A Pension Appraisal is a Must

February 6th, 2014

Calculating the value of a defined benefit — the old-fashioned company pension – can be difficult because defined benefit pensions have what is known as present value, or time value of money, that is, what today’s money is worth tomorrow, which can make calculating their value difficult.

No one should attempt to divide a pension without first getting it appraised. Very often neither party in a divorce can negotiate the fair division of pension plan without a competent pension appraiser first making an appraisal.

A pension plan can be the most valuable asset a couple divides in a divorce.  It is much too valuable not to take care.

Other Options to End a Gay Marriage

January 24th, 2014

Just like straight couples, gay men and woman who build lives together sometimes find that the relationship does not last. And just like heterosexual couples ending the union, dividing assets, interests and debts of the partnership requires careful thought and unselfish consideration.

Absent a prenuptial agreement that outlined the rights of each should the relationship end they are left with gay couples have three options:

> Private negotiation. Since there is no legally binding contract there is no balance of power. One partner may walk away with more than is his/her right, and communication and compromise can be difficult.

> Divorce attorneys. This option could is expensive since both partners have the cost of a lawyer, but since there is no need to file in the courts, couples would not be faced with that extra expense.

> A private mediator. The couple turns to the guidance of a mediator. They negotiate a legally binding contract and, within a shorter time span.

Each of these options may demand that the partners improvise solutions. For example, the second parent of a child who is not biologically related to it may want visitation rights that would normally be automatic to any parent.

The Six Steps of a Divorce Trial

January 7th, 2014

A divorce that goes to trial (only a tiny fraction do) has six steps. They are

> 1) The Petition, which identifies the parties, gives the basics of the marriage and states the grounds for ending the marriage;

> 2) The Service of Process, which is the delivery of the petition to the respondent (or defendant) and a summons to appear;

> 3) The Response, in which the Defendant replies to any allegations made by the petitioner (or plaintiff), usually within 30 days;

> 4) Discovery, which includes a financial investigation of the marital estate; negotiation, wherein the parties attempt to reach agreement about the terms and conditions of the divorce and sometimes a settlement;

> 5) The Pretrial Conference, which, when the parties are unable to reach agreement, happens in a judge’s chambers when both attorneys present their respective positions and the court makes recommendations in hopes of a settlement;

> 6) The Trial, which happens when the parties cannot negotiate a settlement.

Insure the Payments

December 12th, 2013

Amid the wind and waves of a divorce, life insurance is not something people think about. Both the custodial and noncustodial parents should consider life insurance to protect their children.

Very often in a divorce settlement, life insurance on the former spouse responsible for alimony and/or child support is overlooked. The paying spouse may intend to comply with the divorce agreement, but death has other plans.

The same is true for the custodial parent. The noncustodial parent may not be able to afford complete care of the children.

The insurance may not be an insignificant amount either. A custodial parent receiving even a few years of monthly spousal support and child support for small children may need to be insured for $250,000 or more. To determine the appropriate amount, a “present value” calculation yields the desired monthly payments needed and inflation considerations. Term insurance (for the period of payments required) is usually a good and least expensive choice as well.


Divorce Recovery Means Pain and Suffering

November 18th, 2013

Even when divorce ends a bad marriage gone terribly wrong, a divorce does not make people happy. Pain and suffering are natural and inescapable consequences of any divorce. Even after the divorce, waves of pain and suffering shoot through consciousness, like the phantom pains in an amputated limb. Something hurts, but only the stump of memory remains. Sadness and anger, fear and anxiety, sorrow and denial — all race like alternating current, back and forth.

In the face of this, divorce recovery is a do-it-yourself project. Divorce recovery means acceptance and the ability to go forward. The ability to keep a perspective, a sense of humor (even a dark one), but in the end people recover by putting one foot in front of the other and living.


After a divorce, getting through the day often seems no small accomplishment. There is no single right way to survive a divorce; there is no universal right way to start over. A person does it by doing it. Even with help such as counseling and support groups, the surviving divorce is a self-help project. The ancient Greeks believed that the reward of suffering is experience, and so it is with divorce.

Change of Beneficiaries Should Not Be Forgotten

November 6th, 2013

As a rule, divorce does not effectively change a beneficiary designation unless the divorce decree makes a stipulation to change the beneficiary. It could be argued that the individual retirement account (IRA) owner wants the former spouse to remain the beneficiary of this IRA. Unless a court order states otherwise, the former spouse may be entitled to receive the assets if he or she is the named beneficiary on record at the time of the IRA owner’s death.

Assets with a designated beneficiary – life insurance, pension plans, IRAs, annuities, investment and bank accounts – bypass a will. Upon the death of the owner, they are paid to the person identified as a beneficiary.

After a divorce, naming the right beneficiary is very important.

If there are children and they are named beneficiaries, a court guardianship is established for the minors. Some people name the former spouse to manage the funds for the child until he or she achieves a majority, which is 18.

Reciprocal Altruism Versus I’m Only in It for Myself

October 22nd, 2013

According to Herb Guggenheim, writing for CapitalM, a Mensa newsletter, the “only two social strategies that human beings use” come into play in divorce negotiations. They are:

> “Reciprocal Altruism,” which is the psychological equivalent of the Golden Rule, or “do unto others that which you would have them do unto you”; or

>“I’m Only in It for Myself,” which is an every man for himself concept that works in a dog-east-dog world.

Reciprocal altruism is based on the belief that kindness is rewarded. As the French say, “You send the elevator up to me and I’ll send it back down to you.” I’m Only in It for Myself, on the other hand, appeals to people who see the world as a hostile place where only the strong survive. Social Darwinists believe “the inferior, weak people are busy being nice to each other, they will swoop down and take what they want, when they want, no matter what the consequences may be.”

When spouses use reciprocal altruism, the negotiations can move to an easy conclusion; when the spouses try to rip and tear, the negotiations often break down.

Uncontested Divorce Makes for A More Gentle Climb

Divorce is not an easy road, but uncontested divorce is a more gentle climb for both spouses. Negotiating an uncontested divorce means that the two spouses are in agreement about the terms and conditions of their property division, spousal and child support, custody and visitation. In short, they have nothing lest to argue and fight about.

When couple can agree on everything, they are in effect their own negotiators. Although each spouse may want her or her lawyer to check the paperwork, the involvement of the attorneys is greatly reduced.

So are the legal bills because when a couple negotiate for themselves, they can sit down and do at no cost what lawyers do at a great cost. The courts will approve anything the spouses decide that is fair and reasonable.

Interest-Based Bargaining Versus Position-based Bargaining

Collaborative negotiators describe two types of bargaining that happens when spouses negotiate a divorce. They are interest-based bargaining and position-based bargaining.

In interest-based bargaining, the parties focus on their underlying concerns, needs or interests; in position based bargaining, the parties lock in early on inflexible positions defining their needs and wants.

In interest-based bargaining, the parties communicate what is important about an issue rather than arguing for a specific position or solution. In position-based bargaining, the parties become adversarial and go one against the other.

Interest-based bargaining aims to understand the other party, and it is cooperative. Position-based-bargaining, the traditional approach, allows for little emphasis on future relationships.

Couples and their lawyers who can negotiate interest-based positions find the resolution of a divorce settlement must less painful.

Negotiating a Divorce Is a Matter of Timing

Rarely do the two partners mutually decide on a divorce at the same time. Invariably, after some long period of reflection and consideration, one spouse decides to end the marriage and, one way of another, tells the other the marriage is over. Call him or her the leaver; the other, the left. The leaver does not decide impulsively and he or she may think about divorce for years before acting. The spouse left may take the news “on a continuum from resigned acceptance to utter shock and surprise.”

According to divorce mediator and psychologist Sam Margulies a “good divorce” happens when both spouses are ready to negotiate, that is, when both accept that the marriage is over. “If you are the one who wants out,” says Margulies, “you have to give your partner time to adjust, time to mourn and time to explore his/her own possibilities. Push too fast and your spouse retreats to the perceived safety of a lawyer who she thinks will “protect” her interests. Then you will have a long divorce.”

No One Gets It All

Sometimes when a marriage crashes the spouses become possessed by an idea that they can vindicate themselves in the divorce negotiations. That is, an angry spouse uses the negotiations — and the distribution of assets and liabilities — as a way of vindicating their own conduct during the marriage. In particular one spouse may wish to punish the other for real or imagined misconduct during the marriage.

It is easy to see that angry spouse is not going to be able to negotiate a fair and reasonable – equitable—divorce. No matter how hard it is, anger has no place in the negotiations, and no one gets everything he or she wants.

Taxes and Divorce

September 24th, 2013

Divorce Choice: Filing Jointly Versus Filing Separately

A couple married on the last day of a calendar year may file jointly even if permanently separated in anticipation of a divorce. Most middle-income divorcing couples find it advantageous to file jointly, and they can file jointly if they are married as of midnight on the last day of the tax year, Dec. 31. For example, Rufus and Rhonda separate in the spring, decide to divorce in the summer, and set to working on the property settlement in the fall, but they are still legally married on the last day of the year. Rufus and Rhonda couple may:

> file jointly (called “married filing jointly”);

> file married as separate people (called “married filing separately”); or

> under certain circumstances, file as single (when they are “deemed unmarried” or “head of household”).

Even if the divorce was finalized between Jan. 1 and April 15, they are still married when it comes to filing the previous year’s taxes. If, however, the divorce became official in December, they cannot file as married even if they were for most of the year.

A married couple is liable for taxes for the years they were married, and the IRS audits the tax returns of formerly married spouses. A former spouse is not liable for current taxes, just the taxes of the years when he or she was married. If a deficiency is found, the IRS can - and does - pursue either or both spouses for the back taxes and any penalties.

Despite their marital strife, however, most couples file jointly because it results in a lower total tax bill than any of the other options. (”Married filing separately” is the most expensive way for a couple to file). If they jointly, however, both of them are responsible for the taxes due. Each spouse is responsible for the entire debt because married couples have joint and several liabilities, which means they share the responsibility.

Other Tax Considerations

While joint or separate returns are important tax decisions that every divorcing couple makes in the last year of a marriage, divorcing couples make other tax decisions, and when they negotiate and honor their agreements in good faith, they can save themselves money and aggravation.

Wealthy couples may do an extensive analysis that considers the incomes and deductions of both spouses, the number of dependents, tax credits, applicable tax rates and contributions already paid to avoid penalties.

The I.R.S. considers spousal support — alimony — as income shifting. It is deductible to the payor and taxable to the payee. Sometimes for tax reasons, spouses decide to make the payments nondeductible to the payor and tax free to the recipient. On the other hand, child support is not deductible to the person who pays it, nor is it taxable to the person who receives it.

Couples must decide which spouse takes the dependency exemption, the child-care credit, and medical deductions for a dependent child. 

In property settlements, transfers between spouses are gifts and are not taxable. However, in order to pay a settlement, sometimes couples must disturb assets in a way that creates tax consequences. For example, taxes may result when a party must withdraw funds from a restricted account, such as a pension fund. Sometimes couples do “horse trading” to reduce the impact of taxes on the settlement. For example, the sale of assets received in a settlement, such as a house, may create a capital gains liability; or when both parties make an in-kind distribution of property, such as set-off and trades; or when the parties take future income from a pension to be received later.
Couples can shelter a primary residence from capital gains of up to $500,000, but the sale of other real estate may result in taxable events.

The distribution of any ERISA-qualifed pension, profit-sharing or bonus plan may have adverse tax consequences because under the I.R.S. Code and ERISA these benefits are not assignable, and can only be transferred via a QDRO.

Do Trial Separations Work?

September 6th, 2013

Expert opinion seems divided about the effectiveness of a trial separation in repairing a failing marriage.
Unlike marriages and divorces, which are formal and recorded, trial separations are informal. No one knows the number and frequency of such separations. In that sense, trial separations are similar to cohabitation, which also goes unrecorded.

Moreover, no one really has a firm definition of a successful separation. For example, suppose a separated married couple reconcile – then separate and divorce two years later. Was that separation successful in extending their marriage another two years?

Some marriage therapists say that the danger of a marital separation is that it shatters the trust, or, as one put it, “breaks the bedrock of the marriage.” Like a divorce, martial separations are seldom bilateral. The spouse who is involuntarily left may find that the break, though unsought, appeals to him or her.

Divorce Recovery Means Pain and Suffering

August 23rd, 2013

Even when divorce ends a bad marriage gone terribly wrong, a divorce does not make people happy. Pain and suffering are natural and inescapable consequences of any divorce. Even after the divorce, waves of pain and suffering shoot through consciousness. Something hurts, but the memory remains. Sadness and anger, fear and anxiety, sorrow and denial — all race like alternating current, back and forth.

In the face of this, divorce recovery is a do-it-yourself project. Divorce recovery means acceptance and the ability to go forward. The ability to keep a perspective, a sense of humor (even a dark one), but in the end people recover by putting one foot in front of the other and living.

After a divorce, getting through the day often seems no small accomplishment. There is no single right way to survive a divorce; there is no universal right way to start over. A person does it by doing it. Even with help such as counseling and support groups, the surviving divorce is a self-help project. The ancient Greeks believed that the reward of suffering is experience, and so it is with divorce.

Stages of Divorce Recovery

Many counselors agree that a divorce takes a person through stages very similar to those described by Elizabeth Kübler-Ross, in her landmark On Death and Dying, including denial and isolation, anger, bargaining, depression, and acceptance.

Dr. Kübler-Ross pioneered methods in the support and counseling of personal trauma, grief and grieving, associated with death and dying, and she also improved the understanding and practices in relation to bereavement and hospice care.

The five steps she identified as the progress associate with death and dying overlay neatly with the grief and recovery associated with divorce. In denial a person refuses to accept facts, information and reality (“I can’t believe this is happening”). Anger follows denial. Bargaining sometimes means making hypothetical deals (“Can we still be friends?”). Depression prepares a person for grieving. And finally acceptance.

While Dr. Kübler-Ross’s focused on death and bereavement, her grief cycle model offers a useful perspective for understanding, not only our own but also other people’s pain and suffering in the face of personal trauma and change, such as divorce.

“Time,” as Thomas Jefferson said in a letter written in connection with the death of his wife, “is the Great Physician.” The same is true for divorce.