents to make a commitment that they may be uncomfortable about making presently but still provides a deadline for addressing college expenses. Of course, there is a risk of future disagreement. For parents who aren’t enamored with the idea of having to discuss financial issues post-divorce, this may not be workable.  Establishing provisions for future dispute resolution is also important to the success of this kind of planning.

No Commitment

This strategy works best where uncertainty is the greatest and resources are limited.

Most parents want to help their children financially in some way, yet the financial challenges of divorce can be significant enough to affect a parent’s ability to make a promise that may not be kept.

When parents choose this path, they are not abandoning their children financially. Instead, they are saying that, while they will do what they can to help, they don’t want to be bound by a legal agreement to any specific plan for paying for college costs.

The benefit of this strategy is that the risk of breaking a promise later is eliminated, as there are no promises being made. The risk relates to what can happen in the future if one parent expects the other parent to contribute to college and that parent is unwilling to do so. While courts can order parents to contribute to a child’s college education, how a court would address this when the parents agreed not to make a legal commitment is not clear, and the prospect of going to court does not usually appeal to divorce mediation clients.

~ ~ ~

A fundamental part of the divorce mediation process is to allow for exploring options and identifying needs and interests that can be met by each option—with the end goal of a decision that best meets those requirements.  

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:

1. If the parents attended college, how was it paid for?
2. How much “buy-in” do parents expect from their children for college?
3. Are there savings or other resources (for example, from grandparents) available?
4. Will the child qualify for grants or scholarships, either based on financial need or on merit?
5. Viewpoints on student loan debt. (Note: according to U.S. News & World Report,  the average student loan debt for an undergraduate education is now over $30,000.)

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:

1. Adjust your payroll withholding. At a minimum, you can change your withholding status to “single” and claim no dependents. For a more precise strategy, contact a tax professional, and be sure to have your most recent pay stub.
2. Adjust your household budget to acknowledge the reality that your spendable income may be reduced because your taxes are going up.  Use this information to determine how this might affect your future needs as it relates to providing financial support for your children or spousal maintenance payments.

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

1. A new round of stimulus payments (full amount) will be sent out to taxpayers who have Adjusted Gross Income of less than: a) $150,000 per year (if filing jointly). b) $112,500 per year (if filing as head of household). c)  $75,000 per year (if filing as single). Lesser amounts are paid for joint incomes between $150,000 and $160,000, heads of household incomes between $112,500 and $120,000, and single taxpayers with incomes between $75,000 and $80,000. The full amount of the stimulus payment will be $2,800 for those filing joint returns, $1,400 for those filing as single or head of household, plus $1,400 per dependent child. Unlike previous stimulus payments, dependent children can include college age children who are still supported by parents.
2. The child tax credit for 2021 will be substantially increased from $2,000 per child to $3,000 per child. (And for children 5 and under, the credit is $3,600.) The child tax credit will also be available in 2021 for children up to age 17. (This used to end at age 16.) The increased child tax credit phases out at income of $75,000 ($150,000 for joint returns).
3. The child tax credit will be fully refundable. This means that, for single parents who have a low tax liability, they can receive the full amount of the child tax credit. This is a big change, since previously, in negotiating which parent claimed children, the parent with a lower income may have decided to let the other parent claim the child(ren) since the other parent would get the full tax benefit.
4. Health insurance costs under the government health insurance exchange will be capped at 8.5 percent of income through 2022.
5. The maximum credit for dependent care (i.e., child care) will be increased for taxpayers with incomes up to $125,000.  

Timing
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:

• The other person’s understanding of the details of a situation
• Clarification of something that the other person said
• Assumptions that have shaped that person’s views
• What the other person is feeling in the moment and looking ahead to the future
• The other person’s values and attitudes
• The intentions behind something that the other person said or did
  

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: 

• What is the value of the house?
• If one of us wants the house, can we modify or refinance the mortgage?

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.

Attorney Referrals

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.

Thoughtful Choices
​
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!

Budgeting Tools
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:

1. Income
2. Expenses

An easy way to organize this list is to use a worksheet. You can develop your own, or feel free to use the ones I provide for my clients. There’s a column for each spouse and a separate worksheet for children’s expenses.
Income
The first part of the worksheet addresses sources of income, which may include the following:

1. Wages or salary
2. Business or self-employment income
3.  Investment Income
4. Social Security Income (if you are old enough to receive benefits)
5. Pension Income (if you are retired/receiving income)

I recommend that gross income be estimated before taxes and deductions. To estimate taxes, a good starting point is to look at the taxes being withheld on a paycheck, or if self-employed, looking at quarterly tax payments. In estimating income taxes, it’s important to remember that current taxes deducted from your paycheck may change when your filing status changes after divorce. While I am not a tax professional, I assist clients in estimating their future taxes to assist them in budgeting. Resources on the Internet can also help in estimating taxes. Other taxes that are a flat percentage, like Social Security and Medicare, are easier to estimate. 
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.
Expenses
The second part of the worksheet covers expenses. These are the categories I use for adults:

1. Housing
2. Groceries and household supplies
3. Transportation
4. Health Care
5. Personal

Once you have totaled your expenses, you can compare this to income. If expenses are higher than income, you are starting off with a deficit (which is not unusual, especially if you have less income than your spouse). If expenses are lower than income, you are starting off with a surplus.
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.
Budgeting Tips
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.