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Fullerton Family Law Blog

Past financial support does not eliminate future support

People have a lot of misconceptions about financial support in divorce. They often feel like the payments the court orders are unfair or put them in a tough position. This may be due to a lack of understanding of what those payments revolve around or how they get determined in the first place.

One woman's example

Developing a parenting plan for an infant

Parents of children at any age may find it challenging to adjust to a child custody plan and a visitation schedule in California. After all, it is difficult for many parents to deal with losing time with their children when they were used to being with them every day of the week. However, parents of infants may face even more questions. There is no clear right answer about the right custody and visitation schedule for infants. While it may not seem that babies have any particular preferences or feelings for their time with their parents, they benefit from time with both of their parents.

When a baby is being breastfed, he or she will generally need to have more time with the mother. Pumping can allow for more shared visitation, but some mothers can have difficulty pumping. While supplementing with formula may be an option for some parents, others may opt for a visitation schedule that changes after the period of exclusive breastfeeding is over. Some parents prioritize breastfeeding for the health benefits as well as the financial savings. If the feeding question is resolved, overnight custody sharing or visitation can benefit everyone.

Staying on top of financial issues in a divorce

When people in California get a divorce, there are several financial steps they should take to protect themselves. Spouses who have not been involved in the financial side of the marriage should make sure they are able to gather enough information to understand their finances and what assets are owned.

Dividing property may be complex even if the couple is largely in agreement about how they will do it. This is because there may be taxes or other penalties or paperwork associated with selling or dividing assets. For example, selling annuities could incur capital gains taxes. To divide some types of retirement accounts, the couple will need a document called a qualified domestic relations order that must be approved by the plan's administrator. A QDRO is not necessary if the account is an IRA, but the distribution must be rolled into a new IRA to avoid taxes and penalties. Investment accounts may have certain rules associated with them. For example, a taxable account may need a letter that asks for the account to be divided into two separate ones. The value of assets should be assessed after accounting for taxes and other expenses.

When does divorce make financial sense?

In California and across the country, political debates have drawn attention to tax policy in the United States, especially as it affects some of the wealthiest families. Some candidates have advocated for higher taxes on rich individuals and couples, and these discussions have sparked some conversation about the potential merits of strategic divorce. Wealthy couples both bringing in a substantial amount of income might choose to divorce in order to save on their income taxes. In practice, however, few couples would make this choice, as the tax savings would often be offset by other costs associated with a divorce.

People of more modest means have also chosen divorce for financial reasons, including parents attempting to increase their children's financial aid for university and senior couples dealing with the difficulties of obtaining nursing care through Medicaid. However, deciding to divorce to deal with a financial problem is not an easy decision, because there are many other factors that can be affected by the end of a marriage. Many people rely on spousal benefits for health care insurance. Once a divorce is final, the other partner would have to obtain new coverage, which in some cases could offset any financial benefit to separating.

Prenups can be a key step for business owners

In California, many people hope to achieve their dreams in Silicon Valley by founding the next big tech startup. The right idea and the right investors can propel small companies to billion-dollar valuations, and the state is a hub for advanced tech workers throughout the industry. However, tech startup founders and other business owners have some unique considerations to keep in mind when it comes to their personal relationships. Because California is a community property state, all assets acquired after marriage are assumed to belong equally to both partners, even if one of those assets is one partner's closely held company.

As a result, a divorce can be devastating not only to the partners' finances but also to the company's viability. This means that many startup founders and entrepreneurs are securing prenuptial agreements before they decide to tie the knot, even if their business plans are only in the idea stage. A prenuptial agreement can make clear how both partners agree to have their assets divided in case of a divorce down the line. Prenups are designed to benefit both spouses, not just the wealthier party; both parties should be represented by attorneys during drafting. Prenups are becoming more common as people choose to marry later in life and often combine two high-powered careers.

Setting up a new budget after divorce

For better and worse, divorce changes your finances. Maybe your spouse spent most of your money, so you assume you'll have more financial freedom. Maybe they were the main breadwinner and you're nervous about how you're going to make ends meet. No matter what, things are going to change.

That means you need a new budget. Here are a few things to consider as you plan in advance:

  • You need to know what expenses you will now have alone. The best place to start with any budget is not your income, but your expenses. List out everything you must pay for. Leave off extras or things you want. Just write down things you cannot avoid.
  • Remember that some expenses double. For instance, maybe you paid $2,000 per month in rent before the divorce. You and your spouse shared that. After the divorce, that cost "doubles" in the sense that both you and your ex now have to pay on your own. It will feel like your money does not go as far since you don't share these expenses.
  • Track your spending consistently. You can do this before you make the budget so that you know what you can afford to spend, but you should also do it after you create the budget to make sure you're sticking to it. Remember that a budget takes dedication. Write down even minor purchases, like a cup of coffee.
  • If the budget doesn't work, don't fret. Instead, get creative. People often worry when the budget makes their lifestyle appear unaffordable. Instead of feeling depressed, look at it like a challenge. Get creative and try to figure out how you can cut back on expenses -- cutting the cord on cable, for instance -- or how you can increase your earnings.
  • Consider your divorce-related payments and expenses. Divorce requires you to split up assets, but your obligations may extend farther than that. Do you get alimony and child support payments? Do you have to pay your ex? What does this mean for your monthly budget and your taxes?
  • With kids, remember that expenses change. Expenses relating to children can shift with time. Older children get involved in new activities at school. Younger children need childcare while you work. After a divorce, you have to factor in transportation costs when exchanging custody. Try to leave some flexibility in your budget to address all of these issues.

Dividing the marital home in a divorce

When people in California make the decision to divorce, dividing the marital home can be a challenging prospect. Both people may feel a sense of emotional attachment to the property. Even more, the home can be the largest single asset shared by the couple, so each partner may have difficulty raising the required funds to buy out the other. Of course, the value of a buyout is not solely determined by the market value of the home but rather by the equity that the married couple has in the property. The amount of the buyout may be affected by the mortgage remaining on the home, and refinancing the mortgage is another significant issue during property division.

In many cases, the spouse wanting to keep the home will need to refinance the mortgage into his or her own name alone. If this is part of the property division agreement, that spouse may apply for a larger mortgage to cover the buyout of the other spouse. However, this means that the remaining spouse must be approved to borrow that greater sum of money on the basis of his or her income and credit alone. Spousal support payments may be taken into account by some lenders when determining mortgage eligibility.

Making the divorce process bearable

With divorce rates hovering at about 50% for all first-time marriages, and even higher for subsequent marriages, a significant number of California residents might go through this experience. Divorce can be a long, tense period that evokes many negative feelings. However, there are things a person can do to make it more tolerable.

Overcoming a divorce in a healthy manner begins with self-care. This includes exercising regularly, not just to keep physically fit but also to release the tension that divorce brings about. It also includes seeking support in the form of family and friends. Finding someone close who is willing to listen and offer a hug is important, particularly when divorce means not just losing a partner but also shared dreams, goals and lifestyles. Self-care can also mean seeking professional help through a therapist or psychologist, who can provide tools in how to overcome the negative feelings of the process.

Annoying personality traits do not have to lead to divorce

Many marriages in California and around the country end in divorce, and spouses sometimes choose to take this path when personality traits that may have once seemed minor or even endearing become irritating or overwhelming. Nobody is perfect and annoying habits are age and gender neutral, but bad behavior does not have to lead to divorce if couples are able to communicate openly and address these issues before they become unbearable.

Narcissistic and selfish individuals are difficult to live with and rarely stay married for very long. One of the main problem with these unpleasant character traits is that people with a high sense of entitlement tend to be very sensitive to criticism and often feel victimized when their behavior is questioned. These traits generally become more pronounced as time passes, but they can be tackled if spouses are willing to accept their shortcomings and put their priorities in order.

Millennials enter marriage more cautiously than their parents

Millennials in California and across the globe are showing themselves to have different priorities than the generations that came before them. This shift in priorities has led to changes in the way that millennials look at marriage and the possibility of divorce. A survey showed that there has been a 62% spike, driven by millennials, in people getting a prenuptial agreement.

There are a number of factors that seem to be behind this shift. A lot of it appears to be connected to the way millennials are investing in their financial future. Baby boomers and generation Xers were a lot more invested in concrete assets, such as purchasing a home or other properties. Millennials are more inclined to invest in the stock market; their interest is not only in protecting what they have now, but they are also interested in protecting what they may possibly have in the future in the event of a divorce.

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