Category Archives: Thinking of Divorce?

A Not So Happy New Year

Like most, at The Big Kaboom, we cherish the renewed optimism that comes with the New Year.  The simple calendar tick from December 31 to January 1 seems to bring out the best in everyone and everything.

Unfortunately, the start of a new year also has a dark side–a giant spike in the number of divorce filings.  Many sources point to January as being “Divorce Month”; that is, the month when most divorces are filed.  Still, other sources make light of March as being the peak month for divorce filings.

In general, most individuals are adverse to change.  And few life altering events top divorce.  A new year gives people the optimism and courage to make important life changes.  And as is pretty evident, as the year progresses those new year resolutions begin to wane.   So it’s easy to see why January through March has a disproportionate amount of divorce filings when compared to the rest of the year.

But the January through March time period also has another dubious distinction.  The average length of a divorce in the U.S. is one year from the time of filing.  So, January through March is also witness to the most finalized divorces in the year.

Which month has the least divorce filings?  You guessed it, December.  After all, who wants to mess up the holidays?

We wish our clients, partners, supporters and readers a wonderful and prosperous 2017.  Our only wish is that the New Year brings each of you what you want most.

Pitbull or Pussycat

The other day, I received an interesting phone call.  The women, let’s call her Jessica, decided to divorce.  The conversation starts with Jessica saying, “I want to get divorced, but I want it to be as amicable as possible.”  I think to myself, okay, all good so far.  Then Jessica continues talking, “But I want a really aggressive attorney to represent me!”

Given that these types of requests are sadly not uncommon, I took a deep breath and continued with Jessica’s consultation.  I inquired into the nature of her request.  Jessica explained that her best friend told her that an aggressive, expensive attorney is required to win.

Win?  Very interesting.  To Jessica winning meant getting everything she was entitled to. Well, if Jessica’s husband has the same definition of winning, how is an aggressive attorney gonna settle this amicably?

In reference to Jessica’s situation, there were four points I asked her to consider:

  1. State of Mind.  An amicable divorce, like a good negotiation, starts with two parties wanting to hammer out a win-win deal.  There is no such thing as a civil divorce where each side wants everything they think their entitled to.  Winning at all cost is a sure formula for a long, drawn out, expensive and nasty divorce.  I challenged Jessica to reassess her motives and her desired outcome.
  2. Aggressive May Not Be Better.  For the most part, the top family law attorneys all went to reputable law schools and have years of experience.  They are all good attorneys who represent clients in the best manner possible.  Aggressive is simply a persona that some attorneys take on, and it has nothing to do with the law or making them better attorneys.  I’ve seen plenty of clients who handed over their cases to aggressive attorneys only to be extremely unhappy with the results.
  3. It’s Not About How Much You Spend.  Another complete fallacy:  the more an attorney charges per hour, the better he/she must be. If it were that easy, all attorneys would simply raise their rates.  Individual attorney rates are based on supply and demand.   The more an attorney is in demand, the higher his/her rates will go.  Also affecting the hourly rates are the reputations attorneys acquire by the types of clients they represent; the firm they work for; and the types of referrals they get.  In Miami-Dade county, hourly family law attorney rates can vary greatly, anywhere from $150 per hour to in excess of $700 per hour.  It was time for Jessica to do a budget check.
  4. Everyone’s Got An Opinion.  I play soccer on the weekends, but that does not make me a professional.  In the same sense, one divorce experience does not make someone an expert on the subject.  Friends, family, the plumber, just about everyone has been touched by divorce, directly or indirectly.  So, naturally, everyone has a story to tell or an opinion about what to do, including the recommendation of an attorney.  I asked Jessica to carefully reflect on the friendly advice received from her friend and that person’s point of view.

Selecting a family law attorney involves many factors, among which are the specifics of a case, the desired outcome and the available budget.  It’s not black and white; pitbull or pussycat.

In Jessica’s case, she could not afford the expensive, aggressive attorney that she wanted and did not need.  Instead, Jessica decided to retain an attorney she could afford; matched to her personality and the specifics of her case; and one willing to work in the spirit of settling the case amicably.

The Postnuptial Agreement

Starting out in Argentina as newlyweds, Alejandro and Teresa did not have a penny to their names as they made their way to the U.S. Alejandro as a computer programmer and Teresa as a junior bank executive, both with multi-national employers, shared a promising future. Approaching their 25 year wedding anniversary, everything was wonderful–lots of love, two kids, pension plans, money in the bank and a good lifestyle.

But something started to change a couple of years ago. Alejandro abruptly decided to quit his good paying job to start a business. Much to Teresa’s objections, Alejandro began using their savings to fund his start-up. Typical of such long-term marriages, all the couple’s assets were comingled, with each spouse having access to the funds available.

Such a situation is not uncommon. Young couples with not much in terms of assets and little focused on the future see no purpose for a prenuptial agreement. However, the passage of time can change the married couple’s financial circumstances, to the point that one or the other spouse may regret not signing a prenuptial agreement.

In cases such as these, a postnuptial agreement maybe the solution. Prenuptial and postnuptial agreements are very similar in nature, but postnuptial agreements can be executed at any time after a couple is married. Many assets become marital property after the “I do” is spoken. A prenuptial agreement stipulates how marital assets and future earnings will be distributed, be it due to divorce or some other life-altering event.

In the case of divorce, both prenuptial and postnuptial agreements can be enforceable. However, some experts believe that prenuptial agreements tend to be the more clear-cut of the two. Still if no prenuptial agreement was signed, a postnuptial agreement is much better than no agreement at all.

Rightly so, Teresa is very concerned about her future and that of their two children. While divorce is on Teresa’s mind, it’s not really an option. Still, Teresa desperately wants to protect whatever assets they have left. Teresa also sees no hope for Alejandro’s plans and wants to force the issue of winding down the business and getting back to work. With this in mind, Teresa recently retained an attorney in order to author a postnuptial agreement.

Do you want to protect your future income? Do you want to control what assets your spouse can access? Do you want to manage how the appreciation of your non-marital assets, such as a business, is handled? As a married couple without a prenuptial agreement in place, considering a postnuptial agreement might be a good idea. Of course, keep in mind that your spouse must agree to the agreement.

The Multi-Billion Dollar Industry

Divorce is a big business in the United States. For anyone having been through a long, drawn-out divorce, this comes as no surprise. Every year in the US there are roughly 1 million divorces, which effectively means that 2 million people are affected, not to mention children, family and friends.

But just how big is the divorce industry, you may ask? While hard to pinpoint an exact figure, it’s estimated that divorce represents a $28 billion-a-year industry.

Okay, that looks like an extremely large figure, but how does it compare to other industries. Well, the bridal industry is estimated to be about $2 billion annually. And in 2013, the personal computer and tablet/eReader markets were just over 38 billion and $20 billion, respectably. So, although not a pleasant subject to discuss, there is sure big money exchanging hands in divorce.

Likely you know the direct costs of divorce: family law attorney fees, mediation costs and court related expenses. But the industry is much bigger than that. Accountants, financial advisors, realtors, insurance brokers, private investigators, psychologist, real estate attorneys, life coaches and a host of others all form part of the divorce ecosystem.

What this means to anyone thinking of divorce is “buyer beware”. In an industry where there is so much money being made, it’s incumbent on consumers to be informed, on guard and prepared to fight for every hard earned dollar spent on divorce.

With the average divorce in the US taking one year, if you want to save money and not swell the coffers of the divorce industry two things are a must: 1) Be as amicable as possible with your spouse before, during and after the process; and 2) get through the process as fast as possible.

Actually, if you want to fast track your divorce, being amicable with your spouse is of paramount importance. I know it can be difficult—been there—but the more you can agree upon between each other, the less time and money will be spent on the divorce.

For example, if one of you wants the house, so be it. Agree on that point and move on. Agreement on 50/50 custody of the children…noted. With no argument on the visitation with the children, take note and on to the next issue. Bottom line, work through all the issues you can agree upon—one by one—and leave the contested points to a mediator or the attorneys.

As you could imagine any long-term marriage can be complicated. And so it was with my 24-year marriage. But with children, assets and a business involved, my divorce took four months and cost just under $30,000. If I had not followed my own advice, I can assure you that my divorce could have dragged on for a year or more and cost in excess of $100,000. The way I see it, $70,000 were saved for the benefit of my children. Better they get the money than the divorce
machine.

 

Referral Roulette

I’m sure many of you can relate to this. You’re in need of a service, say for some general repair work around the house. Naturally, the first thing that comes to mind is to ask a friend or someone you trust with such matters. Everyone responds with their opinion on the best handyman they have ever worked with.

So, you pick two or three of the referrals and speak with them on the phone, maybe even interviewing them in person. They all seem good enough and the prices are more or less the same. With no desire to make a project out of this and to move quickly, you select one of the handymen and agree on a final price and start date. You can’t wait to get started in order to resolve all your house issues and be at peace.

And then the first problem; the handyman does not show-up on the agreed upon start date. You think to yourself, it could happen to anyone. Still, you negotiate another date and the work begins. Fast forward six months, the work cost more than you imagined and the quality was far from what you expected.

In this story, I could have easily replaced the handyman with a family law attorney. This is exactly the same way many people pick an attorney for their divorce. Believe me, I see and hear the countless horror stories daily.

This is how it goes. Someone needs a divorce attorney; they turn to friends and acquaintances for referrals. In many cases, some of the people they ask are not even divorced, but still they provide a referral. With referrals in hand, the person does little in terms of vetting the attorneys; most of the time hiring the first one they call. In turn, he or she hires an attorney who believes in winning at all cost. Or, they pick an attorney based on a referral from a wealthy friend who said, “She was the very best—did a great job for me and was well worth the price.”

What do you think can happen? Exactly, the divorce may end up being very adversarial and cost more than ever imagined. Hiring any divorce professional, attorney or otherwise, should be based on unique factors to you, among these being your personality and budget; as well as, the credentials of the professional as they relate to your specific case.

Also, keep in mind that if you retain an attorney, he or she will suggest other professionals they work closely with. Just as with your friends, don’t
go with the attorney’s sole recommendation. Ask your attorney and other professionals for multiple recommendations and interview them all. Select only the ones you believe are best for you.

Clearly, there are better ways to obtain professional referrals when it comes to your divorce. It all comes down to having a divorce plan.

Not planning for your divorce is a sure way to fail, which will have an impact on you and your family well into the future. Turning to friends, family and internet searches for professional referrals and answers is a gamble. Remember, throughout the divorce process, you want individuals on your side with the experience, knowledge and compassion matched to your individual needs.

Pension Plans and Divorce

With long-term marriages coming to an end at rate of close to 75%, the topic of pension plans usually presents itself in a divorce proceeding. In marriages of 15+ years, often times, one or both spouses contributed to their respective retirement plans or accumulated benefits under an employer-sponsored pension plan. Therefore, when it comes to equitable distribution, the proper valuing of these plans and their separation becomes critical. To discuss this topic, I asked Elgin Polo to share his expertise with us. Elgin is a CPA and partner with the firm Kabat, Schertzer, De La Torre, Taraboulos.

TBK: Why and how do pension plans get valued for the purposes of a divorce?

POLO: Pensions are also known as defined benefit plans, and these plans provide a series of future payments. In some dissolution cases, the participant may want to retain 100% interest in these future monthly payments, and consideration is made to offset the value with alternative assets. To value the pension plan, the valuator must consider many factors related to the participant, as well as to the plan, some of these factors include: age, life expectancy, mortality factors, cost of living adjustments to the future payments, as well as the time value of money that must be discounted to the date of the valuation. Once the valuation is determined, tax adjustment might be required, if compared to a non-retirement asset. To tax adjust the valuation, the valuator must determine the appropriate marginal tax rate and reduce the value, if applicable.

TBK: When it comes to divorce and the splitting of retirement or pension assets, what are some of the things to consider?

POLO: Typically the most common way of separating retirement-related assets is to divide them; this eliminates the need for complicated valuations and reduces the need to assign the numerous variables required in such a valuation. If there is a desire for one party to receive a larger share of a retirement asset, which is offset by an alternative non-retirement asset, then the tax considerations must be taken into account. The advantages of receiving a non-retirement asset include: 1) Limited or non-taxable transaction concerns; and 2) greater flexibility in terms of being sold and reinvested in a greater number of investment choices. The benefits of retaining a retirement assets are: 1) Deferred tax growth and compounding and 2) Ability to manage taxable income in the future when income tax rates could potentially be much lower. Each option should be carefully considered.

TBK: Where pension plans are involved there is usually a QDRO. What is a QDRO?

POLO: A QDRO or Qualified Domestic Relations Order is defined by the Internal Revenue Code as the legal document prepared and filed as part of a divorce or legal separation related to employee retirement benefits or pension plan benefits, which are subject to the Employee Retirement Income Security Act (ERISA).

TBK: What role does a QDRO play in a divorce case?

POLO: A QDRO may order payment of child support, alimony or marital property rights to a spouse, former spouse, child or other dependent of a plan participant. When certain retirement plans are established, they have specific rules that impose tax consequences on withdrawals from the plan. In the case of divorce, the use of a QDRO eliminates the requirement to pay income taxes on the amount withdrawn and transferred to the other party.

My Divorce Do Over

Based on my own experience and that of our clients, it’s a listing of the top things to consider as you move through the process. Given that I nor any of our clients get a divorce do over, in some small way, I hope this helps those going through a divorce or considering one.

So what did I learned? What have my clients’ experiences taught me?

  1. Have a Divorce Plan. Sounds silly to say, but often times people put more effort into planning a vacation than a divorce. As you go into the process, have an idea of the desired outcome. Think it through and plan ahead. Yes, a lot of it is out of your control, but many aspects are not. Hiring an attorney and letting that person drive your divorce is like surrendering you vacation to a tour operator. It’s your divorce. The attorney is there to provide legal advice and guidance. Remember, when your done, the attorney moves on to another case, but you own the outcome.
  2. Don’t Go It Alone. When it comes to stressful life events, divorce consistently ranks second only to the death of a spouse or child. Divorce affects you in a multitude of ways, which you can’t comprehend unless you’ve been through it. Reach out to loved ones and support groups for help, if nothing else than to release. And if need be, get professional help to deal with your emotions and the situation. Figuring out on your own what others have or are experiencing will likely only make the process longer and harder for you.
  3. Educate Yourself. Did you know that there is more than one way to get divorced? Do you know what your divorce is likely to cost and how long it will take? I can tell you that I had no idea and neither do the vast majority of our clients. There are literally hundreds of things you should know about divorce before you start the process. Understanding the process itself, timeframes, options and costs are critical to effectively managing your divorce plan. Remember, divorce will likely be the biggest negotiation of your life. And as in any negotiation, preparation really matters.
  4. Children Front and Center. True, you cannot control your spouse’s actions, but you can control your own. No matter how angry or vengeful you might be, think about your children. When the dust settles, you and your ex-spouse will still be parents to those children. And while you may think that children are clueless to what’s going on, especially little ones, this is almost never the case. Keep the animosity and ill feelings from the children and reassure them of the love you have for them. Depending the circumstances, it might not easy, but it will pay off in spades as the divorce fades.
  5. Forgive Sooner. No matter what happened to cause the divorce or what transpired during the process, put it behind you as soon as you can. While it might take time, the sooner you can accept the outcome and move on the better for everyone. Although many people like to label winners or losers in a divorce, there is no such thing. Feeling the winner or the loser does nothing to change the fact that divorce is a devastating, life altering event in most cases. Move on with your new life.

Impartiality and Experience Matter

I own an imported car, which I really enjoy driving even if the maintenance can be a bit much at times. Having work done on the car is not something I take lightly, not only due to the cost but also due to the value I place on my car. For any work done on the car, I want it done right and at a fair price. So, it’s no coincidence that selecting a qualified mechanic matters a lot to me.

As I’ve pointed out many times before, divorce is likely the biggest negotiation of your life. As such, finding, selecting and working with divorce professionals must be something not taken lightly. Make the wrong choice or go with “someone my sister used” is a formula for disaster.

In selecting a mechanic, first, I talk to friends who really know about cars. You know, those guys that live and breathe cars. There are the type of people that value cars and those that work on them. After this, I interview the mechanic and check references. Oh and by the way, I check out more than one referral.

Family and friends always have the best of intentions. But chances are that unless they’ve been divorced multiple times, they are not experts at divorce. So unlike asking for referrals from a car guy, turning to close friends for attorney referrals is usually not a great idea.

Let’s say you or your spouse each hires an attorney. And one or both of these attorneys believes in “winning at all cost”. Or, you pick an attorney based on a referral from a wealthy friend who told you, “She is the very best—did a great job for me and is well worth the price.”

What do you think will happen?

Exactly! Your divorce may end up being very adversarial and cost more than you imagined. That’s why you should pick professionals that fit your desires, personality, mindset and pocketbook.

For starters, getting at least two referrals is a good place to start. Interview each before selecting one. Keep in mind that most attorneys charge for an initial consultation. So when scheduling a consolation, ask if there will be a charge and how much. Ask for references of present and past clients. If you are not happy with the referrals provided, as for more.

To make it a good working relationship, your attorney’s temperament and personality should be compatible with yours. Get a feel as to whether the attorney likes to litigate or is good at settling cases. Nurturing? Aggressive? You need to feel comfortable discussing even the most intimate and important matters with your attorney.

The attorney’s fees should match the complexity of your divorce and ability to pay. Know not only the attorney’s billing rate, but that of their support staff as well. Are there set prices for certain things? For instance, they might offer a fixed price for the preparation of a financial affidavit.

The attorney must give you confidence that you will get the attention required. So, consider the size of the firm. Larger firms can be more expensive, but they have more resources and attorneys who can support your case. With smaller firms, you could receive more attention. But, are you at the mercy of your attorney and workload of cases? Get to know your attorney’s paralegal assistant–you will work closely with this person.

Finally, make sure your attorney is an expert in family law. Like any other field, experience and who you know really matters. I would never let a non-specialized mechanic work on my car, and you should never, ever let a generalist attorney work on your divorce.

Immigration and Divorce

South Florida is a vibrant, international community. And part of what makes our area so wonderful is its diversity. People come here with hope, purpose and vision, be it economic, political or reconnecting with family. However, it’s pretty safe to say that few come here with a vision of divorce.

Married 15 years in their native country, Carmen and Jacinto enjoyed a very good life with their two year-old daughter. In 2000, Jacinto, a successful entrepreneur, found an investment opportunity in Miami and acquired a South Florida-based business. The business required Jacinto’s full commitment, so he moved to Miami. Shortly after, in 2001, Carmen and his daughter followed.

Fast forward 13 years, the business is big success and the couple has two additional children. Everything looks great, except for their marriage. While both Carmen and Jacinto agree that a divorce is the best alternative, they are apprehensive about filing for divorce. With assets in their native county and in Miami and a marriage that took place in Venezuela, they are concern as to how to proceed.

Like Carmen and Jacinto, many South Florida residents face this situation. But how is this situation handled? Can the divorce be filed in Miami? What about the assets here and in Venezuela? Which law applies and how?

“At our firm, we see many of these cases in any given year,” says Paul Leinoff, a board certified family lawyer and partner with the firm of Leinoff and Lemos, P.A. “One of the complexities is figuring out an effective way to divide and distribute assets and businesses that are in a foreign country and outside the Florida Court’s jurisdiction. The goal would be to acquire as many assets located within the Florida Court’s jurisdiction for a client, because often times, there is no telling what the foreign court may do.”

The simple answer is “yes”, Carmen and Jacinto can get divorced in Miami. Since at least one of parties has lived in Miami for more than six continuous months, the local court has what is termed “subject matter jurisdiction”. So, assuming a legal marriage took place in their native Venezuela, the local court can rule as in any family court case provided the local court also has personal jurisdiction over the parties on the matters of alimony, child support, custody, visitation and equitable distribution. The only catch is what happens in Venezuela.

“The South Florida court can identify foreign assets,” notes Leinoff. “The court can even value and distribute those assets, but the court has no jurisdiction to enforce the distribution of those assets.”

A further complication in such cases is that the US divorce decree may not be recognized in the foreign country. This means that while the couple is legally divorced in the US, they may very well still be married in their native county.

And any equitable distribution of foreign assets may likely have to take place in the native country, even if a final judgment is entered in Florida. Obviously these are complicated situations. This being the case, Carmen and Jacinto would be well served to retain a law firm specialized in such matters, both here and in the foreign country.

 

Financial Moves Before, During and After Divorce

If there is one recurring theme in our business, it’s the number of clients that enter and exit the divorce process without a sense for financial matters. To delve into this topic, I had a conversation with our Divorce Care Network member, Caridad Vasallo, a CPA and partner in VMBG Accounting.

TBK: Prior to filing a divorce, what financial actions are a must?

VASALLO: There is approximately one divorce filed in the U.S. every 36 seconds. However, what this statistic fails to address are the parties’ lack of inclination to understand financial matters. That is why I recommend that the first step taken is to understand what they own and owe. It is recommended that you obtain a minimum of one year’s worth of information. Next, understand your monthly expenses. This will not only help you with completing the financial affidavit required during the divorce proceedings, but it will also aid in setting funds aside for necessary daily expenses and anticipated divorce costs. Protecting your credit during the divorce process is also critical. Start by obtaining a credit report for yourself and your spouse. Identify what joint liabilities are held, and work to lower the balance on the debt in order to maximize your availability to credit in the future. Also, begin to build your credit by opening individual accounts, and close accounts held jointly.

TBK: What are some of the big mistakes you see made going into the divorce process?

VASALLO: Since divorce is such an emotional time, people tend to want to hurry through the process in order to reach the next phase in their life. However, this creates unrealistic expectations by the parties and can become a big mistake in the long run. Most parties think they will reach a settlement within the first few weeks or months of filing their petition for divorce. This is not always the case. On average, a divorce will take approximately 10.7 months to finalize.

TBK: Once the divorce is finalized, what are the major financial actions to take?

VASALLO: A divorce decree does not preclude you from updating your last will and testament. You must notify your estate planning attorney of the divorce, and request that they update the last will and testament to reflect your new desires after your passing. Additionally, you must notify financial institutions and third parties of the divorce. This means updating your health insurance, changing the title on the deed to your home, updating beneficiaries, and don’t forget your social media accounts. The marital settlement agreement will state terms that must be executed within a certain time frame. Take the time to re-read the agreement, and outline what items you are responsible for executing and the items that belong to you ex-spouse. The divorce can also require you to find a new group of professionals. Sometimes one spouse’s relationship with a specific financial planner, attorney, or accountant was stronger than the other spouse’s relationship with them. After the divorce, assess whether you continue with the pre-existing professional team you utilized during the marriage, or if it’s time for you to seek new professionals. Lastly, meet with your accountant to determine the tax implication of the marital settlement agreement. For example, if you are receiving alimony, consult with your accountant in order to estimate your quarterly tax payment obligations.