Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help.   All right. Today, I want to talk about a very basic and essential topic that is worth your understanding and understanding the nuances of it, and that is spousal support. And when I talk about spousal support, I also mean alimony in there as well. Spousal support or alimony is the same term used interchangeably. Sometimes I'll refer to it as spousal support, sometimes I might say alimony, but know that they are the exact same thing. There's a lot of details that you should know about alimony or spousal support, and I want to make sure you understand the basics of it. Let's start with just a simple definition. What it is, is a court-ordered provision of money for one spouse after divorce, or sometimes separation as well. Spousal support is a very important concept. You may be on the paying end of support, you may be on the receiving end. But oftentimes, people ask, "Well, why do I have to pay support?" or, "Shouldn't I be receiving spousal support?" And you should kind of understand why it exists. Very simply, one spouse pays the other money, usually on a semi-regular basis. And the reason it exists is that most of the time, both spouses don't have equal resources. Usually, one spouse earns more than the other, and to make up for that difference, they have spousal support. Particularly, in a longer marriage where if you've been married for a long time, and if you're getting divorced and one spouse didn't work or barely worked part-time, that income difference can be substantial. Sometimes, in the hundreds of thousands of dollars a year a difference and so spousal support is there to make sure that the lower-earning spouse does not end up without any form of income after the divorce process is over. Why it came into play, if you look up the history of spousal support, why it even exists, is actually, once upon a time, you could get divorced but oftentimes, if we are assuming traditional gender roles, the wife would be left destitute. The husband who has had some sort of profession many, many decades ago before divorce laws evolved would work the job, the wife would stay at home if you think of the traditional family as it used to be. Before spousal support, if a wife were to get divorced, the wife would have no money and they would have to start over with basically nothing. They would be destitute. And so, spousal support was enacted by just about every state to minimize that from happening and keep that from happening in this situation of divorce, like other evolutions in divorce include no-fault divorce laws, which I've talked about on the podcast. It used to be the case where you had to prove a reason that you were getting divorced. Now you can get divorced for any reason at all in any state. Look, there are pros and cons and what not to everything, but just want to give a little bit of context there.   Now, the big question that I get asked a lot is, "How much alimony am I going to get?" And the answer to that is it depends. There are numerous factors that are considered. Now, every state has its own nuances to how spousal support is determined. Some of them, it's a little bit more formulaic. More often, it is almost just whatever you and your spouse agree to or whatever a court decides is the amount of support that's going to be paid, and there are very few guidelines. Particularly, for my California listeners... I work with a lot of people in California, a lot of people in New York... Now, I work with people everywhere but in those two states in particular people, the question is, "How much support am I going to pay?" And the answer is, well, we're going to have to figure it out and negotiate it because it's not a hard and fast rule in terms of spousal support.  So there are a lot of nuances to the spousal support question and what financial status means, and trying to give a bunch of examples is a little bit tricky because everyone's situation is different depending on state and income level and savings and earnings, et cetera. So, I won't try and dive into 50 different examples of ways spousal support might be calculated just based on the financial status question, but something to think about. The next issue is living conditions and lifestyle. Some people who make $500,000 a year spend $600,000 a year, which means they have a lot of debt. I also know families who make $500,000 a year who spend $80,000 a year, and they save a substantial amount of money every year. The point is, is that lifestyles can vary dramatically between families. And if you are in a situation where you or your spouse doesn't spend very much money, there may be the case for lower support amounts going forward. Now, it doesn't apply in every state and every situation, but something to think about. Earning potential, is a very important topic in terms of how the spousal support conversation can go and one that we do a lot of coaching calls around, and that is, the spouse that's receiving support, what is their educational level? Are they able to earn funds on their own? Sometimes the answer is yes, sometimes the answer is no, or sometimes the answer is, well, after a few years, they may be able to. If you are a younger couple, let's just say, in your 40s is a good example, or younger, and you're getting divorced, it's not very realistic almost anywhere in the country to believe that the spouse who's receiving spousal support is supposed to never work again. And so, the question becomes, what is that person's earning potential? Now, if you've never graduated college or don't have any formal education, maybe the answer is, "Well, we're going to assume you can earn a minimum wage job and that's your earning potential." But conversely, if you have a master's degree but have only been out of the workforce for three years, and you can probably get a job with a little bit of extra training or something like that, a six-figure job, then that could be factored into the spousal support calculations. So, there's a lot of question in terms of earning potential that needs to be determined by the spouse. I've also talked in the past on the podcast about vocational experts who will, if there's not an agreement about one spouse's earning potential, can come up with an agreement about earning potential and do an analysis of the spouse's possibilities in the job market. That is something that could factor into the spousal support discussion.   Age. Age is very simple. The older you are, usually the more likely that one spouse will be receiving support and also the more likely it is that that support may be longer. And, that the other spouse isn't expected to go find a high-paying job over time. Because if you're 61 and you're getting divorced and you're expecting to receive support, well, it's most likely the case that you will be receiving support for an extended spousal support for an extended period of time, and they're not expecting you to go rejoin the workforce and get a job, particularly if you've been married for a while, which also brings me to the last point, of the length of the marriage. If you've been married for a long time, 10 years, 20 years, 25 years, 30 years or longer, the longer you have been married, the more likely you're going to receive some form of support and for a longer period of time. Now, it's not always a super clean and easy thing to figure out in terms of timing and how long and how much, but there is a correlation between the length of the marriage and the amount of support you receive. Sometimes I talk to people who've been married for three years or five years, and they want 10 years of support. That is unlikely. You will usually get paid for... Now, every state differs, some states have rules, and you should look up your state's laws, where if you've been married for over 20 years, it's automatically assumed that you're going to get support for the rest of your life. In other states, it's a fraction of the time. But one of the things to think about is how long you've been married and how much support you'll receive. For planning purposes, I use an estimate. If the state doesn't have a law, I usually estimate around a third to a half of the time you've been married for support for planning purposes, both for the payer and for the person receiving. So if you've been married for 10 years, I assume usually somewhere between three and five years of spousal support. Now, every situation is completely different. But if I were doing just a rough guess, a rough calculation, someone were to come to me and say, "Here's the support agreement that's on the table. The state doesn't really have any real guidelines," if it's somewhere in that third to a half of the amount of time you've been married, assuming the couples are younger so meaning, excuse me, early 50s at the latest, but usually 40s or 30s, that would strike me as a reasonable amount of time. But as I said, every situation is different. In the next episodes, I want to discuss some new other nuances of spousal support such as the different types of support, and what special circumstances may exist where spousal support might be longer or unchangeable, and some of the pros and cons of those different options.

Divorce and Your Money - #1 Divorce Podcast

0231: How Does Spousal Support Work? - Part 1

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Almost half the people I talk to on a given day or week have yet to file for divorce. And they are in the planning phases and are trying to figure out their options. Now, I'm never an advocate for divorce, but there's one situation in which I encourage people to file sooner over later. And the reason is because, when you file for divorce, you generally have additional protections when it comes to financial decisions that are made. And specifically, most divorce filings include something that's called a temporary restraining order or automatic temporary restraining order, depending upon your state. And what that means is that neither spouse is allowed to make big financial decisions once the divorce is filed. And the reason that's important is oftentimes I hear people saying, "Well, my spouse is thinking about doing this. Should I go along with it? Or how can I stop this from happening? Or how do I protect myself if my spouse does that?" And oftentimes the only answer is, if this is something you're really worried about, you need to file for divorce now to protect yourself and to prevent your spouse from making this particular financial decision that could be very harmful to your future particularly when divorce is on the horizon. And this temporary restraining order or automatic temporary restraining order, as I said, prevents your spouse and you as well, but your spouse from making big financial moves. And what are those? Those could be something like selling property, transferring property, borrowing, like taking on a big debt, changing your insurance policies, withdrawing, that's a word I have a lot of trouble with, withdrawing large sums of money from bank accounts, destroying or hiding assets, paying down big debts, taking on big debts, making a big purchase, things like that. And the restraining order, which you get when you file, is there to protect you and to keep your spouse from doing those things. Now, it gets a little complicated because there are two things that are really important notes to think about. The first is that you can still do stuff that's in the normal course of business. Had a really challenging case lately where the spouses were business owners and they were filing for divorce, and they were trying to figure out how to still continue... They had a very, very successful business, but they buy and sell, I'm just going to use the word property very generally, regularly. I mean, that was basically what the nature of their business is. They buy and sell lots of properties. And so, the question was, under this temporary restraining order, how do we keep running the business the way we need to run the business, given that basically, all they do is large transactions and how to make that work efficiently. But other times I hear people saying, "My spouse is about to withdraw a bunch of money or transfer a bunch of money to here or there." And that's when that restraining order comes into play. But the point of all of that is just to say, the restraining order’s first important note is that you're still allowed to pay your groceries, pay your bills, pay your mortgage, do the normal things that you do to run a normal life. It's not meant to stop spending completely because that would be unrealistic. The second thing that you should know is that it's not perfect. And what I say by it's not perfect is, just because you have this restraining order in effect doesn't mean that your bank knows, doesn't mean your credit card company knows, doesn't mean that all of the institutions know what's going on. So even though there may be this restraining order in effect, if your bank doesn't know, your spouse could theoretically make some big transfers to different places. And, yeah, that'll come up later in the discussion, but it is not something that automatically goes in place to every institution that you work with. And so, it's something that you need to be aware of and you need to communicate these things with all of your various service providers to make sure that they follow through with what's on the instructions. Now, of course, there will be or there can be consequences down the line if your spouse violates this restraining order, this temporary restraining order. However, the issue is that you have to deal with that later. Meaning, it could take a month or two or several months to get back what has been taken even after that restraining order. And I'll give you a scenario that comes up almost every week or two that someone calls me about, is they say, "Hey, my spouse is from a foreign country." It doesn't really matter which country, but another country. "How do I protect myself?" And the big issue is, that spouse could at any moment really, they could take the... Before the divorce is filed, they could just say, "Well, I'm just going to wire all of my money to this country and then I'm going to move there and what are you going to do?" Well, that's a real possibility. And while you're married, and there's no divorce action that's been filed, that's a theoretical possibility and a real one. But in those types of cases, I'll always say, look, your best hope is to file, or oftentimes your best hope is to file and then also send this order directly to your bank the same day to prevent a big wire transfer from going out that you don't sign off on, and the money disappearing and your spouse disappearing and you're out of luck. So it's something to think about. Another scenario that comes up all the time is, you know that divorce may be on the horizon in a year or two. It may not be immediate, but as I said, about half the people I talk to, some are close to filing, but some are several years off. And a common question is, "Hey, we're thinking about refinancing the house." And I'll say, "Where's the money going to go? Are you going to take money out? Where's that money going to go? Is this going to be a smart decision?" And I'll walk through a bunch of questions for the individual person, but I'll say, "Hey, if you're taking out $100,000 or $300,000 as part of the refinance, is that going to be a smart move for you? And is that really what you want, particularly if you get divorced a year from now or two years from now, is that going to hurt you financially? And how do we stop your spouse from doing this?" Now, another thing to note is, as I talk about these temporary restraining orders is, if you file for a divorce because you want one of these in place, it doesn't mean that you have to rush the divorce process most of the time. You can file just to have this in place, and then work very, very slowly on the other stuff because you just don't write from a timing perspective. But in terms of protecting your funds and protecting your money, if you're in a disadvantageous position and you don't want something to happen, or if your spouse is about to, I don't know, go back to school and take on a big student loan. You don't want that to be marital property, or that could be something else, or just take out a big debt. There are lots of different scenarios in which this could come into play. And so, I want to make sure you're aware of the importance of a temporary restraining order. It's almost in every divorce situation, but you need to think about it, know your state's rules, do your research, and it may be a very useful tool for you as you figure out the appropriate timing for filing for divorce. And it may be a good way, a useful way, to protect yourself going forward.

0230: A Restraining Order to Protect Your Money in Divorce (Automatic Temporary Restraining Order)

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help.   A question that's been coming up quite a bit is what day or what month do I use to value all of my stuff? What day do I pick to value the house, value the retirement account, use what numbers in the bank account? Is it June of this year? Is it April of last year? Is it when I filed for divorce? And or is it when the trial date is coming up? What day do I use to pick to value all of our stuff? And it's a really important question and a really complicated question because the date that you value all of your stuff can have really important impacts. I'll give you just a few examples so you know what I'm talking about. Let's just say you separated two years ago, and now you're finally getting to the divorce negotiation, which is a very common situation. Well, two years ago, your house may have been worth $500,000, but let's say now your house is worth $700,000. And you're planning on keeping the house. Do you use the $500,000 valuation from two years ago, or do you use the $700,000 valuation? Or a more complicated subject that I've been dealing with a lot lately is people who have stock options. This one's a very tricky one, but if you have stock options, those options often have certain grant dates where you get more options or certain exercises dates where those options get a lot more liquid or have more value. And so, one of the things that gets complicated is, well, when you're trying to get divorced or you or your spouse has stock options, not only what date do you use to value those options? Because generally speaking, oftentimes those options can fluctuate substantially in value over time, but also how many options are actual marital property versus not? And trying to figure that out can be very important. And the reason I bring up this subject is it is something that you should be thinking of. And then the third example that actually happens is a very simple one that actually doesn't have a lot of complications, but something you should be thinking about, which is, let's just say, I was talking to someone this morning about this. Let's just say you and your spouse are going to negotiate things yourselves, and it's relatively amicable, all things considered. And you're trying to figure out, well, what day do we use to pick for the bank accounts? Do we use last month? Do we use three months ago, whatever it is? And we just want to make sure that we're all on the same page and that could be a simple situation, but the point is, is that all of your property fluctuates. Oh, and then one more, sorry, I said that one more example, but if you think about a retirement account or a stock brokerage account or an investment account. Investments in your account fluctuate every day. And so if you were to calculate your investments on April 5th, that same investment account will have a totally different value on April 6th. And it could have a very different value in July of the next year. So there are a lot of things to think about when it comes to what date you pick to value assets. And I just want to give you some things to think about. And the important thing about this episode is to know what date to pick and to be thinking about what date to use. And it may give you some thoughts in terms of what timing you should pursue when it comes to your divorce process. And another way to think about the date that you value the assets is your separation date. And the goal in your divorce is to have a date where all of your assets, all of your debts are valued as of that date. So there is no confusion. So things go up in the future, that's not something that gets discussed. If things go down in the future, that's not something that really gets discussed either. The goal is to have it consistent going forward. Now, what is extra complicated about this topic is two things. One is that every state has very different laws as to how the separation date or the date that you value assets gets calculated. On top of that, it can change within the divorce process and depending on your state's rules. And so you need to really understand and talk with an attorney about the ways that your assets may be valued and sometimes revalued. And I'll give you some examples of what the options might be. So in some states, you use the date that you separated. Now, what does separation mean? For some people, it's very clear. The data separation could be the date that one spouse moves out of the house, or I talk to plenty of people where one spouse lives upstairs. The other spouse lives in the basement. And you could use that as the date of separation, but oftentimes you are still living under the same roof, pretty much in the same space. And it's hard to determine what that date of separation is. And sometimes it can be a big fight. And when I say fight, I'll say negotiation about what the date of separation is because whatever date you pick could have a very big impact on how much money each spouse ends up with at the end of the day. So the date of separation is one option. A second option that comes up all the time is a very clean and easy one to understand, which is the date you filed for divorce, right? So the day you file, that can oftentimes end up being the date that you use to value all of your houses, your bank accounts, your credit card debt, your retirement accounts, et cetera, would be on that date you file for divorce. A third option that can come up as well, is the date, or sometime right before a trial. So oftentimes if you have, or sometimes if you have a trial date set, your state may say, and as I said, all of this is very state-dependent. So you need to figure out the rules in your state, but your state may say that, okay, well, we have a trial coming up in nine months. I'm just going to say the trial for sake of example is going to be in December. So they might say we're going to value everything as of October and use that as the value of all the assets. And if you're coming up on a trial date, you may have been in this process for a year, two, three years or longer to get to that date. And therefore, that's why they decide to do everything closer to the actual trial date because they know that things have fluctuated quite a bit. And then finally, the last option is oftentimes, or sometimes you can decide upon a date that you want. So if you and your spouse agree that this is the date that we're going to use for separation to value all of our assets, then that's the date that you pick. And it could be as simple as that, but both of you have to agree. And it's not always super simple to get both of you to agree. So there are lots of options there. Could be the date of separation, could be the date you file for divorce, could be a date right before a trial, or could be a date that you and your spouse agree upon. But an important point to know is the date that you separated, the date that you value all of your assets can have a huge impact on your divorce and how much money each person gets. And one of the places that comes up a lot of times in the coaching discussions and divorce strategy discussions is what date should we be pushing for? And why? Because if you have stock options that grant in three months, well, maybe you should file for divorce now to protect those options that you get granted to you in three months, right? Because they wouldn't be included in the marital pile. Or maybe the question is, well, we should push for a date later down the line because there are benefits to waiting in your particular situation. It really just depends. And it depends on your situation, depends on your state, but it's a topic for discussion that can oftentimes get overlooked by one party. And I want to make sure that you are aware of it and thinking of it when it comes to determining well, how much is all of this stuff really worth?

0229: What Date Do You Value Assets in Divorce?

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. It's been a few months since I recorded a new episode and not because I haven't been working, but because been working a little too much and got behind on the podcast episode. So apologies for that. Thank you to all 0f the people who I've been speaking to over the past several weeks and months, there've been lots and lots of good questions and, and coaching calls coming in. And I want to get back in helping educate you on the different intricacies of the divorce process. And this episode specifically, I want to talk about some subjects that have been coming up quite a bit.   And the first one I'd like to talk about is how do you keep your separate property separate? And also, how do you know if a separate property or what's being called separate property is actually marital property. And if you've been listening to other episodes, you know what I'm talking about in the context, but the big issue is, let's say you had some money.   When I say property, it could be something like money. It could be a physical property. It could be, a retirement account, a car, whatever. Let's say you had something before you got married. How do you make sure that if you're now, unfortunately, facing divorce, that is still considered separate property? What kind of things can you do? Or should you be doing? And conversely, if your ex-spouse, for instance, is saying, well, this is separate property, but, but you think it's actually something that you should be splitting between the two of you. How do you broach and go down that discussion? It's a very common topic that comes up every, every few days in terms of people that I get to speak with. And there are a few things to consider here.   And let's take it from the perspective of you have some separate property. Maybe you got an inheritance as a, maybe you had something when you got married, there's a lot of different types of separate property. How do you make sure that it stays separate? A few things.   The first is to keep good records. Now keeping good records, doesn't ensure that something is separate, stay separate. However, keeping good records can ensure that you can at least be able to prove the argument one way or another in terms of what is going on. So you need to make sure that you can keep good records. Now it becomes a challenge when sometimes you've been married for, someone called me, I spoke to just the other day, who'd been married for 31 years and there was a separate property question and there's no way to get the records. And so we were talking about some advanced strategies in terms of, getting affidavits from a parent who's still around and, and other siblings who are on the receiving end of this inheritance when everyone got the same amount, et cetera, et cetera. In lieu of being able to have actual records, they had to approach a different direction.   But if you have things like bank accounts or old account's statements, some of these institutions keep account statements for, for a decade or more, or if you walk straight into your bank, sometimes they can pull if you've used the same bank for a long time and they're still around. Oftentimes they have good records that go back further than what you may build, ask or access online, or just to get when you stroll in, if you just talk to a casual person at the bank. But anything you can do to get old records, old communications that indicate when you received some form of property and how much it was at the time it can bolster your case.   The second thing is to avoid co-mingling is a term that if you listen to the podcast, you should've heard before. But co-mingling is just the idea that you may mix your separate assets with your marital assets. Simple as that. And what does that mean? Well, let's just say you got an inheritance and then you got an inheritance of $100 and you put 50 of it into your joint checking account. Well, now you have co-mingled that money. And then you spend that $50 on groceries. Well, is that still separate property? And the answer is it gets really tough and you're probably dealing with marital property at that point. And there's not much for you to do. But if you keep that a hundred dollars that you got as an inheritance in its own bank account, and you didn't ever put your spouse's name on it and you didn't touch it, if for, for normal family purposes, then you will have a much better shot at keeping that account separate.   Now, of course, you always need to have your records and you need to always keep that account in your name. And if you're adding in some tracking to that account, all of a sudden the math gets messy unless you have those records, but it is something that is doable. And the cleaner you keep that separate property, the easier it'll be to prove that it is separate property in the context of divorce.   And conversely, I said I was taking this from the perspective of the person who has separate property. Well, if your spouse is the one who's claiming it's separate property and they don't have these things that present a good case for you to say, well, hold on a second, maybe this isn't separate property, this should probably, or may need to be considered marital property. And so for these different issues or different tips, I'm giving, if you're the person who's on the other side of this, these are the things that you should be thinking about, bringing up to advocate for yourself to make that separate property marital. Particularly if some of these things don't exist.   So one is good, keep good records. Two is to avoid co-mingling. The third thing is to keep track of income and dividends from separate property. And now this is a very tricky one, and this is very state-specific. And I always say, when someone calls, I say, this is technical. And when I say this is technical, I mean, each state can be very different in how they interpret this. And so you really need to have a knowledgeable lawyer in terms of understanding what I mean by this point.   Keep your income and dividend separate. Well, let's just say you have a bank account with $100 in it and you get 1% interest a year on that account. Well, with that 1% interest, you're earning $1 a year. Well, that $100 that is in, in some states, the $100 is, is almost always going to be separate property. However, that $1 in interest in some states is considered marital property. So if you're earning interest on an account, the $100 is separate, but $1 is marital. And if you think about that over time, where after a year or two, you have a little bit over $102, year three, et cetera, et cetera.   Well, if you think about those earnings over time, that can add up to become a substantial amount. I'm just using the context of a simple savings account, but some of you have retirement accounts to pay a lot of dividends and interest, and there's a lot of appreciation in them. And you need to really have a discussion with your attorney as to, well, is it all separate or all marital, or is there some combination of the two? Because sometimes it is sometimes that separate property that you thought you did everything right. Well, that income and dividends may actually be marital property that you have to split. And now all of a sudden the picture certainly shifts for you.   So something to really think about and know the laws in your specific state on that one. And, and it gets tricky. And so what you may want to do if you're thinking about, or if you have separate property, I should say using my example of you have $100 in separate property and you get $1 in interest a year. Well, maybe you want to put that $1 in interest always goes to a different account now that different account, might still just have your name on it, that different account you might not touch anyways. However, from an accounting perspective and trying to figure out what's part of the marital pool later down the line, having that separate account is a good way to pursue that and to figure that out.   The fourth thing I want to discuss is to consider getting a postnuptial agreement. Now, look, postnuptial agreements are very tough. Now, sometimes you may have a prenup which deals with these things, but if you're listening to this podcast, getting a prenup is a little too late. But if your state allows for postnuptial agreements, that may be a way to keep separate property separate. Now not every state allows for postnuptial agreements, but if your state does, and your spouse is willing to negotiate with you on it, then that is something to consider that can make the math. And at least simplify part of, this part of the divorce discussion later down the line. Now postnuptial agreements can happen in a few different circumstances that I see most commonly. It's hard to be married for eight years. And then in year nine, you say, I want a postnup. That's, that's a tricky proposition. I mean, if you can do it then great, but that's normally not the situation in which I see postnuptial agreements.   In one of the situations, I see postnuptial agreements a lot is right at the time of separation. So, if, if there's something going on, for example, I'll give you an example of something that happened recently as a business owner separating from their spouse. The only thing the business owner wanted is that if that business owner does some sort of deal with the business after the time of the separation, that the spouse isn't entitled to that now. The spouse still gets any portion of the business before they separated in their value, their fair share. But in this case, this business person wanted to, keep things separate and, and that's going to enable this person to, to run their business as they see fit for as long as they're separated. I mean, it's, it's a question of they're, they're still trying to work things out so they may get back together. They may get divorced. They don't know. But as long as they're living separately, they got a postnup.   Or, another time I see postnups is, is after a new marriage when you're older. I mean, there's a window of time where it's acceptable to ask for a postnup, but there are, if you are in a position where a postnup makes sense, and you may be able to ask for it, a consultant attorney, and it's a good time to think and helps can help keep separate property separate.   So those are just some things to think about in terms of keeping separate property separate. Or as I said, if you're the person and your spouse are arguing, well, this is separate property and they can't provide some base level information or provide the details on some of these things. Then it may not totally be separate. It may actually be marital property that you're, you're entitled to a sheriff.   Now, the last thing I want to mention on this point, that's, that's very relevant is that sometimes things aren't clear and there are shades of gray. And so oftentimes separate property is not 100% separate and there is a marital component to it. I'll give you a very common example. Let's just say you had a house before you got married and that house you, you, you bought before you got married. And then, a few years later, you get married. Your spouse moves into that house. You have your kids, blah, blah, blah, blah, blah. Now let's say that you decide to renovate the house or put an addition on the house you put in a new deck or a new roof, or a new, a new floor or, another add-on, addition to the house, whatever the case may be.   And that addition to the house substantially improves the home's value. Well, under that case, oftentimes maybe I'm just making up these numbers, but 70% of the house might be separate property, but the 30% of the house value may be meritable property because of some of those additions you made to it in some co-mingling and gray areas. It is a very tough and confusing and complicated area of family law that applies all the time. And so, the goal I always talk about with people is, all right, well, let's figure out all the ways we can argue that this is going to be separate property, or if it's your spouse, all the ways we can argue this should actually be meritable marital property. And let's just make the best case for you. Because oftentimes, it's not going to be 100% in one person's bucket or 100% in the other person's bucket. And there are a lot of shades of gray when it comes to separate property and keeping separate property separate and, and marital property.   So those are the four things just to think about and keep on the top of your list is the top of your mind, as you're thinking about separate and marital property and the best ways to keep it separate or prove that it's not separate. First is having good records. The second is to avoid co-mingling. The third is keep track of the income and dividends. And finally is a postnuptial agreement if that is available, or if you had one in place. 

0228: How Do You Keep Separate Property Separate? (Or Prove Separate Property is Actually Marital Property?)

0227: Infidelity, Divorce, and How to Prepare - Interview with Dr. Marie Murphy, Relationship Coach

0226: All About Divorce Mediation with Monica Mazzei, Mediator & Family Law Attorney in California

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help.   In this episode, I want to discuss an important term called co-mingling. That is the process in which you can inadvertently make separate property, marital property. Co-mingling is a very important term when it comes to divorce, and I'm going to use an example of an inheritance because it's a very common example.   Let's just say you receive an inheritance from your mom, I'm just going to make it up, and let's just say you received $100,000 from your mom because unfortunately, she passed away. Well, if you receive that money, the perfect circumstance or the ideal circumstance is you deposit that money into a separate bank account and you never move it to your joint bank account and you only track and... In a perfect world, you don't even spend that money. You save it for a rainy day. But let's just say you have to use some of it for a down payment on a house, and so you use that money for a down payment on a house. You and your spouse now have both of your names on the house, but that down payment came from that inheritance. That's a common example that I hear almost every week. Or even you needed the funds for daily living expenses and you started mixing those funds in and you move that money to a joint account. Well, when it comes to the time of divorce, you have to say, "Well, hey, is that money, is it separate property or is it marital property?" And it starts to get really complicated because it depends.   Now, if you got that money first, and let's just say you used it for life expenses, and you used that money and you put it in a joint account from that inheritance money into a joint account. Well, those funds may have become marital assets, inadvertently, because of that. Or if you used those funds for a down payment on a jointly owned house, does it immediately become marital property? Now it gets a little bit more complicated. This subject is very complicated and it depends on your individual circumstances, but I want to give you the highlights as to what you're going to be thinking about if this is an issue in your divorce.   Conversely, you could be on the other side of this situation too, where your spouse got an inheritance, and sometimes it's a pretty substantial amount, and you're trying to figure out, "Well, hey, we used some of that inheritance for these one, two and three things. Does he or she get credit for that money? Does that money come back? Is that joint property? What's the deal? What do we get to do with that?" So that is where this process becomes very important to understand from both sides of the spectrum.   So the first part, and the term that I'm going to introduce to start, is called tracing. So the first word is co-mingling, and that's the process of making a separate property, marital, broadly speaking. Now, tracing is a very important term, and that is figuring out where the money came from. Simple as that. So if you had, let's just say, a gift from a parent, and let's just say that gift came or that inheritance came eight years ago, and then five years ago you used that money to buy a house. And then now fast forward five years, you're facing a divorce situation. Well, you want to keep that inheritance separate, is my guess, and you don't want to split the funds that your parent gave you. So how do you figure out and prove, basically, that that inheritance is separate property? And conversely, if you're the one who's contesting this situation, you're going to have to make your spouse illustrate where all of that money came from and have the records for it.   So that's where tracing comes into play. Very simply, it's just figuring out where the money came from and going through that process of, "Hey, eight years ago, those funds were deposited into this account. And then five years ago, it was wired to this company for the down payment on the house." And you need to go through that process and have all the steps involved, and it's not an easy one oftentimes. So here's where one of the most important things you'll hear me always talk about is having good documentation. That's the problem and that's really the biggest challenge with co-mingling is having the documentation.   If you've been married for a long time, and I speak to people who've been married 20, 30, 40 years oftentimes, and you may not have clean records for where every dollar went. It's something that's very important to think about because state rules can vary on the subject in terms of what you should do in those situations. And one of the things you're going to really need to focus on is gathering documentation. Because sometimes in a state, the burden is, and really you need to talk to your attorney about this point because there are a lot of nuances on the burden, but some states will say, "Hey, unless it can be proved it's separate property, it's automatically marital property." Other states have a little less restrictive or a little bit more flexible burden on that very point.   So you really need to understand what's happening, but the clean way to figure things out is to have records. So to get records, you can... The first thing is that even if an account is old, you might not be able to log into your Bank of America account or Chase account and see records more than two or three years old. But if you walk into your local Chase branch, or you set up an appointment, you may be able to get records from the time you've had the account. I've been in banks with clients before where you go and you figure out, "All right, well, here's the time that we had the account" and they'll go back and they can go to the bank and get 10 years of records. It might take a couple of hours, but it is a very doable thing to do when you go into the bank.   Now, it can be tough and you still may not have all of the records, but also look for old correspondence. If you've had the same email account, or if you have any mail, or if you keep a safe or a file cabinet with important documentation. Or sometimes if it's related to an inheritance, you may have or you may need to contact the old attorney who handled the paperwork if an attorney handled it. Or your sibling, sometimes maybe you don't have it, but if you have a brother or sister or something, you might be able to contact them and figure out what kind of shreds of evidence sometimes it is, particularly, we're talking about something 10 years or eight years in the past, you may have to keep things clean. Now, sometimes it's not a big issue when it comes to documentation and you have everything there. But if you don't, those are some tips I would suggest for you.   Now, let's just say not all things are clean and smooth, and let's just say this is going to become a big issue between you and your spouse as part of the divorce process. What do you do? That is you're going to have to bring in some experts. There are forensic accountants and CPAs who do this work and can help figure out, "All right, what part is separate? What part is marital?" And sometimes they may even come up with estimates. But if you get a good accountant, they will look at what of information that you have or that your spouse has, and they will say, "Okay, well, I can see 70% of the picture" and they'll say, "Okay, well, from my best judgment, I think this amount of money is separate property and this amount of money is marital property." They can sometimes estimate or even trace with imperfect information where funds came and went.   So if you have a lot of money at stake, and sometimes it is, if you're dealing with hundreds of thousands, if not millions of dollars that you're trying to figure out, "Hey, what is separate property? Hey, what is marital property?" Then you should strongly consider getting an accountant or a forensic accountant to help you.   Now in a perfect world, and I always say this about hiring experts who do valuation or forensic accounting, et cetera, is in a perfect world, and we're talking about divorce so almost nothing is perfect, you would get a neutral person to look at all of the available documentation that you and your spouse agree upon. And will have that person analyze everything, prepare a report, and those are the numbers that you use to determine separate or marital property. Now, that's not always the case. Certainly, I see all the time where one person is hired by you, one person is hired by your spouse, and they come up with very different valuations of what is separate property and what is marital property from the co-mingling and the tracing that they do. And you have to basically fight it out, unfortunately, or come up with a middle ground.   So something to think about, but as I said in the previous episode is really to the extent that you can keep things separate and avoid making things separate, or making separate property marital, you should. Now, not all the time are you walking around your life and thinking that I'm going to get divorced tomorrow and therefore I need to have done these things eight years in advance. I understand that life doesn't work that way and so you shouldn't necessarily feel bad because you've made the wrong decision, but you do need to... Or you didn't have the records, or you didn't keep things as cleanly as you would like. But even despite that is you need to get on top of and start collecting and getting the information on all the records that you don't have and start planning for the future and putting yourself... I always say this is even in an imperfect situation and imperfect world, you need to start putting yourself in a very good or the best situation you can for the future to ensure, or at least to help ensure, that things are going the way that they should through the divorce process.   And if you gather up as much documentation as you can, you gather up some of the records, you might not be able to get 100% of the money back or prove 100% is one way or the other, but hey, if you get 80% of the way there or 70% of the way there, you are still in a much better position than before.   So the important term for this episode is co-mingling. And if you are thinking about your individual circumstance, this is a really complicated term, both legally and involving individual circumstances, and involving your state's laws, but I would type in co-mingling in your state and I would look at some attorney websites. I would contact your attorney and figure out, "Hey, what do I need to be thinking about both good or bad when it comes to co-mingling in my situation?" Because it can mean the difference in many thousands, hundreds of thousands, or in some cases, millions of dollars that go from one person to another.

0225: Understanding Commingling In Divorce - And How to Protect Yourself

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help.   It's been a little while since I have done an episode and it's been a very busy couple of months, so apologies about that. But I want to discuss a topic that's been coming up quite a bit in the coaching calls.   And that is how you handle inheritances and gifts during a divorce. It's a tricky question. And it's an important question because oftentimes your parents, or someone, will leave you a substantial sum and you want to protect that during the divorce process. Sometimes that inheritance money comes at a poorly time to time where you can't control it. Someone passes away, unfortunately, and you receive some money maybe right before a divorce or during the divorce process. And you're trying to figure out, well, what should you do?   I just spoke with someone the other day who had filed for divorce and then, unfortunately, a parent passed away, eight months into the divorce process And they were wondering, "Well, how do we handle this new inheritance that arose, and what to do about that?" And so in this episode, I want to give you some tips when it comes to handling gifts or inheritances and how to protect that property. And really, the main thing is how do you prevent it from becoming a community property, which is the property that is subject to, or that you're going to end up having to split as part of the divorce process.   So let's go through a few quick tips.   The first thing is if you receive an inheritance, or you receive a gift from someone, keep that stuff in your name only. Meaning, if you get some money, let's just say a hundred thousand dollars, because I'm going to use that as an easy example. If the parent passes away and gives you a hundred thousand dollars, don't deposit that into a joint bank account. Set up a separate bank account that's in your name only. And we're going to call it your inherited funds account. And so put the money in that bank account separately so that it doesn't get commingled with the other assets. And that could get complicated because not always is an inheritance a gift. Sometimes it may be a home or a car or any other type of property. Whatever it is, make sure to title it in your name only.   The second thing is don't let your spouse make any contributions to that gift or that inheritance. And the house is the easiest way to illustrate that. If you inherit a house and let's just say it's been run down for a little and it needs some repairs to get it up to speed. Well, one of the things that you should do is don't let your spouse contribute financially to those repairs because the value increase of that house, or even the whole house itself, depending upon where you are, could now come into question as part of the divorce process. And sometimes this may be a house that you maybe just made renovations or adjustments on a few years ago, and now the divorce process is happening. And now you're wondering, "Well, is any part of that house marital property, because my spouse helped renovate the master bathroom and bedroom in there?" And so if that's your situation, be very careful and think through what you're going to do with that inherited property. And if you can keep your spouse from making contributions to it, financial or labor even, then you should do so.   The third thing is to consider transferring that inheritance or gift to a trust. Now, oftentimes a parent who was savvy in estate planning, or at least inheritance is most commonly from parents, which is why I use that example, are very savvy in their estate planning. And so oftentimes as part of their estate is they will give you that property, be it cash or the home or whatever, jewelry or whatever it may be, and they might require it to be put in a trust as part of the process. But if that wasn't the case for you, I would consider setting up a trust.   Now there are lots of complications and nuances to having a trust set up for you. But what I would do is if you have an inheritance coming, or you recently got one, or you're thinking about it, I would go and look for an attorney called an estate planning attorney or a trust attorney. And they're kind of one and the same and they can illustrate options for you to set up a trust. Now, usually, there are some fees involved, of course, we're talking about legal work, but it can be worth a little bit of trust set up in the short term to protect you in the long-term.   And then the last thing I would strongly suggest is to keep really good records about where the inheritance came from, how much money was in there, where the funds went, et cetera, et cetera. One of the most common things that I deal with and see people make a mistake with is not keeping track of the money and keeping track of the details of an inheritance. And so what can happen is, let's just say you got an inheritance seven years ago and you knew it was approximately $123,000 but you don't remember the exact math that was there. Well, one of the things that you can do, error the exact amount that was in there because seven years have passed and you want to know. Well, if you don't know what that amount was and your spouse is going to contest it in terms of how much was actually in that inheritance, you could be setting yourself up for a world of potential hurt in that you may end up losing part of your inheritance in the divorce process since you didn't keep accurate records.   And so, one of the things that is most important to do is make sure that you keep track of the paperwork. Keep track of any emails. Keep track of any bank statements. Keep track of any lawyer's correspondence or documentation to ensure that the information that you have from the inheritance is kept and kept track of over time and kept cleanly. Because one of the things that can happen is, let's just say, hypothetically, you've received an inheritance of that $123,000, and the next year you purchased the house with your spouse and use those funds as a down payment. That's something that's very common. And then three or four or five years or 10 years, whatever the amount is, goes by and now you're facing divorce. And you're like, "Well, I contributed $123,000 to that down payment of the house from this inherited gift."   Well, the good news is that even though you may not have followed my initial steps or initial tips, my tips one, two, and three, that you still may be able to get credit for that money as part of the divorce process and consider it still separate property if you have accurate records. But you need to make sure that you have very accurate records of where every dollar came from and where that inheritance money went. On the other hand, if you didn't keep accurate records, you may lose those funds and it may become a costly issue. And it's something that you want to be very careful about. So it's one of those things where you need to make sure that you find every piece of documentation that you have related to that.   Now I've been talking mostly in the context of inheritances because that's the most common, but oftentimes I also see a parent give a gift to you and or your spouse. And what can happen is some money flows in, it's usually pretty informal, gifts around $14,000 or so are not taxed. But sometimes they're bigger gifts. And you forget, because of the size of the gift, to go through all of the steps and document everything. You may have just had a phone call with your mom or dad and your mom or dad just said, "Oh, I'm writing you a check for, here's a $10,000 check for some spending money." And if you're fortunate enough to have parents who are in that position and then you're like, "Oh great. This is a good check." And you use it for something important, but you want those funds back as part of the divorce process because you feel it's appropriate given the situation.   Well, one of the things you should make sure that you do is you need to have a list of documentation from your parents. Your parents, your mom or dad should say, "Hey, I wrote you this check for $10,000." You should have some emails from the time of the check. You should have other correspondence from that time. And you should indicate that all of that stuff happened and happened smoothly because that way you can prove where those funds came from. But just because it's casual or just because you may not be thinking about it at the time and divorce may not have even been on your radar at the time of the gift, which is okay, but you need to make sure that whenever money is coming in from a source, particularly a family member, that those transactions are documented and you gather that documentation.   So the four most important tips for protecting your inheritance or gifts in divorce. And I'll just go through them quickly. One is to keep inheritances or gifts in your name only. The second is don't let your spouse make any contributions to that account or that property to ensure that it stays separate. The third is to consider contacting an estate planner and transferring that inheritance or that gift to a trust. And fourth is to keep really good records as to where that inheritance or gift came from.

0224: How to Handle Inheritances and Gifts in Divorce

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. One of the most common questions I get, and one of the biggest anxiety producing questions I get, is how much is divorce going to cost? How much should I expect to spend on the divorce process? And if you're going to ask your attorney how much divorce is going to cost, they're going to say it depends. And I've never known an attorney to give a straight answer when it comes to the cost of divorce.  And so in this particular episode, I want to go through some considerations in terms of how much the divorce may end up costing you in terms of the financial check that you might have to write. So I'm going to just give some ranges and some considerations and things to think about as it comes to the divorce process. Now everyone's situation is different. Divorce can cost more whether you live in a city, versus a suburb, versus a small town. Divorce can cost a lot depending upon what assets you have, what needs to be done. There's a lot of variations, but I'm just going to give you a range. And so on the low end, from what I see per person, I see the minimum, minimum, minimum, most people are going to spend on their divorce is about $5,000. And that's for one person. And so it'd be $10,000 as a couple. And that's assuming that everything goes smoothly in divorce, and yes, there are ways to make divorce go smoothly, but that's your best-case scenario.  Now, the normal range I see for people is usually in the 20 to I'd say 35 or $40,000 range per person. Sometimes it's closer to 15. Sometimes it's closer to 50, but that unfortunately is not uncommon when it comes to the divorce process. And sometimes if there's just a lot of fighting, a lot of complication, the process is going to drag on for several years, the bills can get into the hundreds of thousands of dollars, and I've seen that too. And so what I want to go through is first to be aware of the cost of the divorce, and if you're going to be going down this path. I mean, that's why you're listening to this episode. There is a big expense, and you have to really think about what's worth it, and what's not when it comes to investing in the divorce process. And I want to go through a few ways in terms of explaining both how you could control the cost of divorce, and also how to figure out just a few quick methods on how to pay for it. When it comes to minimizing or controlling the cost of divorce, really the biggest expense when it comes to divorce cost is how much you and your spouse disagree on certain items. To put it a different way, is if you and your spouse can come up with solutions on your own, and come up with as much of an agreement as you can between the two of you and not involve attorneys, the cheaper the divorce will be, the less expensive it will be.  And so if everything is a fight, and I use an extreme example all the time, is I grew up with a middle-class family. They did well for themselves, saved, and they had several hundred thousand dollars of savings, and a house and the normal stuff. And they spent 100% of their money and then some fighting over everything, from not just the big items like houses and retirement accounts, but all the way to who gets the dining room set. And unfortunately, they ended up in the divorce process, they spent hundreds of thousands of dollars on legal fees, and that was all the money that they had. On other examples, I know billionaires who've gotten divorced for less than $20,000, and that's because they came up with an agreement ahead of time with their spouse. And yeah, maybe the check they're writing to their spouse is going to be pretty substantial, but they knew what they were going to do. They were smart about legal fees, and they did a very good job with it. And so really it just depends on how much fighting there is. And just some other costs to think about is if you go the full litigation process, where you get an attorney, your spouse has an attorney, and you're going to discuss and fight about every detail. That's going to start at a minimum of $10,000 a person. Every time you have to hire an expert, be it someone to do an appraisal for a business, do an appraisal for a house, do a forensic accountant. Each time one of those experts get brought in, expect that to be another 10 to $25,000 each, in addition to legal costs on top of that from analyzing the reports and discussing it. And if you were to take that to trial, that check just keeps getting larger and larger. Divorce attorneys are very expensive. I mean, on the low end, I think a good attorney can be 250, $300 an hour. And on the high end, I know attorneys who are 900 to $1,000 per hour of their time. Imagine that. So a 15-minute conversation can cost you $150 sometimes, with your attorney, or sometimes just sending a one-off email. And so you need to be very smart about how you interact with your attorney, and how you use that attorney. I already mentioned other professionals, but there are also court fees. You have to think about an attorney's full team, paralegals, assistants, et cetera. There's a lot that can go into a divorce and divorce fees. And so one of the questions that you should be thinking about, and one of the most important things we talk about in the divorce process, or I talk about on coaching calls, is how are you going to pay for this? That's one of the most important questions that I get from people all the time. And I'm going to go through just a couple of quick items to think about. If you have money in a joint account, generally speaking, you're entitled to half of those funds. Generally speaking. So if you need to withdraw half those funds to start putting your little war chest together for attorney's fees, then you should do so.  Now by doing so, you're also going to definitely be tipping your hand in the divorce process, but that's something that may be necessary, particularly if you didn't originally have funds to go through the divorce process. If you have savings, then you can consider using your savings. If you have savings in your own name, if you need to borrow funds from a friend or a family member to make the initial retainer for an attorney, then borrow funds from an attorney.  And then there's also retirement accounts and home equity lines, and other things like that you should be thinking about. But when you walk into an attorney's office and say, "Hey, I want to hire you for my case", you should be expecting to write a check for anywhere between five and $25,000. The day you hire that attorney and anywhere within that is very much normal range. And so I just want you to be really cognizant of the cost of divorce, and the things that you can be thinking of. The biggest factor as I said is acrimony. And so if you can come to, and I work with a lot of people in this situation, where you and your spouse, let's just say, there's 10 issues that you're discussing and have to fight over, if you can get to an agreement on eight of them, and then you only have to work out two issues, then that can save you a lot of money in your divorce because there are only two things that need to be discussed versus starting from scratch with all 10. And so things like that can help you save money in divorce, and maybe it can be a small thing like, hey, if you can start a negotiation when possible with your spouse, it's not always possible to negotiate with them. But if you're in a situation where you can say, "Well, I think we're going to both keep our cars." Well, you've already started an agreement on that.  And that's one less thing you can check off the list, and just getting the cars agreement set in stone before having attorneys have to negotiate over it could end up saving you a few thousand dollars. So sometimes even a smaller items that you can come up with a can help you, but if you continue to drag out the process and every attorney wants to beef up there, I won't say every attorney, but it doesn't hurt the attorneys when you have more to fight about. It's something to be aware of as you go through the divorce process. So just as a quick recap, on the low end, divorce can be five or $10,000 a person to get things done. If you have an attorney involved, and on the high end, it can go, I'd say the average is usually around the 25 to $50,000 range. But if you are fighting about everything and this goes to trial and you have money to take it all the way to trial, legal fees can get to $100,000 or more. So be very wary and very well prepared when it comes to figuring out what's the right investment that you need to make for your case.  And sometimes I'll tell people like, "Hey, I don't know if you want to spend an extra $10,000 on this issue, because it may not be worth it for you," but other times I'll say, "Yeah, you know what? You should spend $25,000 on this issue because if you get $300,000 in return, that's a useful return on investment to invest in legal fees." Every situation is different and there are always lots of complications depending upon what's going on, but be prepared for the cost of divorce if you're going in that direction, and go in with eyes wide open. Regardless, it's going to be an expensive check that you're going to write, and it's up to you to be prepared for it, and determine what really is appropriate given my circumstances that you're willing to put into this process to secure your future and get through it in one piece.

0223: How Much Will Divorce Cost? (Answer: It Can Be Expensive!)

To get in touch with Nicole Noonan, visit newchaptercapital.com or call (212) 404-7807. Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Shawn Leamon: All right. Today we have Nicole Noonan. She is the CEO of New Chapter Capital, which is a firm that deals with a topic we haven't covered in a while, but a very important one, which is divorce funding. Nicole, welcome to the show. Nicole Noonan: Thanks so much. Happy to be here. Yeah. Shawn Leamon: Why don't you tell us what New Chapter Capital does? What is divorce funding? What does that mean? Nicole Noonan: So New Chapter Capital and divorce funding provides liquidity for individuals going through a divorce, that would not otherwise have access to it. So we provide an advance against the potential settlement. And the advance can be used for legal fees, expert costs, and for living expenses. Nicole Noonan: And this is something that I saw, in my own practice, a real need for, where one spouse had more money than the other. And they cut up their credit cards, and try to back them into taking a settlement less than what they're entitled to. Shawn Leamon: And so, to simplify, I mean, liquidity is money. So you're giving them the funds to get through the divorce process. Nicole Noonan: Exactly. Yeah. Shawn Leamon: And the objective then is to level the playing field, it sounds like. Nicole Noonan: Right, right. So they can go out and hire the right attorneys, the right experts. We don't want someone to have, I'm going to use a generalization, their husbands go out. They're the money, the bread earners. They're going to go hire top counsel for the divorce. Nicole Noonan: And the wife is going to have to go borrow money from friends or family and go hire someone who's fresh out of law school. And this is their first divorce case. We don't want that. We want them to have equal representation. And that's what they're entitled to. Shawn Leamon: Yeah. So I think a lot of people, I mean, anyone who's not the primary breadwinner in the house, if there is one, probably is at a pretty significant disadvantage, at least from my experience, in terms of having the available money to go and start paying legal fees. Shawn Leamon: I was just talking to someone yesterday. And they had some money in savings, but basically drained all of it within the first month or so of the process. How does someone know that they'll be a good candidate? How do you figure out whether they should contact you? Kind of gives me the overview, as someone should evaluate kind of this divorce funding, versus using credit cards, or borrowing from family and friends, as you mentioned. How does someone think about that? Nicole Noonan: Yeah, no. So, we always say, people save for their wedding. You plan for the wedding, the dress, the cake, the caterers, the band. So when it comes time to divorce, no one's sitting there planning for a rainy day divorce. So if you don't have access to your own money, you're going to have to go to friends or family, potentially, or you're going to have to take out credit cards. Nicole Noonan: Now, that being said, not everyone needs to have an attorney. Not everyone needs full-blown litigation. I always say, it's best to sit down with your spouse, if you can, open up a bottle of wine, have dinner. And say, "Hey, these are my 10 non-negotiables. What are your 10?" And hash it out as much as possible. Because you'd rather send your child to college than send your attorney's child's at college. Nicole Noonan: But that's not always a possibility. That being said, if you're fighting over ... There's case law, very interesting things. I get it for animals. People want to fight over animals. But fighting over your baseball card collection, or your Nintendo set. Or fighting over something with no value, it's really not worth putting a fight on something like that. Nicole Noonan: So what we say is, if there's an asset, usually it's a house, and how it's going to be divided. And if you can't work it out, or if there's a custody dispute, and you can't work it out, then you're probably going to need to retain some sort of expert, whether it's an attorney or a mediator. And at that point, it's going to be divided. The money's going to be divided. Nicole Noonan: And that's when we come in. That's where we can say, "Hey, okay, let's figure out what you're going to be entitled to, and what we can potentially advance you." So you can go in and, unfortunately, sometimes have that fight with the attorneys, and the accountants and whatnot. Shawn Leamon: So what stage then are people normally coming to you, or do you normally help people? Are these people who are at the beginning stages of the divorce? So still literally may be at the kitchen table, and haven't really started the process yet, in some cases. Or are they generally kind of early or midway through the process? How does someone know the timing, in terms of when to contact you? Nicole Noonan: Yeah. Shawn, I've been doing this for 15 years, between my own practice, mediation, and for divorce funding. So I get people from all over the country at all stages of the divorce, whether they're looking to say, "Hey, I'm looking to hire an attorney in California. Who would you recommend?" Now, I don't give them one. I give them a list of people. Nicole Noonan: And then they may come back to us and say, "Hey, you know what? I want to hire Joe something such, and I want your funding. Let's start an application." There are also the people that are on the eve of trial. And I get a call from an attorney saying, "Hey, we thought this was going to be a $10,000 case. Looks like going to cost another $30,000 to take it to trial, because no one's settling at the courthouse steps." That's when we come in. So, really, it depends on the case. Shawn Leamon: And does someone need to have an attorney as part of this? Or if I'm going through the process representing myself, or more or less by myself, am I a candidate for funding? Nicole Noonan: Yeah, no. You have to have an attorney. We don't represent any people that are representing themselves. Yeah. Shawn Leamon: Okay. No, no. Fair enough. So let's say I figure out that there may be an option for me to get some funding. How does the process work? Nicole Noonan: Try to make it as simple as possible. Because, honestly, money is stressful. Divorce is stressful. So talking about money and divorce is super stressful. So we send an application to the firm, to work with the client and the firm, of what they're looking for in terms of funding, and what the marital asset pool is. And the reason we send it to the firm is it's not their first rodeo, but it's potentially the client's first rodeo. Nicole Noonan: Documents are sent to us. It goes to our underwriters. We try to make a decision as quickly as possible, again, because it's a stressful time. So usually within three business days, unless we're asking for more documentation. And, of course, the more complex the divorce, the longer it may take. But, traditionally, it's three business days. Nicole Noonan: Once the client's approved, documents are sent to the client. We do ask the client to review it with an independent counsel. So it does not need to be a matrimonial attorney, cannot be the matrimonial attorney you're using, but it can be any attorney that's practicing within your state. Documents are then sent back to us. And the whole process can be done in as little as two weeks. Nicole Noonan: Usually, the longest portion of it takes place when we're trying to find counsel to review the documents with you and get them in, especially in light of the time we're living in right now. Shawn Leamon: And I'm going to make up a very low number, but just for the sake of example, if you were to lend me $100 ... The divorce process could be another month, or it could be another for three years. When do I have to pay that money back? Nicole Noonan: When you settle. So we get it. Unlike a credit card, we have to worry about monthly payments. We understand. I mean, I've been doing this for a very long time. And the people I work with have been doing this for a very long time. It may take two years to sell a house right now. So you may decide, "I'm going to get 50% of the house. You're going to get 50% of the house." And we'll have to wait until you get the house sold. Nicole Noonan: Unlike a law firm, where they're not really willing to wait. And if they are, it's also not great. And as an attorney who's done this before, where we would say, "Okay, well, we'll carry this case. And hopefully, at trial, at settlement, we'll get repaid." And it takes another two years, three years, especially during the housing crisis, for us to get repaid. So it's not great business for law firms. Nicole Noonan: But let them do what they do best, let them represent you. And let us fund you, so you take the pressure off them and the pressure off yourself. Shawn Leamon: And then is there an interest rate? Or is it a fee? Or how do you kind of charge someone? How do you make money, basically, is what I'm asking? How's this all work? Nicole Noonan: No, I'd love to do this as a charity. And honestly, that's my next chapter, and my new chapter is hopefully being able to give back. Because I just think that there's such a need for this, for people who don't have a lot of assets, but that really need funding to get them to their new chapter and move on. Nicole Noonan: But we do. We have a monthly fee. But nothing is due until you get to settlement. So they don't have to stress about that. No. Shawn Leamon: Got it. And so when do you finally get to a settlement, or there's an order or something, the papers are signed, and as the assets are getting moved from one place to another, is when your repayment? Nicole Noonan: Exactly. Shawn Leamon: Got it. How does someone know if they're ... One of the common issues that comes up with a lot of my clients, is people have different levels of their credit, let's just say. Some people have done a great job, over time, maintaining that credit. Others are in between. How do you manage or navigate that process, if I'm kind of looking at my options? Nicole Noonan: Yeah. So we do do a credit check. That being said, we get it. I mean, we get that not everyone has built up their own credit history, because their spouse was the one who did all the banking, was the main breadwinner, and was the main signee on their credit cards. Nicole Noonan: We do have other people that have been experiencing job losses or unemployment right now, and they just can't maintain that level of credit. Again, we get it. So it's not something that is our main decision-making standard, for divorce funding. Shawn Leamon: And you mentioned something important, is oftentimes if you need funding for your legal fees, you may also need funding just to sustain life. Does your funding include or allow for use for fees that are outside of your attorney? Nicole Noonan: Yeah. No, absolutely. So we understand. First and foremost, we want to make sure you're able to get this divorce done. So we want to make sure that your attorney and your experts are paid. So whether that's a forensic accountant, anyone that you're going to need, an appraiser, someone who you're going to need to get your divorce settled. Nicole Noonan: But we also fund for living expenses for clients. So we want to make sure that, based on what our assessment is, you're going to need X amount. And if there's anything left over, we'll say, "Okay, if you would like to draw down, we will fund for living expenses as well." Because some people just need to move out. And they need to get a new apartment. Or they need to have money to go back to school, so they can start their new chapter. Nicole Noonan: Sometimes the most rewarding fundings that we do is people come back to me and say, "Hey, I went back to school. I got a degree. And I'm starting a new job. And I'm on my own two feet. And I'm never again going to let someone maintain a bank account, and know nothing about my finances." So those are really sometimes my favorite fundings that we do. Shawn Leamon: You're based in New York. Right? Nicole Noonan: Correct. Shawn Leamon: Yep. I'm in Texas myself, as many of the listeners know. But we have people from all over the country. Where do you work? Can any state apply, or almost any state? Nicole Noonan: Yep. We're all over the US. So we're both East Coast, West Coast, Midwest. We're there. And my biggest hurdle is for people to know that we're there, Shawn Leamon: And what's the best way for someone to contact you? Nicole Noonan: So we have a website. It's New, N-E-W, Chapter, C-H-A-P-T-E-R, Capital, C-A-P-I-T-A-L, dot com. You can also find us on LinkedIn. We also have an Instagram, @divorcefunding. We're all over. But yes, New Chapter Capital is probably the best. Or they can call us, at 212-404-7807. Shawn Leamon: Well, Nicole, thank you very much for coming on. I think it's a great option. It's one of the biggest and most common topics that I speak with people about, is trying to figure out what options they may have, in terms of getting money to fund the legal fees. Particularly, if they have a spouse that has been manipulative or controlling, or just kind of limiting access, as you started the conversation with. So I think it's a great product and service that you offer. And thank you very much for coming onto the show. Nicole Noonan: Thank you so much. Really had a great time.

0222: Divorce Funding with Nicole Noonan, CEO of New Chapter Capital, Inc.

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. One of the challenges of picking a divorce attorney is finding the right type of attorney or type of personality of an attorney to work with you and for you during the divorce process. There can be a lot of different styles of attorney. Sometimes you want an attorney that is more there towards working towards a resolution and won't run up your bill, but you also want an attorney who is going to advocate for you and fight for you. One of the things I want to cover in this particular episode is why you want to avoid hiring the most aggressive divorce attorney. You'll see a lot of attorneys out there who claim to be the dog, the bulldog, the fighter. They're going to go all-in and advocate for you and fight for you on every issue and make sure that you're there to win. In fact, if you think about the way that divorce attorneys are represented in movies, oftentimes the attorney's going to be that pit bull aggressive, sports car driving, fancy suit, 35th floor in a downtown office. An attorney that is there to be aggressive and fight. But I want to give some considerations when it comes to choosing an attorney as to why that might not be the ideal in terms of picking the most aggressive person. And there are four big topics I want to cover in terms of an aggressive attorney. The first is that going to court is expensive. Second is aggressive does not equal respect in the legal community. The third is aggressive doesn't mean effective. And finally, fourth is that an aggressive attorney can be emotionally draining. So, I'm going to go through these four points. And just keep in mind when you're thinking about your attorney selection, you're thinking about the divorce process, you're thinking about how these processes go, is ultimately you're going to need to get to a resolution. Most people listening want to get to some form of a settlement, and it requires some negotiating ability. Now, everything being lopsided, it doesn't mean you cave in and give in to the other side, but you want someone who is there to advocate for you, but help you get to a resolution, not just fight for fighting sake. And so, the first point in this is going to court is expensive. If you get an aggressive attorney, you will constantly be fighting absolutely every issue, there'll be a motion for every issue, you'll have lots and lots of legal work that's done. And anything that your spouse or soon to be ex-spouse brings up, whether it's valid or not, is going to be challenged, even when it's not justified to be challenged. And sometimes it is going to ultimately hurt you, not harm you. And so, when you have overly aggressive attorneys, oftentimes you don't get to a point where there's a resolution and you end up going to trial or having many, many court dates. And the process takes twice as long and is five times more expensive because you're fighting every issue. The second point is aggressive attorneys aren't always respected both by judges and the legal community. And remember, when I use the word aggressive, I do mean the person who fights for fighting sake. If you know that someone's always going to fight every particular issue, whether it's big or tiny and irrelevant in the overall process of things, that person starts to lose their credibility. I mean, imagine, and I use an example that's actually a true example, but let's just say you have $300 worth of dishes at home. You know, you have your plates and your bowls and your cups and whatever else, but seven motions later and 14 hours of legal work later, you have now spent $5,000 or more on trying to get those cups and plates going to your house and not your ex-spouse. And that's kind of the thing, where you would have been better off just letting this issue be rather than fighting over every detail attached to it. And so, when you're fighting over every little issue, there comes a point where people don't value what you say, because everything is an emergency, everything is a big deal. And then the issues that really are big deals get lost in the overall shuffle because you don't have that credibility to say when there are actual emergencies, there are actual issues because everything is. The third point is that aggressive doesn't necessarily mean assertive or effective. Now, you want, and one of the most common things that almost everyone wants, and I hear all the time, is you want your attorney to fight for you. That is a fair point and a fair statement. You want to feel like your attorney is on your side, advocating on your behalf, standing up for you through the legal system to make sure that what's going on in this divorce process is right and just. And if there's something incorrect that's going on, that that person is going to advocate and make sure that you walk out with a good settlement or the best that's possible given the circumstances. Now that said, there are ways to do that without causing unnecessary fights on every issue. And the way I make that distinction is there's a difference between being aggressive and being assertive. And so, there are some people who... Many attorneys I like, some of the ones that I recommend to people when appropriate is they are very assertive, they're always in your corner, and they will always advocate on your behalf, but they aren't overly aggressive on how they do it. They treat themselves as being right. And so, because they know the law well, they know how to negotiate skillfully, they don't have to yell or cause an unnecessary burden. They can speak in a tone like this, they can write factual statements, they can use the law to their advantage in order to help you versus making every issue an explosion or a blow-up. And then the last point is that an aggressive attorney is just emotionally draining. I've been on the receiving end of and also seen clients who are on the receiving end of overly aggressive attorneys. And what they say and what they receive and what they communicate is just always something. Whether you said something the right way, or you incorrectly typed something, or whatever the case may be, that the receiving end that they're going to say, they make every issue a five-alarm fire when it may just not even be smoke coming out of the kitchen. They pretend like the whole house is burnt down and we got to rebuild it. And it just becomes overly complicated when it doesn't need to be. In a perfect world, and there isn't a perfect world in divorce oftentimes, this is divorce that we're talking about, but if there were a perfect world in divorce, you would have two reasonable people, two reasonable attorneys, that say, "Hey, our sole objective is to get to a fair settlement so that everyone can move on with their lives at a reasonable cost and in a reasonable timeframe. That's the goal." And when you have someone who's fighting every issue, either on your behalf or if unfortunately, your spouse picks that aggressive attorney, everything just is a constant fight and it's a battle and it's draining and it isn't productive. And so, you want to make sure that the attorney that you pick, when you're looking for an attorney, knows how to pick his or her battles on your behalf. So some things are worth fighting, other things are not, and a wise attorney will guide you in the right direction. And so, in the overall big picture, one of my favorite phrases that I've said on the podcast before is you can't see the forest for the trees. Meaning you look at every individual tree but you can't realize that you're in this big forest and you don't necessarily know what the big picture looks like. Well, that's what it is like working with an overly aggressive attorney as you're fighting and looking at every individual tree, but sometimes you just miss the whole big picture as to why you're here, what your objectives are, and what's the best way to get out of this, all things considered. Picking an overly aggressive attorney can really harm you in that regard. That's it for this episode. I'm going to continue the series on attorneys because it's one of the most important things that you can do as part of the divorce process.

EP 0221: Why You Don’t Want the Most “Aggressive” Divorce Attorney

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. In this episode and the next several episodes, I want to discuss divorce attorneys, and family law attorneys, and the details and choices amongst them. And how you can figure out whether or not you have a good attorney, how to find a good attorney to make sure your attorney is fighting for and advocating for you and the complexities of the attorney selection and just relationship management process. I'm a huge fan of divorce attorneys and having them help represent you, but like in all industries, there are people who are really good at their job and some people who, let's just say, politely, may need some improvement. And attorneys are no different. There are some excellent family law attorneys out there who will do a good job for you at a reasonable price. And there are some attorneys out there who will cause a mess of things, and you end up spending tens of thousands of dollars or more. And on top of that, not getting anything done. And I want you to avoid that scenario. But in this particular episode, I want to focus on, do you need an attorney? And what situations that might exist where you don't need an attorney to help you. And let's just start with the basics. Do you need one? Well, your attorney is going to have, if you work with one, is probably going to have one of the biggest impacts in terms of how this divorce process goes for you. And same is the selection of the attorney of your spouse. A good attorney or good set of attorneys, will keep things moving forward at a reasonable clip people will, of course, have disagreements, this is divorce, but they'll do them civilly and you won't end up spending more money and time and energy than you have to. And if you get a bad attorney, this process is going to be an additional nightmare on top of nightmares. Not only will you lose a lot in your divorce, and when I say lose a lot, I mean, money, time, energy, but the outcome will likely be pretty poor as well. And so, you need to be very careful about who you choose as an attorney. And so, it's one of the most important things that you can do when it comes to the divorce process. But some people ask me, I get this question all the time is, "Do I need an attorney or can I do it myself?" And I know a lot of people are hesitant to fork over thousands or tens of thousands of dollars to an attorney to help with their issues. And sometimes, I get people who'll say, "Well, my issues are pretty simple. I think I can handle most of this." And a lot of times I'll talk to you and say, "Yeah, you have a pretty good handle on things, but you should still consult an attorney or at least consider it." And there are other times where people don't really need that much legal help because they and their spouse agree on most of the issues. And so, can they do it themselves? A few things I tell people when it comes to whether or not they need an attorney. The first thing, of course, is that divorce is complicated. There are a lot of details in order to come up with a divorce settlement, a divorce agreement, or ultimately if you are one of the handful of people who has to go to trial. I mean, there's a lot of details involved even in the simplest of situations. And you need to be prepared to have a handle on that and understand all of those complexities. The second thing is, it's very, very easy to make mistakes in the divorce process. The mistakes that people think of, which are, are they getting the right financial deal for them? Did they structure a custody agreement the right way? Are they doing what's within the bounds of the law when they come up with an agreement? Those are common things. But there are also issues where did you fill out that divorce paperwork the right way? And is the clerk going to reject it? And you have to reject it after 60 days of it sitting there in the office and say, Oh, you didn't fill this out correctly, and therefore you got to redo it and resubmit everything. And there's a lot of just little details that add up when it comes to the divorce process. The third thing is almost obvious, but it can be really hard to see the big picture when you are going through divorce. You're in it. You are in the middle of this situation. This is happening to you, your life, your family, and everything that related to it. And sometimes it's very hard to de-personalize and just make smart decisions. It's very, very tough to make the best decisions for yourself oftentimes in an emotional process when you're going through the middle of it. And so, having someone like an attorney can provide you guidance from the outside to help you and keep you on the right path and make the right decisions. And then the last point I'm going to bring up is, regret is powerful. I'm going to bring up two more points. One is, regret is powerful. So this is point number four. What you don't want to happen, and one of the most challenging things after this process is over, is looking back and saying, I wish I did X, Y, or Z. And it's something that's very, very common. Because life is complicated. Divorce is complicated. We all get that. And you want to make sure that you're covering your basis for everything that could happen later down the line and just during the process. So you don't have these regrets six months later, a year later, five years later, when you're looking back as to how you handled certain things in this process. And one of the things, I'm shifting gears slightly as I make this next comment, but one of the things I talk about in my document review appointments all the time is, making sure the what-ifs are covered. And when I think of some of the best attorneys that I know, I mean, there's a lot of factors that make great attorneys, but one of the defining characteristics is they're really, really good at understanding the what-ifs. So, what if you can't sell a house in the agreed timeframe? What if someone doesn't agree or doesn't follow through on this child support agreement? What if the custody schedule needs changing? What if someone gets sick, or a child gets sick, how is that handled? What if there's an issue with the split of the retirement account? And really good attorneys can anticipate, and plan for, and write in documentation, and help you negotiate, what if, scenarios that are very favorable for you and make the longterm process of this divorce smoother. And then the last point I'm going to bring up, is that you need to protect yourself. There's just a lot of details, as I've said before, in terms of divorce process, and you don't always know where you might be going wrong, where you could get a better deal, or where it's okay to give up a little bit, this is a negotiation. And you want to make sure that the agreement you are coming to is a fair agreement for all parties. It's not about "screwing your spouse." That's not the goal here. The goal is to come up with a solution that both of you can live with for the rest of your lives. It's not going to be fun. It's not necessarily going to be perfect. But the goal is to get to that point and get to that point sooner over later at a reasonable cost. And a good divorce attorney can help you do that. So, that was all-pro attorney, of course. And I'm going to be getting into lots of different details to think about when it comes to an attorney. But what situations might you not need an attorney, or need very little legal help? And I have just three scenarios. And even in all three scenarios, if I were writing this down, I'd put a little asterisk next to it, to say, yes, but still, you might want to contact an attorney. But three things to consider, the first is that, if both of you have a very clear picture, both of you as spouses understand your assets and your debts. You have a clear understanding of where the money goes, what's there, you agree upon all the values of things, and there's not going to be a lot of disputes about it, but if you know it, that's a good checkmark that you might not need as much legal help. The second thing is that you and your spouse don't have complex custody issues. If you have any kind of custody issue or it's going to be a discussion or a potential conflict later, get an attorney to work it out for you. Because there are just so many details. I mean, I'm a financial specialist, by no means am I a custody specialist, but from working with enough attorneys and reading enough agreements, I can tell you there are so many details that attorneys know and have worked through over decades, in terms of getting the right custody schedules, and handling all the complexities of raising kids and co-parenting, that they already have planned that oftentimes someone who's just trying to do it themselves doesn't know. But if you don't have custody issues or the kids have grown, maybe you don't need as much legal help. And then the last point is, if you and your spouse can work out a reasonable settlement, then, by all means, save the money. I said, for all of those points is there's an asterisk. I'm going to get into some options in future episodes as to different ways you can use attorneys without going all in and necessarily writing a 10, 25,000, $50,000 check for each of you to get the appropriate legal help that you need. But one of the things is, is the more that you can agree upon yourself, between you and your spouse, and the less fighting there is, the less help you'll need from an attorney. And so, that's something to think about as you choose. Now, the nature of this podcast and the nature of what I do, unfortunately, I don't get to work with too many people who are in ideal scenarios. It happens every week, but the vast majority of people are in very complex financial circumstances and are not in full agreement with their spouse, which is why they're listening to this podcast or you contact me and we do a coaching call. But when you can, particularly for the people who are early in the process or haven't filed yet, I always say like, "Look, if you can work out a lot of this stuff in advance, you can minimize the need for attorneys down the line and the cost you're going to have to pay as it goes through this divorce process." So, a lot of things to consider in just a short amount of time. I also have a great section, not to over-promote my book, but in my book, Divorce and Your Money: How to Avoid Costly Divorce Mistakes, there is a ton of information on how to choose an attorney in there, because it's one of the most important things that you can do during your divorce process. And I will be talking about a lot more in future episodes.

0220: Do You Need A Divorce Attorney?

EP 0219: How to Conserve Cash & Save Money During The Pandemic    Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. In this episode, I want to discuss preparing your finances during a recession and how to conserve as much cash and capital you can during this time period. It's not purely a divorce topic, but it has some general financial discussions in here. And there's some things I want you to think about. As I'm recording this, there's something like almost 30 million American adults out of work. The unemployment rate is high. A lot of states have been locked down, and some are slowly starting to reopen, but the economy has fundamentally changed. And just a few months ago, at the beginning of 2020, there was a great economy, and then that changed in the span of about a week or two. And a lot of people have lost jobs or are on unemployment or some combination of those. And when you're on a budget, regardless of your lifestyle and your income, oftentimes a big decrease like what has happened recently can completely change your lifestyle, your budgeting, your plans, and it can be hard at a certain point if you've exhausted your savings or are getting close to it to figure out ways to conserve some additional money and give yourself added financial flexibility as you try and keep up with the relevant payments that you may have. And so I want to go through a few different strategies, five specific strategies to consider when it comes to this environment and some ways to improve your financial picture, particularly if your income is down, but your expenses have remained the same or your expenses have even increased given everything that's going on. And so I'm going to go through five things and I'm just going to start them now. The first is to check and understand your spending. You should have a very good handle on your expenses. If you haven't completed a financial affidavit or statement of net worth, oftentimes they ask you for your monthly expenses. One of the things you should be doing is really understanding what those expenses are, how they look, what can be cut from your expenses. I look at every transaction every month and I go through and I say, "Hey, do all these transactions look good? Where do I spend too much? Could I cut something here or there to make sure that I'm not spending too much?" And when your budget is tight, you have to realize that even small things add up. I'll use a very simple example, is if you pay $10 a month for Netflix ... I don't know the exact Netflix price at the moment, but let's just say you pay $10 a month for Netflix, and that's $120 a year over five years, that is $600 of spending on Netflix. I always look at those small subscriptions as a five year commitment, and you can realize that $10 a month can add up pretty quickly, much less if you have an expense that's $50 a month or $120 a month or more. And so you need to really think about those expenses and what you may be able to cut. The second thing is if you have debt of any kind, be it a credit card, student loan, personal loan, mortgage, whatever, you can negotiate with your lenders. Under normal economic environment times, people were not as willing to defer or adjust your payment schedule, but now given the millions of people in very tough situations, and you may be one of them, there are ways to lower your payments in the short-term so that you have some flexibility and in the long-term, you're going to make up for it. But doing and cutting what you can in the short-term can be helpful. When it comes to a student loan or a credit card or personal loan, you can pay ... Sometimes they'll let you just pay the interest. Maybe you can't pay the principal balance, so if you have ... I'm just going to make up a student loan, for example. Well, let's say you pay $1,000 a month on a student loan. Well, 500 of the $1,000 might be going to interest, and 500 of that $1,000 may be going to the principal balance of that loan. And if you don't have the same amount of income coming in, you can say, "Hey, can I maybe just pay interest only for the next six months, the next 12 months until I can get back on my feet?" And most lenders are very willing to do that for you because I mean, they want a payment and they don't want you to stop. And it's better for them if you pay some over paying nothing and it's okay ... They'll be happy if you carry a balance for six months, so long as month seven or even month 12, whatever it is, you start paying that as normal again, but if you just stop payments altogether, that actually hurts them quite a bit as well. So people are willing to negotiate and adjust the payment schedules today, so whatever kind of debt you may have all the way to a mortgage or a credit card or anything in between, call the institutions, tell them the situation, and most aren't even requiring a whole ton of proof in the short-term just because the mass volume of people who are affected right now. Now, a caveat to that is don't just stop paying. You should contact the lenders and tell them what's going on, but if you stop paying, it can hurt you. Now, the only plus side ... I would stop paying is a last resort. The only upside is if you stop paying, it does take a few months before those missed payments show up on your credit report, but it's not suggested. Much better to modify and find a lender or find someone who's willing to work with you than just stop paying because you don't have the capital available. The third tip is to pause retirement contributions. If you are still working and you have a job, or I know plenty of people who still have jobs, but I have lots of friends and people I know who got salary cuts to keep their job. Some took 30%, 25% salary cuts. I know other people who are on unemployment at the moment, but whatever it is, consider pausing those retirement contributions. If you're contributing 3% or 5% of your salary to retirement, whatever the number is, well, I would lower that to nothing and conserve as much capital as you can in the short-term so you can get through this difficult period. And conversely is point number four is pause college savings. If you're saving for your kids' colleges, you might want to pause that and keep that cash as well. And when you're in a better financial position, you can start making those contributions again. I imagine just as a general note is particularly for kids who aren't going to college in the next few years, there's going to be some adjustments given the whole virus situation and some hard questions in terms of the cost of college, the value of college and what you're paying for. And so if you're planning to spend 200 or $300,000 on a kid's education, you might need to save or hold off. These are short-term bumps in the road, or at least try and think of them as that, and you can catch back up when you are on your feet, but you shouldn't overstretch in the short-term. And then finally is consider negotiating or consolidating debt. One of the things I do all the time whenever looking at someone's debt is I like to rank debt by interest rate. Let's say your mortgage is somewhere between 3 and 5%. Well, that's not a very high interest rate, but you could have a credit card that's charging you 21%, or if you're behind, it could be 27% and you can have everything in between. And what you should do is be very organized or very careful about how much you're paying and know how much you're paying an interest for pieces of debt and figure out if there's ways to lower that. I was just having a conversation with someone the other day and I got an offer in the mail, said, "You are preapproved by Discover," because I use Discover for some of my daily expenses and they said, "You're preapproved for a personal loan at 6.99% and we can get you up to" ... It was a really high amount. And they were like, "We can get you up to $36,000 if you apply within 24 hours." And I was like, "Wow, that's a lot of money." Thankfully, I don't need it to pay anything off, but there are situations where something like that could be helpful. If you have a credit card and your credit card payment is charging you 18, 19, 20%, and let's say you have $10,000 in credit card debt, you could be paying $2,000 in interest a year. But if you refinance with a personal loan at 7%, well, you would be saving yourself 1,300 bucks in interest on that $10,000. I keep a document actually that I update for myself every month that has each credit card, how much the interest rates are and just making sure I pay off my balances, but if there was a situation where I had a bunch of debt, I would know, "Okay, well, this is the most expensive debt, so I need to pay that off first. This is the cheapest debt, so like a mortgage and I'm only paying 4% and there's some tax benefits, so I'm going to leave that one outstanding and not try and pay that one off." And so organizing your debt and negotiating, figuring out if you should consolidate certain debt, you can quote unquote "refinance debt" by getting a lower interest loan to pay off some high interest debt. These are all considerations, particularly during difficult times. The five tips to help you conserve some capital are to first just check and understand your spending. That's one of the biggest tips I give everyone going through the divorce process in general, but with the economic situation changing on top of it, understanding your spending and cutting your spending for anything that's unnecessary is the top tip. The second is negotiate with lenders. Be it a credit card, a student loan, a mortgage, whatever it is, if you can't make the payments or you need to reduce the payments in the short-term, people are willing to work with you. I guarantee it. The third is pause your retirement contributions in the short-term, and the fourth is pause your college savings contributions if you're making them for a kid. And then finally, the last is consolidate your debt or renegotiate your debt and ... excuse me ... refinance your debt if you have to. And so if you have high interest debt like credit card debt and you get a personal loan at a lower interest rate, it can save you hundreds, if not thousands of dollars over the course of a year or several years just by refinancing certain pieces of debt. And that might be something for you to think about and work on.  

0219: How to Conserve Cash & Save Money During The Pandemic

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help.  This week, I want to cover a slightly different type of episode. How can you manage stress the instant you are experiencing it? Oftentimes life can feel overwhelming, and finding ways to manage all of those feelings without shutting down is essential to our well-being. Here’s a technique that I find helpful and in fact, use frequently to manage stress – it’s very simple. It’s a deep breathing technique where you count to 10. What do I mean by that? Listen to this latest podcast for more on this guaranteed technique to help you ease stress the minute you feel it.

0218: A Simple Breathing Techniques to Manage Stress

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. In this episode, I want to do a more timely addition of the Divorce and Your Money episode. As you know, clearly if you're listening to this that there is a big virus going around and businesses are closed. Courts are closed to most extent. And a lot has changed in the span of just a few weeks. And depending upon where you are, the severity has changed quite a bit. But, many life-altering changes, and I wanted to discuss its impact on the divorce process and some things that you may want to consider during the coronavirus epidemic, or pandemic I should say. There are some helpful tips in here and just a hodgepodge of ideas I wanted to go through and some frequently asked questions and thoughts as you consider everything that's going on. There's a few big things that have happened all at the same time. First, of course, is the virus. The second is the employment situation has changed. As I record this, over 3 million people have reported that they have filed for unemployment, and that number will go up, I'm sure, over the coming weeks. Also, the stock market is down quite a bit, and a lot of people are in much tougher situations than they found themselves just a month ago when ... Well, you still have the divorce part, but at least the economy was good, market was up, and everything else. So I want to give you some things to consider and things that you can do. The first thing is that across the country and just about every attorney I've talked to in every state I've talked to, court's closed. Now, they're not closed, closed for absolutely everything because the legal system is very important. But for anything that's not essential, the court is likely closed. So what does that mean for you? Well, it means for many things you cannot go get them resolved. So if you have a session in front of a judge that's not immediately urgent or an emergency, it will likely be delayed for several months. And unfortunately, because there are hundreds, if not thousands, of delays happening at the same time, things are going to take a lot longer once we start to reestablish some form of normalcy. Now, if you have an emergency order for some reason, and you will have to have an attorney to help you with this, at least I recommend one, emergency orders, almost universally, are still going through in courts across the country. But it has to be a true emergency for a court to want to hear it and for you to get a resolution on that particular issue that may be occurring, so there's something to that point. Now, if you want to resolve your situation, your divorce case, and court is not available at the moment, what are your options? Well, if you are in a position to mediate or negotiate a settlement, every attorney I know is still working. These are all small businesses for the most part. Most family law firms are small businesses. They still are working the same way they would. Now, of course everyone is remote. I've always been remote. So for better, for worse, this hasn't changed a drop of my day-to-day life. But attorneys are working remote, and so you can still work towards negotiating a settlement as if nothing mattered. Now, will you be able to file the final paperwork? Probably not. Or at least it may get delayed until you get the final sign-off, but everything is still possible to make progress in terms of a divorce case or issues you are facing. Now, if you have to have a court date for something and that would be essential to your process, that's not going to happen anytime soon. But at least in terms of making progress, if you're willing to do that, and your spouse is willing to do that, and the attorneys are willing to do that, you can still resolve. I still have plenty of people that I know that I'm working with who are making progress like they would normally, even though the court itself is closed, and that is an option available to you. Another thing that's available to you is that if you wanted to do mediation. Now, the traditional mediation when you are in a courtroom is ... Or sorry, a conference room I should say, is not happening, where you get you, your attorney, your spouse, your spouse's attorney, and a neutral mediator in a courtroom is not happening. However, believe it or not, just a few weeks ago, I had done some episodes on virtual mediation services. So it was actually one of the most recent episodes that came out and with Susan Guthrie. She's a virtual mediator. And there are lots of virtual mediation options that are popping up over the last few weeks given the change in circumstances and situations. So if you're in the mediation process, well, a lot of times that's happening via video conference now where it would've happened in person before. So long as everyone agrees to it and agrees to move forward that way, that is possible. Now, where are people having a lot of extra complications in this process? Well, something that's just obvious is a lot of people are now stuck at home all day with their spouses. That may be you. And that can present a host of issues. It was one thing when you might see your spouse for an hour in the evening and you could get along relatively civilly for that hour in the evening, but now you are together 24/7, 365, or at least that's what it feels like. And whatever was going on is being accelerated, good and bad. But whatever was happening could be worse. So just my tip during that is, I know everyone's situation is different, but to the extent that you can be civil, or have your own space, or be flexible, please try and do that. Not accelerate things. I've heard an increasing number ... And I don't have data on this point, but I've heard an increasing number of domestic violence issues, of child abuse issues, of lots of additional stressors just given everything going on, and I don't want that to happen to you. So if you have any hope of compassion left to deal with your spouse even though you're in the process of divorce, try and make that work, particularly when you are forced under the same roof. Another consideration is that custody is a very complicated issue at the moment. A lot of you may be living under different roofs from your spouse and they're going through this process and you've been figuring out different custody arrangements and parenting schedules. Well, if you had a temporary schedule in place or you'd been working on something in an informal basis, I would say try and be a little bit more flexible with what's going on. Now, there's some weird issues coming up as it comes to custody and parenting time. School is out, or school is being done virtually, or some hybrid of that that may be causing some issues depending upon who is the parent, what resources they have, what set up they have, and that may be causing some issues. So you need to be documenting these issues. I would say first, figure out if you can work them out between the two of you somewhat civilly before getting attorneys involved because it may not happen in the pace that you want it to happen. The other thing that is happening is sometimes one parent is being more diligent about health mandates than the other parent. So I've heard stories already of where one parent is bringing a bunch of people over to the house with the kid present when they're supposed to be staying at home or avoiding gatherings, etc. And because of that, you might be worried about your kid's health and safety and increasing their increasing probability of catching the virus, or having complications from it, or just being around people who might be spreading the transmission of the virus. Well, that's something that you should not only document, but that is a good time to contact an attorney immediately to see what potential options are. The smart attorneys that I know that I work closely with, they are already thinking about potential options for this scenario and helping clients. I know some attorneys haven't thought about it one drop. But if you get a good attorney, and I'll be doing some episodes on attorneys in the near future, a good attorney will certainly be able to help you navigate and come up with some creative options during this time when it comes to custody, handoffs, parenting time, etc, given that we are in an unprecedented scenario at the moment. Another area I want to cover is support, child support, spousal support. Things could be changing for you. Just a month ago when I recorded this or when we were recording episodes, and if you're just thinking about life a month ago at the end of February, we had the lowest unemployment rate ever. And a month later passes and we now have the highest unemployment number, at least people out of a job, ever recorded by a big magnitude all in the span of about 30 or 45 days. What that means is that you or your spouse could very well be in a scenario where income-based support, it could be child support, could be spousal support, could be temporary, could be whatever, all of a sudden that is no longer financially feasible for you. Now, there's a lot of things going on government-wise, economy-wise, just a lot of different moving parts. And so the question is, what happens with those orders that may no longer be based on financial realities? Well, there's a lot of things to think of. Also, some people were negotiating. I've talked to several people in the last week or two who were in the process of negotiating settlements and those settlements, all of a sudden, we had to change the strategy due to what was on the table and all of a sudden potentials for job losses or people who were out of the workforce, etc. That all of a sudden changed our strategy from a financial perspective in terms of what the best options were. Here's the point, is that if you have an existing order, you should continue the status quo of that order. So if you're receiving payments, you should hopefully continue receiving that same amount that has been agreed to. If you're the one making payments, you should continue to make those payments that have been agreed to for the foreseeable future, assuming that they agreed to by the court in some form or fashion. If your job is the same, too ... I know some people who haven't been affected yet by the job issue. If your job's the same, your salary's the same, definitely don't do anything. But if you are in a position where someone's lost a job or on reduced hours, at least for the short term that plan should be to keep going under the current amount. Now, there are things that you can do, particularly if you're the payer of support, is you can file to have that support reduced, especially given a job loss or unemployment for reduction in hours. And that has to go through the court process so it may take a few months, in which case the default recommendation is to keep things going for a few months. Then when that process works itself out, then you would pay the reduced amount. And if you're the person receiving support, I would also assume that the person who's the payer, be it spousal or child support, is going to be asking or looking for reduction in the near future and so you need to plan accordingly. But I would say this, I would be very cautious. Now, I know some people are in a situation where they have to conserve every dollar that they can, otherwise they're not going to be able to make the mortgage payment, or the rent payment, or eat over the coming months. And if that's what you have to do, that's what you have to do. But to the extent that you can continue to make some form of spousal support or child support payment, particularly in the short term, you should do that, especially if it is ordered. But, everyone needs to be aware that things will likely be changing and people will have less in terms of money in the near future. The other thing to remember is this is an unprecedented situation. It just is. I was talking to someone who was getting ... Well, everyone I talked to just about is going through the divorce process, and we were talking about what should you really be focused on during this process. And I said, "Hey, look, there's a lot that's going to be happening over the coming weeks and months. We don't know how it's going to play out. The economy's down. A lot of things are down. But remember this, is basically all of finances, even in a new reality, are you need to have your income be more than your expenses. Simple as that. Your income more your expenses, and then you need to have money saved for a rainy day." Well, now is definitely a rainy day. I talk to lots of people in the past. And if you've listened to this podcast, I always say try and hold on to your cash. I'm very much biased, even in the best of times, that you need to hold onto your cash and stay as liquid as you can whenever you have that option because you never know when a rainy day is coming. And unfortunately right now is that rainy day. So what you need to be thinking about is your lifestyle. You might need to be making adjustments in terms of what's relevant, what's not, and conserve every dollar you can. I would avoid paying down debt at the moment. I would hold on to your cash. You can refinance debt, but hold on to as much cash as you can in the immediate term because we don't know how bad things are going to get. It depends on where you are in the country. I travel a lot so I get to ... so I know people all over and I'm checking in. All over the world as well. I mean, I have friends in over 80 countries, and it's a different issue depending upon where you are in the country and in the world. And if you're in the East Coast, or West Coast, or middle of the country, it doesn't really matter. Things are happening at different rates and different paces. The point is you need to be prepared for everything that is happening and even if you have to start making some immediate cuts. You should be doing those and thinking about what is going on in the near future. But, there's a lot of things that are happening. I'll keep you updated as I have new information and I hear information from attorneys. I know some good attorneys who are putting out some information, particularly in regards to custody because that's the biggest thing that's happening right now. But, we don't know what the extent of things is going to be. We do know the world is moving online very rapidly and trying to keep up with as much as we can given the changing circumstances, but prepare for this to go on for several months. And things are going to be delayed. It's going to take a long time to catch back up when the time comes, and so you need to be making those financial moves and preparations now so that you're not caught flat-footed later when some of these scenarios that we might have been thinking about hypothetically are actually here and are real and could cause some very substantial stress in your life.

0217: Divorce, Custody & Support Tips during COVID-19

If you are currently going through a divorce or soon will be, Divorce and Your Money is the perfect podcast for you. The author, Shawn C. H. Leamon (MBA), is a professional and well-respected financial advisor and Certified Divorce Financial Analyst. His podcast provides real-world practical advice, including tips and checklists to help women and men protect their financial interests and future.

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Divorce and Your Money - #1 Divorce Podcast

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