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Thinking About Divorce?

| August 10, 2017
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    What You Have, What You Need and Getting What You Want

      Thinking about getting a divorce? These 5 questions should be addressed before you file.....

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  Do you know what you HAVE?

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         Have as much information about the family finances as possible BEFORE filing for divorce. At a minimum gather statements of all accounts you can find:

    Bank Statements

    Statements for Retirement

    FundsBrokerage Accounts

    Mortgage Credit Card Statements

    Tax Returns (last 3 years)

    Make Copies of all the above documents. Create a list of all Assets (things you own) and Liabilities (what you owe). Sometimes accounts “disappear” once a divorce has been filed and divorce papers have been served. This prevents that from happening. Now you have an idea of what might be received in the divorce; though it is a little more complex than getting half of all Assets and Liabilities. Some Assets may not be Community Assets (items that were accumulated during the marriage).

    For example, if you or your spouse had an IRA before you married, and have not contributed funds to it during the marriage, its considered separate property; and will not be divided.

    Things to consider:

    Be particularly aware of Bank Accounts and how much are in them. Cash is King in divorce for separate living expenses, legal costs, etc. Keeping cash from the other spouse is a common weapon in divorce.

    You have two reasonable options when dealing with a joint bank account. The first option is simply to do nothing. The second option is to take half the money in the bank account and put it in a separate bank account for yourself.

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    Do you know what you NEED?

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     Now that you have an idea of what your financial life may be post-divorce. This is the most  important part, figuring out your post-divorce budget. The goal is to determine the monthly  income needed to support a reasonable standard of living. 

     Creating A Budget

     

    Start by making a list of all known expenses. Think of what it takes to run the household and come up with a  dollar amount for every item/service. Or skip all the writing and use our Cash flow calculator. It is a  predefined table that allows you to simply plug in your income and expense numbers. This Budget will ultimately provide the answer to another question…Can you afford to Divorce? And if the answer is no. What changes and sacrifices will have to be made so that you can. Your spendable income will most likely drop drastically after the divorce, whether you’re paying support or receiving support.

    Moving forward this budget can provide the framework needed to submit your AFI. Every state requires both parties to file an Affidavit of Financial Information (AFI) to determine living cost post-divorce. It is the basis for determining spousal maintenance or alimony for payor and payee. Some expenses may have to be estimated, be reasonable and as accurate as possible. You might feel you are owed more emotionally. However, the Judge will base decisions on the presented data. The courts also keep a standard list of calculated expenses; so don’t go overboard.

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    What will your LIVING SITUATION be? 

     Staying in the same home will have to be financially adjusted. The courts could transfer ownership to one party. However, that party would receive a lesser share of other assets. There are many options especially when the goal is to provide continuity for children. Ownership can also remain the same until the youngest child turns 18; at which point the home can be sold and proceeds split.

    Can you afford the mortgage or is the home paid for? In reality, selling and splitting the proceeds may be the most financially responsible decision. Whatever the case may be, the cost of living elsewhere should be considered in the budget.

    After the Divorce:

    Selling the home may have capital gains tax implications on the property. On the other hand, if both parties choose to continue living together; tax deductions cannot be claimed for spousal maintenance payments.

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    How will you handle the CUSTODY of your children? (Or Pets?)

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    Arizona encourages parents to resolve custody issues on their own. Every Divorce involving children requires a detailed parenting plan filed with the court.  Before you file ask yourself what type of custody you would like to have.

    What do you want?

    Physical Custody (Children live with you the majority of time)

    Sole Custody (Legal control over all parenting decisions)

    Joint Custody (Shared Legal and Physical Custody)

    Post-divorce, unless one party is deemed unable or unwilling to care for children; The state of Arizona will most likely give Joint custody.

    In Regards to Pets:

    Many people consider them like children. However, in the eyes of the Law, pets are still considered property to be split. If a custody decision cannot be agreed upon, there are a variety of factors the judge considers. One being, who pays for the majority of the pet care. Keep in mind, pets are often used as leverage in divorce.

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    What kind of consultation do you need? a Mediator? a Lawyer? a CDFA?

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    The divorce process is actually 3 divorces: The Legal divorce, the Financial divorce and the Emotional divorce.

    The Legal Divorce

    If both parties are in general agreement and are looking for the most amicable process, They can start the legal process by jointly meeting with a Mediator. The Mediator can file all the necessary legal documents and help you work out the details, including custody. Smaller family estates often find mediation to be the easiest and least costly option.

    IF THE DIVORCE IS:

    Not jointly agreed upon

    Complex in Nature (A variety of Assets, Small Business or Complex Partnerships)

    Custody Issues

    A large family estate

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    Consider hiring an Attorney. Be sure to interview more than one Attorney as they all have different areas of expertise and experience causing a wide range of costs. Divorce is no easy endeavor and should be done with a cohesive team. Be sure your Attorney is qualified to handle your needs. Mediation is still an option when working with an Attorney.

    The Financial Divorce

    If the family estate is over a million dollars, which may include pension plans, real estate partnerships and other complex financial situations, hire a CDFA (Certified Divorce Financial Analyst). They can assist you in taking inventory and building your divorce budget. A CDFA can help you find out sooner than later if the divorce is financially viable. A CDFA Creates personal projections that show future effects of any settlement offer.

    Note:

    If your divorce case calls for a CDFA, any pre-divorce financial work could be done by the CDFA. This information will assist your attorney through mediation or litigation. CDFA Answers.

    Emotional Divorce

    Divorce is a difficult time for everyone involved, surround yourself with people who bring you comfort and happiness. They can help you through this time. Speaking with a therapist is highly recommended and can be placed in the budget.

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    No Sugar Coating It, Divorce Is Tough!

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    While emotionally and financially drained individuals are required to make decisions that affect the rest of their lives. The silver lining is that you are now doing the leg work beforehand and will be far more prepared for what’s to come. If you are currently reviewing financial information and creating a budget becomes more complex than anticipated; call us today. We also have a Post-Divorce Checklist that will help you stay organized.

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