In this episode, I want to focus on discussing the ins and outs of debt. It's a very controversial, and frustrating, and challenging issue that can pop up during divorce. I haven't covered it in a while, so I want to make sure that you understand the essential items when it comes to how to deal with and split debt in divorce and provide some tips so that you can make the right decisions and do what's best for your specific situation.
When I think of a debt, the most common of course is credit card debt. Other things can be personal loans. Medical bills are common. Auto loans fall into that category. Student loans, mortgages, I'm going to exclude student loans and mortgages for the moment because they have some different intricacies than debt overall. But even if you're thinking about student loans and mortgages, many of the core principles that I'm going to talk about here apply to this episode. It really applies to any kind of debt that you may have, so you should really understand your options and what kind of the best things to do may be when splitting debt.
The things I want to cover in the debt episode today is five, or four or five important points. I think four points we're going to focus on. I'm going to go through them in depth. The first is establish what separate versus marital property. Second is minimize and pay down joint debt. Third is split debt simply. And the fourth is going to be if one spouse is responsible for a joint debt, make sure that those payments actually get made. We're going to go through these particular items. Things you should be thinking about when it comes to your situation is debt is one of the most common things we deal with. And almost every person I get to work with, there's some sort of debt I'd say 95% of the time, and we have to figure out what we want to do with it and what the smartest options are given the situation.
So let's start with point number one, which is establish what's separate versus marital property. This is where one of three dates can be very important in the context of your divorce. The first is the day you file for divorce. The second is what might be considered the separation date. The third might be something that is a date that's relevant in your state for a particular reason.
Why are these dates important? Well, you want to understand, and you need to have a clear understanding, is what actually is joint debt, or marital debt I should say, and what is actually separate debt that the person who incurred it, who took on that debt needs to pay for. The reason it's so important is that many times ... Almost every day I talk to someone, like you, who says, "Hey, my spouse went up and got this big credit card bill. I didn't even know we had the card. I don't know what the money was for, et cetera. Am I responsible for it?" Or you'll say your spouse is terrible with money and did this and that, and now all of a sudden we have this debt, or he has this debt, or she has this debt. Am I responsible for half of that amount?
Well, the answer is really hard and depends upon your state. But if you have a clear date of separation or a clear date of divorce, or I should say date the divorce started, that could be an indication of what debt is yours and what is not. There's also a discussion, as every state has different rules and different ways that they treat debt, but sometimes there are other dates that are of relevance. Also, I discussed before in a previous episode, if you haven't heard it, about dissipation of marital property, in which case sometimes if someone wastes money that's not related to furthering the marriage then that can be also considered separate and belonging just to that person rather than joint debt.
But regardless of the situation, it can be ... Or I should say marital debt. Regardless of the situation, you need to really be clear and work closely with your attorney and your financial advisors to figure out, all right, what does the law say? What is actually my debt that I will be responsible for splitting? And what is the debt that solely belongs to my spouse?
Now, there's a difference between divorce rules and other areas of the law. If your name is on the debt ... And we're going to get into this a little bit more in this episode. If your name is on the debt, then you are legally responsible for it, even if that debt may be considered separate property. If you just stop paying that debt and you're responsible for the debt, the person who ... If you went to Visa and had a credit card that had both your names on it but your spouse ran up the bill on that Visa card, you might say, "Well, it's separate property for divorce purposes." But if that spouse doesn't pay down that credit card, then they can still go after you and your credit for the remaining bill. The important thing to do, and one of the most important things in divorce, is just figuring out what you have to split and figuring out what is actually something that you're splitting versus something that gets moved on to the separate property side of the pile, and that applies equally to debt.
The second thing is minimize and pay down any joint debt. I talk to a lot of people who have IRS debt. I talk to a lot of people have joint credit card debt. One of the pieces of advice I say is if you look at your full financial picture, one of the questions is, can you pay down this joint debt with other assets so that when this divorce is over you're not still tied to your ex-spouse in any way financially or have any liability connected to them because you still have a joint debt outstanding? And now, of course, it varies by person. But to the extent that you can talk to and talk through the joint debt issues and your financial picture will allow you to pay it down, then you should pay down that joint debt as part of the divorce process and just be done with it. Makes things much smoother or can make things much smoother down the line when you are ... after the divorce is over.
The third tip is to split debt simply. What is most important about that is that the person whose name is on the debt, to the extent possible, in general, should be responsible for paying off that debt. Now, let me be clear, is just because they're responsible for that debt doesn't mean that it's separate property. It still could be a marital debt that just happens to have only one person's name on it. But if you have a credit card, and ... I'm just going to make up a very simple number. But if you have $1,000 on a credit card that you racked up while buying groceries over a few months, that could very well be a joint debt. But as you think about splitting things in divorce, you should take that debt and be responsible for paying it on your own after divorce is over because it's much easier than trying to transfer it to another spouse and going, to your ex spouse I should say, and going through that process.
Conversely, though, you have to remember that one thing that a lot of times you forget or you may forget during the divorce process that everything is a trade-off. Negotiating a settlement or coming up with an agreement in the divorce process is just about what trade-offs are you going to make. So if you take the example of the thousand dollar marital credit card debt, you might take it as part of the divorce settlement. But still, 500 of that thousand belongs to your spouse. So what happens is you would get an extra $500 worth of another asset. It's not like you're taking the debt and you're losing out, it's that you have an extra 500 of a negative balance on your ledger so you're going to have to get $500 extra of assets somewhere else to make up for it. So, it's not a one-way street.
And conversely, if your spouse has a debt, let's say they have a $5,000 debt, that turns out as marital property, well, it might just be much cleaner and simpler for that spouse to take that $5,000 debt. But conversely, to make up for it, maybe they get an extra $2,500 out of a bank account or something or proceeds from something so that they get their share of the debt. But at least you're not the one who's responsible for paying it. So there's both sides to the issue. The most important point is that it's just a trade-off. Financially, it's just numbers on a piece of paper. We want to get those numbers as fair as possible as we can, and it's easy to account for many times just by what assets you give up or what you keep.
And then finally, the last point is that if one spouse is responsible for a joint debt, they need to make sure that they make ... You need to make sure that that person actually makes the payments. I'm going to give an example that I've dealt with many times in the past, which is oftentimes as part of the divorce process you have some debt and you're going to sell the home. And as part of selling the home, you need to pay off some debts with the home proceeds from the equity, and it's actually your spouse's job to pay off some of those joint debts. Well, if you sell the home and give the spouse the money to pay off the joint debts, what happens if they decide to spend that money on something else and don't pay down that debt they agreed to? Well, the money's gone.
Or what happens if they just hoard the money? Or what happens if they only pay down part of the debt? Or what if they tell you they paid down the debt but didn't actually do it? So maybe months down the line or years down the line you find out that that debt is still outstanding and you're getting calls from credit creditors and your credit, your personal credit, goes down the drain because your spouse didn't do what he or she was supposed to do with the proceeds that you gave them.
Or if you're not even giving the proceeds, sometimes you could just say, "Hey, there's this credit card from MasterCard that has $10,000 outstanding. It's the sole responsibility of your ex-spouse to pay that card down," and to not hold you liable. Well, it's all well and fine that you came up with that agreement, but MasterCard didn't agree to your divorce settlement. So if your spouse doesn't pay that debt, then they will be coming after you for the remaining balance. The point is is this is why I also said in point number two is to minimize and pay down any joint debt. When you do have some debt that's outstanding, you really need to make sure that your spouse or ex-spouse is on top of paying that ... or that debt down because it can come back to haunt you later.
So here are the four things to focus on when it comes to debt. The first is establish what's separate or marital property. The second is minimize and pay down any joint debt. Third is split debt simply. The person with the name on it, generally speaking, should be the person who keeps it, and takes it after divorce, and takes that responsibility. And forth is if one spouse is responsible for a joint debt then makes sure that they make the payments.
Here's the big overarching thing that I always keep in mind when talking about debt, and that is you want to minimize your liability. You don't want to be liable or have liability connected to your ex-spouse when the divorce is over, particularly when it comes to debt. Look, you might always have kids or something like that together, so you're always connected to them. But when it comes to certain financial things, if you can avoid having joint accounts with both of your names on it, it prevents anything bad from happening later down the line with those joint accounts if one spouse racks up a bill, or if one spouse fails to pay a bill, or if one spouse steal some funds from something. Whatever the case may be, it's oftentimes much, much more expensive to try and go back through the legal process than just dealing with these things with a little bit of foresight and thinking about them in advance.
I really want you to listen to this episode, understand the key points, and think about the debt that you may have as part of your divorce. Make sure that you're handling it and splitting it the right way because it's a very important topic that we have to deal with and deal with carefully to make sure that you end up in a good position when this process is complete.
One of the challenges in divorce is making sure that separate property stays separate. And it could be the case that you're trying to prove what's being claimed as separate property is actually marital property. Now it's a bit of an advanced topic, but an important one, and just a reminder, and I said this in the previous episode, if something is marital property, it means you have to split the value of it between you and your spouse during divorce. And if it's separate property, then the person whose separate property it belongs to gets to keep it and you don't really discuss it at all as far as the divorce goes.
One of the most common types of separate property is an inheritance where the parents of one spouse gives them a bunch of money. He may be married or not married at the time and that inheritance is a common type of separate property that exists. Another time it could be a retirement account or a house bought before the marriage.
Now if you didn't listen to the previous episode on tracing and how to trace separate and marital property, that is important context for this episode. But also I want to give you some different tips and how to keep separate property separate and how to maybe prove that that separate property is actually marital property and ways to do that cleanly and things that you can think about. Because also one of the important points when it comes to separate and marital property is sometimes not all of the property is separate. So sometimes a piece of property, let's just say it's worth 100 bucks, could be an inheritance, could be a retirement account or something else and say it's $100 today. Well it could be the case that 10 of those $100 are actually marital property or 50 of those $100 are marital property or all of that hundred is marital property.
It's not always an all or nothing thing and so there are some gray areas and I want to show you how to avoid the gray areas depending upon who you are or actually to ensure that there are some gray areas so you can get your appropriate share. Now the other thing I always have to say, particularly with this type of an episode, is state laws vary a lot in terms of the languages they use and how they discuss whether something is separate or marital property. So make sure you ask your attorney some of the mechanics of the particular asset that you're discussing when it comes to this. But I'm going to give you three tips in this episode on how to keep separate property separate. And that's what I'm going to focus on. One is to avoid co-mingling. Two is to keep track of income and dividends and three is a prenup or postnup.
So let's get into these. Let's start with point number one which is avoid co-mingling. It's a term you've probably heard before and it just means keep something that's separate property, always in a separate account with only your name on it. And so if you get an inheritance, let's just say a $100 inheritance, because we can all do math on $100. Let's say you get an inheritance of $100 and you got it a decade ago. Make sure that that inheritance only went to a bank account and stays in a bank account in your name only. And then the other element to that is don't ever move those funds to a joint account because once you move those funds to a joint account and they get mixed up with a bunch of joint assets, it makes it very, very complicated, expensive and challenging to go back in time and try and figure out how much of that asset is marital property and how much of that asset is separate property.
The second point to think about is that you need to keep track of income and dividends, so it's not just enough to keep money in a separate account to keep that property separate. Sometimes, depending upon your state laws, the income from that account or the dividends that come in from the account or other things related to that could become marital property and they don't stay separate.
So if you get, let's just say you have an account with $100 in it and every year you get one extra dollar in income on that account. So after 10 years you've got $10 of income. Well, you need to keep track of that income every year and maybe even deposit that income into a separate bank account. It can still keep your name and your name only on it, but when you keep track of it in a separate account, it makes it easier to figure out, "Hey, that portion of the account may ultimately be marital property, therefore let's keep it." And that way it's easy to track it and you don't have to go get a bunch of forensic experts to say, "Oh yeah, here's where all the income came in."
Some of the terminology used for this is an income sweep account, if you go to a bank or something like that, and that means that the income is swept into the various portions of your account. The way to do that, or so if you're on the other side of that issue, even if an account is mostly separate, you need to go back and ask your spouse or get the records to see if any income came in from that account because that income may be marital property for you to discuss and split up.
And so that's where one of the levels of complication comes in. But to the extent you can avoid it, if you're the person who owns that account, you want to keep it clear if any income came in or dividends came in and make sure that that is separate. It just depends on the state laws whether or not that income is considered separate or marital. And so you need to ask your attorney how it applies in your state and your situation. But that's something to think about.
The third thing to think of, if you are able to have some foresight and that is to get a prenup or a postnup. Now, if you're listening to this podcast, you probably are not thinking about a prenup, but you might have one that exists, in which case it would be important to think about what's in that prenup. But also you might be able to investigate a postnup or postnuptial agreement, in which case you can designate certain assets as separate in the event that you get divorced. And one of the places I actually see a lot of postnuptial agreements and a lot of prenuptial agreements is second marriages, and even a postnup.
If you're getting married after 40 or 50 it's very possible to go back and get a postnup and get that. And if you agreed to a postnup, you can designate a particular inheritance or designate a business or a home or retirement account or whatever the asset is as separate property in the event that you were to get divorced. So that's something else to consider.
And if you're on good terms with the spouse and maybe a divorce isn't for another several years, you could perhaps, depending upon the situation, have that discussion about a postnuptial agreement and go from there in terms of protecting yourself and protecting a particular asset as it goes on, as time goes on, and keeping that separate property separate.
Now one last warning, one last topic and that is is even if you do everything perfectly, it can still get brought up in a divorce and it can still be a fight and a discussion that comes up as part of the divorce process or at a minimum, the opposing, your spouse's attorney can ask for records related to a certain asset even if you did everything properly. So one of the things I talk with you about all the time on coaching calls is, "You kept it separate, it was clear it's separate, but your spouse's attorney is getting a bunch of records on the particular asset," or it could be a house, could be inheritance, whatever, and you get worried. Well, if you did everything right, there's nothing to worry about.
Now if you're on the other side and you didn't do everything right, there are certainly some things to think about and things to prepare for. But, and there might be some more expense involved, but if you did everything right, so be it. The way that I look at this on a different way is even if you do everything right and you did everything right and your spouse's attorney is asking for records on things, it's their job to.
And so your job is to make sure you have all the records and have everything cleanly set up so that there's no question when it comes up. It's their job to question everything and try and get more assets for their client. So even if you do things perfectly, you're not necessarily out of the woods, but if you don't do things perfectly, it can really complicate things down the line. And so what I want you to do with this episode is make sure you're thinking about and you understand and you have a concept of all the issues you might be facing when it comes to separate property or marital property and how to keep things separate or how to challenge whether something is actually separate or marital property. And the three tips are avoid co-mingling the assets, keep track of income and dividends and finally to consider the prenup or postnup as it comes to getting divorced.
In divorce, one of the big questions is whether something is separate property or marital property. If it's separate property, than the person who had it before divorce keeps it. And if it's marital property, the value needs to be split amongst the people divorcing. And so, one of the questions that we deal with a lot and I help people navigate is how do prove whether something is separate property or marital property. And what do I mean?
Well, the most common is an inheritance. If an inheritance was given to one person, is that still considered separate property or is it marital property? Inheritances, sometimes they're small, but sometimes they are very big because they can be a parent's lifetime of savings. Could be something like a retirement account, where there was money in the account before you got married and then it grew during the marriage. But how much of that is marital property that you split and how much of that is considered separate property?
What about the house? Same deal is what if you bought it before you were married. Does a person who bought the home beforehand own the house or not. It could be things like trust, business interest. There's a lot of different assets and many different questions that can arise when trying to determine whether something is separate or marital property. It's a big deal because if you prove that something's separate property, it doesn't get split, but if you prove it's marital property, the value does get split as part of the divorce process. But the big challenge is, is how do you prove something is one type of property or another.
And it's an important discussion and something that we work with on a lot of our divorce calls or coaching calls, I should say, for people going through divorce or preparing to go through divorce. And the difference or figuring out the answer can often mean the difference between hundreds of thousands of dollars that one spouse gets or has to give up or even millions of dollars in some cases depending upon the asset.
The problem with this subject is it's really complicated and I'm going to discuss a term called tracing. It's T-R-A-C-I-N-G, tracing. And that's going to be the subject of today's episode. And it's the process of figuring out whether if something is separate or marital property. And to compound things further is sometimes an asset that you're discussing or even a debt in some cases that you're discussing can be both separate and marital property at the same time. And so, figuring out what it is can be extra complicated. And really for the sake of this episode, I want to focus really on just two things. I want to introduce you to the subject, but the two things I want to focus on are one, getting the appropriate documentation. And two is hiring the appropriate financial experts.
So, the first and biggest and most complex challenge with tracing assets is having the documentation. And for the sake of the example, I started the episode with different types of examples, but we're going to take a retirement account for the sake of an example as I walk through this episode because it's easy to illustrate the point as to why this gets complicated. One of the biggest issues with getting the documentation is that it can be old. If you've been married 10 years, then you have to go back and get statements from 10 years ago. If you've been married 20 years, then it could be 20 years ago. If it's been 40 years, then you're trying to get documentation from 40 years ago. And as businesses change, as the world changes, a lot of the institutions that you may have had at the beginning don't have those account statements at in their records anymore. Some times they might only have a year or three years or five years.
And so, trying to go back and get 10 or 20 years or 30 years of data is very difficult. But the important part is, or why this is so important, is that you need to be able to track where every dollar came and went to the extent possible over the timeline of your marriage. Now, here's a really important question to ask your attorney because state laws really differ on this subject, but many states have laws in place that property is assumed to be marital unless you can prove it as separate. And so, you really need to be careful because other states have different rules regarding this. So I don't want to generalize too much on this point, but this is why getting the documentation is important is if you can't prove or oftentimes if a spouse can't prove that the property is indeed separate, it's marital property. It needs to be split.
Now, depending upon what side of the issue you're on, that could be good for you or that could be bad for you. And we're going to talk about some ways around it. But the point of that is you need to be keeping good records and you need to be keeping your account statement. And often times, if you walk into your local bank or you call Fidelity or you're financial firm up and you ask for records, they might say, "Well, we only have a couple of years worth and that's all we can provide." Well, that doesn't really help too much, but believe it or not, you might just have to keep digging and they might actually have more records than they will initially tell you. One of the things I always encourage you to do on coaching calls is don't stop at the first no, where they say they only have X amount of records. Most financial firms have many, many more years of records than they will initially tell you. The challenge is you have to figure out who will provide you access to them and how to get access to them, particularly if it's for your account.
For a variety of reasons, they are legally required to keep many years of data. And sometimes it's in paper format, sometimes it's in a warehouse somewhere, but they often have that information for you to get. And so even if you get a first no when trying to get the financial data, don't worry. There will be more opportunities if you keep digging and it may require some help with an attorney regarding a subpoena to see officially what that firm has in terms of data.
Now, ideally also for yourself, if you're thinking about this, I encourage you to keep good records, keep backups of all of your records, particularly for important accounts over the years because having a snapshot of those can come in handy when it comes to something like tracing. Now, there's also an easier solution to all of this and this is... I don't want to get your hopes up too much because this easy solution does not work in all cases. And when it works it's great, but to be fair, most of the time it doesn't work, but sometimes it does and it is worth bringing up. And particularly if you can avoid a bunch of legal fees and expensive fees, I'm going to get to fees and financial experts in the next section of this episode. But if you get this easy solution, I encourage you to use it and it works for both parties.
If you come up with a reasonable guess. And that is that you guess, you estimate. You make an estimate of how much of a certain asset was separate and how much of a certain asset was marital. So, if you know that there was an inheritance and it might have come 15 years ago, that you got an inheritance or a spouse got an inheritance and it might've been at the time $112,363. Well, no one really remembers the exact amount, but if you both think it was around about a $100,000 and you're willing to agree that it was about a $100,000, and you can move on, then move on. Rather than trying to track down, you're going to spend that extra $10,000 or $15,000 just trying to track down all the records and you might've been better off just estimating.
Now, it doesn't always work that you come up with a reasonable estimate and there's reasons in the divorce process you might want to estimate too high or too low, but if it gets you to a reasonable point. And my whole goal with everyone's divorce is to get this done as quickly as possible in good enough shape and as reasonable as possible. And if you can do this reasonably, and it's an ethical guess, I always say we don't want to screw anyone, but if the estimate is reasonable and your both willing to agree to the separate property estimate, that is the easy solution. But that doesn't work in all cases. And oftentimes, this is very complicated in terms of tracing assets, as are many issues in divorce. Now the other question is... So, part one is just gathering the documentation, while part two is getting the information and how do you get someone to analyze the information that you may be looking at.
And that's with the help of a financial expert. And so, most attorneys have good relationships with financial experts, particularly good attorneys will certainly have a good relationship with a financial expert. And it's usually someone who is a CPA or a forensic accountant and their job is to trace assets. Their job is to figure out where money came from and where it went and what value is there to be split for the purpose of the divorce. And the first thing they're going to ask for is come up with whatever documentation you have. Sometimes when looking at the documentation, they might have to make some estimates of their own. They might say, well, the account grew at X amount. We don't think there were any deposits or withdrawals. The market went up this amount. So, we think that 70% of this portion of this account is marital and only 30% is separate.
Or they might go the other way around. But the point is a financial expert is there to try and make the best estimate or best guess or use their expertise to figure out precisely in some cases how much, what assets are available. And the other thing... When you come with a financial expert, one of the things I always say is if you can get a neutral financial expert to do the tracing that both lawyers and both of you as clients agree upon and people divorcing agree upon, then almost always you should go with the neutral. But if your spouse, for example, hires a financial expert and they spend $5,000 or $10,000 or $30,000 or $50,000 looking at these records or more in some cases, but if they go through this process of looking at the records and the details and everything else, I always say this. If your spouse is writing a check to someone and they're working for your spouse, how do you think the conclusions going to look?
Most of the time, the vast majority of the time, the conclusion they're going to come up with is going to be in your spouse's favor. And so, if that's the case, you're going to likely want your own financial expert to analyze things as well and come up with their conclusion. I'm willing to bet that that conclusion will be more akin to what you are looking for on your side. All of that said is if we have two financial experts on a top of two divorce attorneys on top of any other number of people that get involved in the divorce process, it becomes very expensive.
One last section I want to cover when it comes to tracing is that tracing is not an all or nothing proposition. It's not the case that something is often 100% marital or 100% separate. Sometimes, an account that may be mostly separate still may have marital portions to it. And the episode after this is going to be on how do you keep separate property separate and also basically the ways to figure out if separate property indeed has marital components as well to it, so it'll help both sides depending upon what issue you're facing. But one of the things that could happen, and let's just say you got... Let me use very, very simple math. Let's say you got an inheritance of $100 and you put it in your separate account. And that was 10 years ago. Well over time, that $100 grew to $110 because you were getting interest or maybe dividends or whatever the case from that $100 account.
Well, it could be the case that $10 of income is actually marital property, but the original $100 is still separate property. And what you'd have to figure out is, well, how much did you actually get and how much income came in? And so, it's another layer of complication that even though tracing sometimes could mean an asset is 100% separate. Sometimes it can mean it's 100% marital, but other times it could be a gray area. And you need to be prepared for the gray area and understand the nuances and the complexities of the gray area, is yet another thing that you may be thinking about in the divorce process.
The point is it's complicated. You have to get your documentation. You need an expert to help you interpret the information and go through the information and provide an expert opinion that you could use during negotiations or in court if it comes to that. But you need to really understand, or I want to introduce you to this topic, because it's something that's very relevant in many of the coaching calls. And I want you to be informed and have some things to think about as you consider what assets you're actually going to be splitting as part of the divorce process.
Shawn Leamon: As I record this episode, there are about four months left in the year, and you may be at a time crunch trying to wrap things up before year end. I want to give you some tips on how you might be able to do that, regardless of where you are in the divorce process. Some of you might not have even filed, I've talked to a few of you who are thinking about filing and wanting things wrapped up by year end, and others of you are preparing for settlement negotiations and other things so that you can have it in before the end of the year is out. Of course, there's many reasons to want the divorce to be finalized as the year wraps up. The main reason, of course, just being sanity sake. You get to start the new year a fresh, you get this divorce process behind you, and it gets put into the rear view mirror.
Shawn Leamon: There are practical and family considerations. Sometimes it might have to do with something like getting a new place, or a new home, or credit reasons as you think about moving. There are tax considerations, such as if you get divorced by December 31st of this year, it means you're divorced for the whole year, so for 2019 you get to file taxes as a single person or whatever status you reflect or choose, which may be beneficial for you for a variety of reasons. That's something to think about. But the point is is that you're trying to get this wrapped up before the next year starts.
Shawn Leamon: Now, the big challenge is is that where in September as I record this, there's only three and a half months or so before the year is up, and that is not a lot of time. Just for understanding sake, is that divorce under normal circumstances takes one to two years on average. It by nature is a very slow process, and trying to wrap up and rush the divorce in the span of a few months will not always work. But if you've been at the process for a little bit of time, there may be some opportunities to button it up, close it up, and move on in an efficient manner.
Shawn Leamon: Just something to note if you haven't filed for divorce yet. Almost every state, well I should say every state, I think has a cooling off period for divorce. What does that mean? It means from the date that you file, it doesn't mean that you can have your divorce granted until a certain amount of time has passed. On the short end, states have a 30 to 60 day cooling off period before you can get divorced. You have to look at your state to figure out what the rules are.
Shawn Leamon: On the longer end, some states mandate that you are separated for up to a year or more before they allow a divorce to be granted, so there are very different rules in terms of the cooling off period for divorce. You need to figure out what the rules are in your state. It may be the case that if you haven't filed yet, you need to file first thing so that you can at least get that clock ticking. And so if you have to wait 60 days or 90 days, you'll be able to get that divorce through, even if you take the time in between to figure out all the details. Just something to note and figure out the laws in your state, to get that time clock ticking, or if it is as long as a year, so be it, it is the the nature of things, but you'll need to know that for next year so that you're not dragging it out an extra a year's time anyway. Be aware of that and plan in advance or plan quickly.
Shawn Leamon: Now, the main thing that comes up when you are trying to wrap up a divorce quickly is the negotiation time. One of the things that people don't think about or don't realize is that you can negotiate much of the divorce up front, and you could in theory have the divorce settlement attached to the divorce filing, and then you're just waiting for the time to click off and you're on your way. One of the things I encourage, or at least worth thinking about, if your situation permits it, and that's always an if, is that you can negotiate a lot in advance before you file.
Shawn Leamon: Oftentimes, you can work with your spouse, I know that might not sound like the most appealing option, but they call it the kitchen table divorce settlement, where you and your spouse sit around the kitchen table, you look at all your assets and debts, you divvy them up to something that looks fair and say, "Hey, we're going to take this agreement to an attorney, have the attorney draft it up, and then we're more or less done." That is the best case scenario, and I work with a lot of people like you who might be going through that process, and my job is merely just to check over and make sure nothing's missing and everything looks fair, but that is a way to file and complete the divorce efficiently.
Shawn Leamon: Now, there is another option which is the middle ground. As I said, if you have a cooling off or if you haven't filled out the cooling off period, you can say like, "Hey, I'm going to file for divorce now and let's take the next 60 days to come up with our negotiation, do our discovery as best we can, and come up with that settlement, and just put a rush on the process." I mean the parts of the process that are slow is if you wait for the deadlines to do everything. You and your spouse and your attorneys can work out things quickly if you're willing to work out things quickly and if you're willing to be open with each other in terms of what exists in the discovery process doesn't take forever.
Shawn Leamon: One of the largest or most complex parts of the divorce process is just figuring out what you own and what you owe, and if you are upfront about what you own and what you owe, you can come to a negotiation really in the span of a couple of days if you work at it and put your time, attention, and focus on it and negotiations. There's plenty of times, even in some of the most complex situations where, and I haven't talked about some of these examples in awhile, but you know you might go to a two day mediation, you might go away for a weekend and do a mediation, or you might spend two or three days or a day just mediating all the issues in your divorce. And you can, once you know what you're dealing with, it's very realistic to expect things can be done in a day.
Shawn Leamon: The big problem is that scheduling can have conflicts. There's life conflicts. There's work. Oftentimes if you're not forthcoming about what exists, and what your assets are, and if you have to track down a bunch of things, it slows down and delays the process and you may as well just plan for the next year.
Shawn Leamon: Also, if one of the parties is just not cooperating or is being unreasonable, that can also hinder the divorce process and mean you have to go to settlement conferences, and court dates and temporary orders, and this and that, and your next court date if you file today might not be for 90 days, just because the court has enough on its plate and it's backed up, and you're automatically into the next year if that's the case and that's the way it's going to go. But that said is if you can, even in bad situations, and I see it all the time, and for better for worse, I have to deal with the tougher divorces almost all the time, that time pressure of the end of the year can really motivate someone to want to get things done and wrapped up and settled quickly.
Shawn Leamon: Now, the word of caution when it comes to rushing your divorce is make sure the decisions you're making are still the right ones. One of my favorite phrases is penny wise, pound foolish, meaning you're trying to save a few pennies but you're losing a few pounds, and when I say pounds it's, I think it's a British phrase, so I mean British pounds. I could be making that up and I could be wrong about that statement. But when they say pound foolish, they mean try not save a few pennies and lose many, many dollars by trying to save a few pennies. The point of that being is if you are rushing the divorce and you end up with a much worse settlement, maybe it's not worth rushing the divorce process. But if you can end up in a reasonable place with the divorce, you can start to get that done and get things wrapped up by the end of the year.
Shawn Leamon: Now, one other thing I want to make sure that you're aware of as you think about your timeline and how you may want the end of the year to play out as it pertains to your divorce. Just because you come to a settlement on December 31st doesn't mean the court has signed off on it on December 31st, and so you may end up still with the divorce bleeding over into the next year. One of the things I'm doing, you think about that is get your settlement in as soon as possible so the court can sign off on it. One of the things I've seen, and this is something that you need to contact an attorney about to figure out how your local courts work. In some courts around the country, they understand that people want to be divorced as of the end of the year.
Shawn Leamon: Happens is you might submit your divorce settlement on December 22nd, but in some places the courts are closed Christmas through New Years, and so you're in this weird position where you filed your paperwork but it's not signed off, and you're like, "Well, why did we rush to sign the paperwork?" Well, some courts actually have a solution for that. Not all courts. I don't know how your local court is actually going to work, and I would contact an attorney to figure this out, but if you get that paperwork in towards the end of the month in December and the court hasn't signed off on it, I do know some courts that will backdate your paperwork for you.
Shawn Leamon: They might have a month or two of work just on their docket and they can't get to it, and so what they'll say is, "Hey, you've got your paperwork in by the deadline, even though even though the judge hasn't looked at this order until February 22nd of the next year." The judge will say, "Hey, you got the documents in on time. From a legal perspective, you are divorced as of the end of the previous year. All is well, even though I didn't sign off on it until it's later." So they'll do the backdating for you and make sure that you don't get screwed just because they have a lot of work on their plate.
Shawn Leamon: Something to think about and something to ask a local attorney to figure out how the courts work in your system. But regardless of what it is, now is the time to really be thinking about, I don't want to say rushing, but really being speedy about this divorce process and not delaying if you want it over this year. If you don't, there's no reason to rush and you might as well take your time, but for peace of mind's sake for some, for tax reasons, practical reasons, moving on for others, if you want to move to a new state, get a new job, whatever the case may be, having this divorce finalized by year end can be the lifting of a big burden off your back for many. Something to think about as we're in September here, and I just want to make sure that you're aware that the clock is ticking.
One of the questions that comes up often that is a source of confusion, is how does life insurance work during the divorce process and actually afterwards. I want to take some time and clarify how it could work and how it might apply to you. I'm going to start with how it works during the divorce process. Then also talk about the role after the divorce process because it's not always intuitive and it's usually not what people think. The first element is, during divorce the question that people ask, is life insurance something that's split or how does that work? Does it have value? Generally speaking, it depends on what kind of life insurance policy you have. Most life insurance policies, not all, but most life insurance policies are what's called term life insurance, which is a policy that exists for a certain term or certain number of years.
You buy this life insurance policy. It may be for 20 years and you pay a monthly amount and if you were to pass away during that time, then that life insurance policy pays out. But after that time frame passes, that money goes away and you don't get it back and that life insurance policy doesn't have any value. Conversely, some life insurance policies are called whole life policies which are just that. There are many complications and variations within them, but they cover your whole life. They don't have a term, they don't have an ending date. What's important about whole life policies is that oftentimes whole life policies build up what's called a cash value. That cash value is the case or the place where when you build up that policy, there is some value to it that you can cash out or borrow against or sell the policy for, that has value associated with it.
The real goal is, is to figure out, well what type of life insurance policy do you have and does it have any value. Now, term policies generally speaking, have zero value to them. If you're thinking about your financial information or you're splitting up your assets or whatever, oftentimes you'll see the life insurance policy and you'll put the value. You'll need to list that you have the life insurance policy, but the value on it might be zero. So there's nothing to discuss or at least to split when it comes to the policy itself. That's most common with term policies and, just as an aside, is the reason that term policies are so common, is because they don't have a value at the end, they tend to be cheaper. Term policies tend to be less expensive for people then the whole life policies and just more common and simpler.
I just see them a lot more often and I think they're more popular than the whole life policies. It's just something you should be aware of but nothing to worry about there. Just want to make sure that you understand why it doesn't have any value in why it's so common. Then also if you have a whole life policy. So the question I'll ask is if you have a whole life policy and you're trying to split things during divorce, my question to you will be, well, what is that policy worth? What's the cash value on that policy? If there is a cash value to the policy, then that is an asset that needs to be split and needs to be discussed. Usually you don't physically split a life insurance policy, but the person who owns it, that goes on their side of the ledger and then the person who doesn't own that life insurance policy gets their share of the value from it, usually from some other asset.
Rarely do you actually take the cash out from the life insurance policy. It is an option and there's lots of intricacies and complications to it, but we're not gonna go through it cause it's just so minute and varies so often. But it is an asset, no different than a retirement account or a bank account or a valuable or collectible or whatever is. It has value and therefore it is something whose value you need to determine who's going to keep and what someone else is going to get in exchange for that life insurance policy. Now, the other side of the equation is after divorce, how does life insurance work? It's something that's interesting because oftentimes I'll hear from you, you'll say like, "Hey, my spouse is requiring me to get a life insurance policy. Does that make sense? Why am I getting a life insurance policy that my spouse owns or my spouse is the beneficiary of or whatever?".
Some cases, I'll tell you also like, "Hey, you should require that your spouse gets a life insurance policy", or I should say soon to be ex-spouse, "gets a life insurance policy because it can be effective for you." Here is the scenario. Why does that matter? Well, what matters is that if there are ongoing support payments, and they could be alimony/spousal support or they could be child support payments. If they're ongoing payments, then you may want to have an insurance arrangement ... I also include disability insurance. We're just talking life insurance for the moment ... to secure the spousal support or the child support payments. What do I mean? Well, I'm going to give you a very common scenario and I'm gonna try and keep the math very simple so you understand, and I can illustrate the point very clearly for you.
Let's just say you and your spouse have come to a settlement and your spouse owes you $1,000 a month in support ... Doesn't really matter what kind of support ... over five years. So $1,000 a month over five years. So after one year, that's $12,000 of support. In five years that's $60,000 total support that you're going to be owed. Well, what happens if your spouse were to pass away during that time? Well, if that were the case and you didn't have any kind of insurance, you would just be out of money. You would just stop getting those payments and you would have no way to get those funds that you were owed. Or, at least, it would be very difficult to get those funds that you are owed because there was no insurance set up that you owned and that could be devastating to your life.
Now, I use the example of 1,000 a month, but sometimes it's 3,000 a month or 5,000 a month or whatever the case may be or more. If you don't have life insurance to cover that, that can cause real harm to you if the unforeseen were to happen. Now, the element or what you would do is, so you have $1,000 a month for five years, so $60,000 of support payments coming in. What you would say is, "Hey, spouse, you need to get a life insurance policy with a total amount of $60,000 of coverage so if something were to happen to you, some unfortunate circumstance would happen to you, that I, the person receiving support, am not left out in the dust and finding myself broke all of a sudden because of your passing." If that person did pass away, you would get a check for $60,000 which would cover all of your support payments that are outstanding.
Or to take it another direction, if you're the person paying the support, someone may request of you to get a life insurance policy for all the outstanding support payments just to make sure that if something were to happen, that those support payments don't just disappear, but that person receives the support that you had agreed to. Now, it gets a little bit more complicated because there are a couple things that we have to think about. One is, who owns the policy and two is, can we adjust that policy down the line? What do I mean? Well, the first is who owns the policy. One of the things that's very tricky is if one person is the owner of a life insurance policy. You can't just call up the life insurance firm after your divorce and say, "Hey, does my ex-spouse still have that life insurance policy?"
No. And that ex-spouse might say, "Hey, I don't feel like paying for this policy anymore" and just stop paying it. If the worst case scenario were to happen, then you'd be in a position where they stop paying for the policy so the policy lapses. If they were to pass away, you don't get any money. One of the things that people write into the agreement is either the spouse receiving the policy is the owner or there's some sort of verification so that you can check in at least once a year, but usually more often than that, to make sure that the life insurance policy is still current and it is acceptable and everything is going on. The spouse that has the policy is required to provide verification anytime it's requested, at least annually, just to make sure that nothing goes missing.
Now, if you're the person paying the policy, if you're the one who's like, "Well, I'm already paying all the support and I have to pay for a policy on top of that, that doesn't seem fair to me." And I understand the concern. I'm not gonna make a judgment one way if it's right or wrong. My job is just to help people set up their financial picture in the best way possible. One of the things I would suggest, particularly if you're concerned about that, is to reduce the life insurance policy amount every year. What does that mean? Well, one of the ways to reduce your life insurance bill, and makes plenty of sense for me and whenever you see the scenarios is, let's go back to our scenario of $1,000 a month for five years. That's $60,000 total. Let's just keep the math very simple.
Let's just say one year has passed. Then there's only $48,000 cause you're paying 12,000 a year. One year has passed. There's four years of support left at $1,000 a month. That's 12,000 a year times four years or $48,000 of support payments are outstanding. But you took out a life insurance policy for $60,000. What you could do is say, "Hey, every year I'm going to reduce my life insurance policy amount by the amount of support that's outstanding." So instead of carrying $60,000 of life insurance, after one year you only have to carry 48,000. Then the next year you only have to carry 36,000 and then the next year 24, the next year 12 and then you're done. The reason you would do that is the lower the amount of life insurance coverage that you have, the cheaper your monthly premiums are going to be.
I see something very often, or at least I encourage people who have enough foresight to think about this kind of thing, is to say, "Hey, here's a way that we can reduce your burden", and there's no reason if you're the ex-spouse who's receiving support, you would have any issue with them declining the coverage or reducing the amount of coverage by the total outstanding support amount, because you still one way or another are going to get all the money that you had agreed upon. Now, it does potentially get complicated and it's something you have to stay on top of and you have to do the calculations, but it's certainly something that you can write into the divorce decree. It's something that you can negotiate in advance and there's no issue, no reason, that you shouldn't be able to reduce the amount of life insurance that you have for the outstanding support each year.
Another thing that I bring up, and this one is sensitive to state laws and also who's very savvy, and that is who's paying for the life insurance policy. Sometimes I'll say, ‘Hey,’ depending upon who's asking and what the scenario is and what the individual circumstances are. If one person wants a life insurance policy, the other person doesn't, or if it doesn't come up, you can split the cost. Split the cost of the premiums so that you're both sharing in it and it's something that you can, so you'll know exactly that it's getting paid every month, you're both sharing it and it doesn't feel like an unnecessary burden to either party.
The after-divorce scenario has a lot more moving parts to it, but I just went through them quickly so that you can understand what types of things that you should be thinking about when it comes to life insurance. A quick summary. During divorce, whole life policies generally have a cash value in which case you will need to split that and that's an important asset. Term policies generally don't have any value to them and therefore, although you need to declare them or disclose them, they don't really have a value that you split. Then after divorce, life insurance is often times used to secure a settlement for the outstanding support payments. If the unforeseen were to happen, the person who has potentially many years of support still supposed to be coming to them, that support is not interrupted by a spouse's passing.
One last minor point to that, because I went through a lot of very moving parts on that quickly. The other moving part is if you're really savvy and you really want to push for it, you can also get disability insurance as well for that same scenario of after divorce. Not just what if one spouse passes away, but what if that one spouse becomes disabled and still owes you a bunch of spousal support payments? You can't necessarily expect them to be able to pay for your life if they're disabled and can't work. Disability insurance is another way, very similar to life insurance in terms of the mechanics, that you could set that up for your future and protect yourself if there are outstanding support payments.
As anyone who listens to the show regularly knows, there's a lot of different moving parts to be thinking about as you go through the divorce process. Sometimes there are some things that are less obvious that you may want to consider as you are filing for divorce, living your life and just doing some of the normal financial things that you should be doing. One of the questions that comes up, only on occasion, but it's a very important question when it does arise is while you're going through the divorce process, is it better to file your taxes as married filing jointly or married filing separately? While you are still married, you have those two options as a status to elect when you file your taxes. It can be an important question. I'll get into the reasons some of you might consider filing separately in a moment.
But historically, most couples file married filing jointly for as long as they can. What that means is that you file one tax return for the two of you and both of you are supposed to sign it independently. The reason you filed jointly as one tax return is for two main reasons. One is that you get the maximum amount of deductions as part of your tax return, meaning, in general, you pay less in taxes at the end of the year. The second reason is it's much simpler for couples usually just to have one single tax return. It means you're only paying one accountant to prepare one return instead of maybe two accountants to prepare two returns or whatever the case may be. You’re probably accustomed to using married filing jointly, but when the divorce process arises or if you're thinking about separation, there are times where it makes a lot of sense to file your taxes as married filing separately.
I'm going to go through quickly some reasons to do this. At the end of the day, ultimately everyone's situation is different. The best way to figure out how you should file your taxes is to work with an accountant to figure out what exactly makes the most sense given your specific situations, but let's think about... And you should always be aware of your options in the divorce process even if you don't ultimately choose it. So why might someone choose married filing separately? Well, there's actually a scenario. The first thing is that you could actually save on taxes if you are filing married filing separately. If you're filing separately, I'll just say to simplify the phrase. If you're the person in the relationship who has a lower a set of income or no income at all, you might end up saving actually overall on your tax bill. And conversely, if you're the higher income earner and you file separately, then you're likely going to have a much higher tax bill than if you filed jointly. That's just the way the tax rules are written. That's the first thing to be aware of.
The second is something that comes up very frequently, particularly when it comes to divorce. That is, you want to minimize your liability when it comes to what your spouse does on the tax return. Why might someone want to minimize their liability? Well, I speak to many scenarios where one spouse is, I'll just say, doing something suspicious or you suspect a spouse of doing something suspicious with their tax returns. It could mean... Scenarios include they could have a cash business and they're not reporting all of their income and you're worried that they may get audited and that would come back and affect you because you're under-reporting and underpaying your taxes.
It could mean that you just don't trust them that they're doing the right thing in their tax bill or they're misstating something and you don't want to be connected to them. You might not know what it is, but you don't want to be connected to them for the future and risk the tax man coming back after you later down the line. There are other things to think about when it comes to liability, but the point is, is you don't want... You are just very uncomfortable keeping yourself attached to your spouse when it comes to filing taxes and what they may be doing on their tax return because you might not see their income. You might not be able to verify what exactly they're doing. And for you, it might be worth the extra cost or extra expense to separate your finances from them in that regard.
Now, there's a third category of reasons you might want to file separately, which I'm just going to call the other category. Some of these are technical or very specific and I can't get into all the details in this episode without boring you, but there are things I want to bring up so that you know that there are other scenarios in which you might want to file separately. Something like... Depending upon your tax situations, there are certain deductions, itemized deductions, that are limited by what's called your adjusted gross income. When you have two incomes or dual income or joint income, that might... you might not be eligible for those deductions later. But if you're a single person or I should say filing separately, then you might actually benefit from a tax perspective from that. There's a student loan question is sometimes student loans have repayment plans that are based on a person's income. When you have a joint income, your repayment plan might be a lot... might be more accelerated because your income levels higher. However, if you're filing taxes separately then your income is lower.
Another potential reason is for state taxes. Sometimes in some states, particularly in some community property states... If you don't know what that is, you should look up the term community property, but some community property states have benefits for filing separately. It's something for you just to think about. The main three reasons though, one is to potentially save on taxes. Two is to limit your liability for a spouse who may be cheating on their taxes. And the third is there are just some other reasons you may want to consider when it comes to your taxes. But here's the deal, I just want to give you that nugget because taxes are a super complicated area, but it's something that you should be thinking about and be aware of and have in your head is, "Hey, what's right for me this year? What's right for me next year?"
One last thing to bring up when it comes for timing and something for you to think about. If you get divorced on January 1st of 2019, you're considered divorced for the entire year. Conversely, if you get divorced on December 31st of 2019, you're also considered divorced for the entirety of the year and so you won't have the married election to choose from. However, if you get divorced on January 1st of 2020 you are considered married for all of 2019, which you were, and therefore you're going to have one more year of tax filing where you have to think about. Sometime in 2020 you're going to be filing your taxes for 2019, hopefully, and that's when the status is going to come into play in terms of what you need to be thinking about. Something to consider. Something for you to think about as you plan during the divorce process.
But the main thing is, is you need to get your own accountant during divorce. You need to, if you haven't before, talk to an accountant. Talk to someone who is not your marital accountant. If you don't trust that person or you're not... don't have a relationship with that person, at least for the year you're getting divorced and the year after, it's very wise to get some accounting help. Someone who can help you walk through and educate yourself, even if you just spend.
As you go through the divorce process, one of the most important things that you can do that's easy to overlook is really understanding all of your legal documentation and reading it. Even though most of you going through divorce aren't lawyers, you should be able to read and understand the legal documents that are getting passed back and forth and that ultimately you'll sign as part of a settlement or if you got a temporary order from the court or whatever the case may be needs to, you need to read every word and you need to understand it. One of the things that I want to talk about in this episode is what kind of things you should be looking for as you try and read and understand and go through all of the legal elements of this divorce process.
Just one important note to remind you or as a reminder is on the divorceandyourmoney.com/coaching page, we have a call that you can schedule that is a document review call. It starts with, you send the documents in advance by email after you book the call, or we can arrange a method to transfer them, and then I will go through and read all of the key documentation, be it a settlement agreement or financial affidavits or whatever else, and then we discuss points of change and other things to highlight as part of that call.
In this episode, though, I want to go through three things that you should be doing as you go through the legal paperwork and the documentation in your divorce. The three things are, first, is to understand every word and sentence. Second is think about the what-ifs. Third is do what I call a sanity check, which is what does this mean to someone 10 years in the future?
I'm going to go through each one of these points and talk about them just a little bit for you. The first step in the process is to understand every word and sentence in your legal paperwork. I'm going to use the example of a settlement agreement because that's the one that also usually has the most text to it. It also has a lot of moving parts and the most subtleties when it comes to understanding the words that are in your documentation. I want to use that just for the sake of example throughout this episode is a potential settlement agreement that you're about to sign or you're thinking about signing, or you're in the process of negotiating and you're thinking about.
When I say understand every word and sentence, it means you need to go through literally every word and sentence and make sure that you understand exactly what it is saying. What I do with documents is I get my highlighter out, I get some multicolor pens, I go to a quiet place, and I sit and study the documents. I go sentence by sentence to make sure that everything seems alright to me.
Whenever a sentence sticks out, I give it a highlight. If... Sometimes, I'll just summarize each paragraph just in the notes of a page to make sure that not only did the words make sense, but I'm comprehending exactly what is being said in a particular sentence. Sometimes, I'll get to a sentence that, or a paragraph that doesn't totally make sense to me.
Sometimes, it just feels a little fuzzy. Might not be incorrect. I'm just not 100% sure, and I'll highlight and say, "Hey," and then I'll go back to either a lawyer or to you or if I'm talking with you is like, "Hey, what was the intention with this sentence or this paragraph? I don't totally get it," in which case there might be a perfectly reasonable explanation, and other times, they'll say, "Hey, we need to rewrite this paragraph to make it clearer just so everyone understands that we're all on the same page," but you should be doing that as well is you need to go by sentence by sentence to say, really, one of the main questions you should be asking is, is this is what I intended, does this make sense, is this clear, is there any ambiguity because we don't want to have any ambiguity in the documentation.
I had a case just recently where someone was doing a calculation for their retirement account. They put the formula that they were going to use for the retirement account in there, or pension plan, I should say, the formula they were going to use, but they didn't actually put the numbers specific to the formula. They said it was going to be a certain percentage over a certain number of years, and that's the formula we're going to use, to which I said, "Hey, let's go back to the attorneys, and let's actually just write in... you can say, 'Let's include the formula,' but we also need to include the exact numbers that we're using as part of this formula to determine the payout just to add some clarification to the document."
But anything that's unclear to you needs to be fixed, or if it makes you feel fuzzy or just doesn't quite match what you thought you were agreeing to, you should be looking at those with a fine-tooth comb and reviewing those.
The second thing to think about is what I call the what-ifs. You need to be thinking about all of the what-ifs. Divorce settlements are some of the most complicated in the legal world because in a divorce settlement, you have to try and think about all the different possibilities that may happen in the future. That's not an easy thing to do, but you need to think about those particular possibilities.
I'll give you one with the kids. If you have children, well, what if one spouse moves to a different county or is planning on moving to a different county that's an hour away instead of 10 minute away, or that's two hours away instead of 10 minutes away, or what if one child has a disability? How do you plan on handling that and paying for those usually additional expenses, be it tutors or medical things or whatever else.
Should a spouse be allowed to move away, and how would that affect the custody issues? Custody is a complex area, but it's easy to illustrate some of the what-if scenarios. What if a spouse, if we're talking about alimony or thinking about alimony, what if a spouse starts making double the income? What does that mean for the potential alimony or spousal support payments? What if a spouse loses the income? What does that mean to alimony and spouse support payment? Should things be modifiable or non-modifiable?
There are lots of things to think about when it comes to spousal support, or I'm sorry, when it comes to what-if scenarios, including spousal support or child support or just any number of things that life can present when it comes to the divorce process. One of the things you should be thinking about as you go through and craft a settlement agreement is for each particular topic, you should really be thinking about the what-ifs. What if this happens in one's life? It might not be next month, but it might be two years down the life. Is our agreement set up in a way that it's easy to handle and we have a process in place?
Another common thing that pops up is what if someone loses their job or what if a child gets ill? Let's just say there's an emergency, and you have to take a child to a hospital. Who's going to make those decisions real-time when there's an emergency? Those medical decisions that are all important and they're time-sensitive, how is that handled?
Those are examples of what-ifs that you should be thinking about in your divorce process, and in your life, as you read the settlement agreement, well, what if this happens, what if that happens? Look, like if complicated. You're not going to be able to cover every potential what-if scenario; however, anytime I'm looking at a settlement agreement, you gotta make sure the most-likely what-ifs are covered and how that might look. Usually, usually, a good attorney has those what-if scenarios or many of those what-if scenarios already covered in an agreement.
Oh, I'll give you one that is a popular one that I see less often than I should, but it's very important. Let's just say one spouse is paying spousal support, and the other spouse receiving spousal support, of course. Let's just say the spouse receiving spousal support remarries. Well, almost all the time in every state, just about, if someone remarries, then that spousal support is expected to end.
But what if that person doesn't remarry but chooses to live with someone for the next decade? Should that spousal support end? Many times, I would say yes, but the point is, is that needs to be written in the agreement in how you determine what the conditions are for the ending or termination of spousal support. To be fair to both parties is very important in your settlement documentation, and that's a what-if that people should be thinking about.
Now, the third thing to consider is what I call the sanity check. The sanity check is very important because... What is it? The sanity check that I like to call it is also just kind of, let's think about this in the future. Let's just say that five years from now, some random person who has no involvement in the divorce reads your documentation and has to make a ruling on it and say that, "Oh, well, you agreed to this. Does this make sense, or is this the way that you intended things to happen, and does it make sense for what's actually written in the document?"
Now, what did I mean by that? That was a little bit of a convoluted explanation. What I mean is, is oftentimes, and this is one of the most important things I want you to keep in mind, oftentimes, when you have a lot of context, when you have a lot of "your life" involved in the divorce documentation, you intuitively understand supposed to or at least you think you intuitively understand supposed to happen as part of this divorce agreement given that everything's fresh.
But what if a few years down the line, going back to that what-if, what if there's a dispute, and one spouse wants to take the other spouse back to court or back to the lawyer's office and say, "Hey, this issue isn't being upheld correctly," or, "It's not being handled properly," or, "I want to modify this particular clause." Well, 10 years from now, if someone's reading this documentation, or five years from now if someone's reading this documentation, is it very clear as to what exactly you agreed upon, and would it make sense to someone who has no context other than just the legal documentation?
I'll give you a case that happened to one of my clients I've worked with for several years both during and after their divorce is their spouse, or ex-spouse, I should say, did not make any kind of, the ex-spouse had, for several years, not been making a specific payment that he was supposed to be making. This payment was a monthly payment that he just never made. It was... and after several years actually owed my client quite a bit of money.
Now, the good news was we went back to the documentation. We looked at it, and we looked at the exact wording, and it was very clearly spelled out and exactly what was supposed to happen. We went to the bank statements. We gathered up the receipts, and said, "Hey, ex-spouse, you owe us many thousands of dollars because we haven't gotten this payment you had supposed to have been making," excuse me. We were able to get that resolved.
But other times I'll look at documentation where someone calls, and I'll read the documentation, and I'll say, "I'm sorry. I get what you're missing, and I understand what you're saying, but the legal documents that you signed, that you and your spouse signed don't quite say that. It's hard for me to understand what exactly is supposed to happen here in terms of how this all works and what you're expecting to happen. I get that it doesn't match what you agreed upon, but you signed this paperwork that said this, and now you're trying to challenge it." It's going to be hard to prove later down the line.
The point being is for every part of the divorce settlement that you read, make sure it's clear, and make sure to be clear to someone who knows nothing about your case many years in the future so if there's a dispute or if something arises, the solution, so to speak, is already in the divorce paperwork, and it's very clear for everyone who is involved.
Those are the three things when it comes to understanding your documents. The first thing is, one is review and understand every word and sentence in your documentation. The second is think about the what-ifs, all the potential scenarios that could happen, and try to address as many of the most-likely ones as you can in the divorce paperwork that you're trying to figure out. The third is do your sanity check, is think about this agreement you're about to sign from the perspective of someone who knows nothing about you, or let's just say a judge, 10 years into the future. If there's an issue, will this paperwork still make sense to the person who's not involved in the scenario, and how might think they about the issues that are being presented.
Also, just one last thing, as I said, is one of the most popular things I only recently launched in the past year is a document review session where we can get in-depth in the documentation that you're looking at as part of your divorce. One of the most common things people ask, and honestly, I say divorce isn't, clearly, is not a fun process, but one of the most fun parts for me or one of the most enjoyable parts for me is reviewing the settlement agreements and thinking about the different scenarios and trying to figure out ways that we might be able to make one section better or improve a section or alter a section so that everyone is happy and we can get this down the line and make sure that there's no unclear area. You can book a document session review with me as well. I do many of them every week, and they're one of my most famous, or most favorite, I should say, parts of this process to review as well.
I hope you found this episode helpful, and talk to you soon.
There may come a point where you need to fire your divorce attorney. And I want to talk about how you do that, what the mechanics are and some things to keep in mind. Now before you fire your divorce attorney, that's what we call a last step in the process. Not the first thing that you need to do. It might be something, if your relationship with your attorney is not going well there are many ways to repair it or to make your comments known and just to give you a heads up I have about seven or eight podcast episodes on how to manage and get the most out of your attorney relationship in the Quick Star Guide and that's just in the Divorce and Your Money store.
You can get a lot of great information that will save you hundreds if not thousands of dollars just from that section on managing your relationship with your divorce attorney but one of the things I want to cover in this particular episode is the mechanics of, "All right, you've had enough. Your attorney's relationship just isn't working out." And what do you do? How do you communicate that? How do you change attorneys? How does that process work and what are the things that you need to keep in mind as you consider changing attorneys?
It can be a challenging thing to do and there are some elements to consider. Now, one thing I'll just tell you is don't feel as if you failed because you picked an attorney that did not work out for you. Choosing an attorney is a very very difficult process. There are a lot of complications. It's not easy. You don't always know what you're getting because it's hard to say how that attorney relationship's going to go before you get divorced and it's not always easy to pick the right attorney. And so ... And sometimes you have what is a good attorney but isn't a good attorney for you and your circumstances.
And so when you finally get to that point that your attorney just isn't up to the task for you and the relationship's not going well and you're on that last straw, it maybe time to fire that person. And I want to cover three areas to consider, or three things to think about as you go through the firing process. The first is communicating your concerns, the second is interviewing other attorneys and the third is how to fire the attorney and what the mechanics of that are.
Let's start with the first point which is, communicating your concerns with an attorney. One of the toughest parts with the attorney is that you have to communicate what is going on and if you are unhappy for a particular reason, you need to communicate the reasons for your unhappiness with the attorney's job. Sometimes, or most of often, almost the same way it is in a relationship is that the biggest issue of the attorney or with the attorney is in the communication area. And your communication with that person just is not where it needs to be.
And so you might not know what's going on with your case, your attorney might not reply to your emails in a timely fashion, maybe they don't seem prepared or know what's going on in your case and maybe their paralegals are not being responsive. Whatever the concerns maybe you need to start by outlining those and communicating your unhappiness or frustration with the job that the attorney is doing. And maybe they might say, "Oh, sorry, let me work on this thing," and you give them a month or a few weeks and they improve substantially. Because they might not know that they have a problem with customer service.
Many times lawyers are good at the law but terrible at running a business and they're not as adept at things like customer service and communication even though it's very important to you. Other times, and one of my unfortunately favorite sayings is, "A bad attorney doesn't become better just because you keep paying them." And so sometimes you're going to be in a position where just that attorney is not working out and you have to, despite your communication attempts, it's just not going well. And so I wouldn't expect because you pay them an extra $5,000 or an extra $10,000 or an extra $50,000 that they're going to magically become better for you and better for your case.
And so, what to do then is it's time to move to the next step, which is step number two, is that is interviewing other attorneys. Now, I have lots of episodes, both free and in the Quick Stuart Guide on how to select an attorney, both the first time and the second time around. And ways to minimize the chance you end up with a bad attorney. There's a lot of different tips in there for you to think about but one of the things I want to cover is that before you fire or consider firing your attorney you need to have somewhere else to go. It's as simple as that is you need to interview, I suggest at least two, sometimes three other attorneys. Go meet for initial consultations. Meet for even a follow up consultation. Sometimes they'll be free, sometimes there's a charge involved, but this is your life and your divorce and so you need to figure out who the best alternative might be for you.
And I would not encourage you to fire your attorney until you know where you're going to go. Firing an attorney without having a back up option in place is similar to leaving a job without knowing what your next job is to be that you have lined up. If you're working and you have a job and you're like, "I'm frustrated with my job. I want to quit," well, and you quit and you don't have a backup option it could take you two or six or a year, six months or a year are even multiple years before you find the next job and that wouldn't have been the smartest decision.
It's the same with your attorney in that you should figure out who you want to represent you before firing that person. Now, let's assume that you've communicated your concerns, it hasn't been alleviated, the relationship between you and your attorney is irreparably broken, you have found your next alternative attorney, now how to you actually fire your existing attorney? This is point number three. And how do you do it?
Well, there's a few ways to do it. And there's a few things that you should be considering. The first is you can give them a call and just say, "Look, I don't think the relationship's working out." It doesn't have to be a complicated call. Just say, "Look, this relationship isn't working out. I've hired Jane Smith or John Smith in my town. I think they're going to be better to represent me going forward. I just want to give you a heads up that I'm going to tell you know, but also I'm going to need my file and unused retainer." What did I just cover in that?
The first is that you said, there's three things I covered. First is that you said, "They're fired." Or I should say four things. First you said, "They're fired and the relationship is over. Stop billing me." The second is that you said, "This is the attorney that I'm going the use." The third thing is that, "Please send my file, all of the documentation, all of the correspondence, all of the backup documents be it credit card statements or tax returns or whatever else to Attorney Jane Smith or John Smith and here is their contact information." And the fourth I said very briefly but you would want to illustrate this is in some cases you can get your unused retainer back.
Now I know some attorneys who don't have, how have nonrefundable retainers but I also know other attorneys who will refund any portion of your retainer that you paid but will, and will transfer that either back to you or will give that money to your next attorney so it's not like you're out hundreds or thousands of dollars in unused legal fees.
Now sometimes I've also seen attorneys find ways to use up that unused retainer but other times you can get a portion of it back. And so I said you should call and do that but also follow up in writing and say, "Look, I'm withdrawing your use as my council. Here's the four things I said on the list." That they're fired, the new attorney, please send all the documents to the new attorney, and to refund any unused retainer and get a final statement, billing statement from them and what that amount is so you know what it is.
And you know it can seem like a scary process. How do you fire your attorney? What's going to happen? Are they going to come after you? Most of the time they will not come after you. Look, changing attorneys happens on a regular basis. It's something that's common. It's something that is not unusual or weird or anything like that. And so you shouldn't worry too much about it in terms of someone being angry or upset with you. It is what it is. You have to be the CEO of your divorce. That's a phrase you'll hear me say many times. And as a CEO sometimes you have to fire employees and your lawyer is someone who works for you and if they're not doing a good enough job, you need to fire them in a professional manner and that be that.
I want you to understand those mechanics. Know that if you need to do it here are some resources to help you and it's not scary. And you just have to do it and take control. I know some people don't like the confrontation with their attorney. They won't go after ... There's nothing like that. Now, there is one point I do want to bring up and that is sometimes you're going to fire an attorney and you're going to have an outstanding bill to them. It might be hundreds of dollars, it might be thousands of dollars. You should pay the outstanding bill.
The last thing that you want is your attorney, and I've been in this situation where someone needs to fire their attorney, there's an outstanding bill. One of a few things happens. One is the attorney doesn't turn over the files until the outstanding bill is paid. That could be something that happens. Or another thing that happens is there's an outstanding bill paid and the attorney sends that bill to collections. Also something else that you don't want to have happen.
Things to think about, things to consider when it comes to an outstanding bill. Make sure you pay that. Just clean up the last little bits. You don't want to be penny wise pound foolish or anger someone inadvertently or have an additional legal proceeding from an outstanding bill. Make sure you pay that. But otherwise, look, it's very simple. Communicate your concerns, interview other attorneys and then follow with my four step process and just four things to communicate to your previous attorney as you fire them.
One important topic that comes up on calls is how do I stop my spouse from spending all our money? Now, this question comes in many flavors. It could be frivolous purchases, vacations, money spent on an affair. I've heard people spending hundreds of thousands of dollars on prostitutes. Sometimes there's just a spouse that's terrible with money, and one spouse likes to go shopping, or might even quit their job and just spend a lot more money than they used to all of a sudden as part of the relationship. I've had cases where spouses are sending money to family members for questionable purposes. I've had cases where spouses take money out and invest it into terrible business ideas. I've had people who spent a million dollars or more investing in some latest fad and losing it all. Could be gambling, could be drugs, could be any number of situations as to when a spouse is wasting money, and the question is, well, what do I do about that? Is there any recourse? How do I handle that type of situation? And, like in all things divorce, of course state laws vary on the subject, but I want to provide a few terms for you to think about, and a few things to be aware of if this is a situation that may be affecting you.
I'm going to give you three things to think about. The first is something called dissipation. The second is tracing, and the third is the timing of your divorce. And we're going to go through these things and dig into them a little bit, and maybe these will be helpful for you as you try and figure out, well, what should I do in this situation? Let's start with the first thing, which is dissipation of marital assets. Dissipation of marital assets. I know some of you take notes, and I want to spell out the word dissipation, D-I-S-S-I-P-A-T-I-O-N. Dissipation. I feel like I'm in a spelling bee. And the general idea of dissipation is that one spouse is wasting marital money, and it's not in the normal course of your expenses. For example, if one person wasted $25,000 on an affair with someone. Maybe taking someone on trips or nice meals, or whatever, buying gifts, whatever the case may be, or it could have been any of the examples above. Drugs, gambling, anything.
And in dissipation, what happens is you figure out what was lost, and you can get reimbursement for the funds that one spouse spent. So if your spouse wastes a bunch of money on an affair, you can basically get that money back as part of the split of the divorce process. Now, there's a lot of complications and intricacies related to that, but it's something that you should bring up with your attorney and look up the laws in your state to figure out if it is something that may apply to you. But that's the term that you might be looking for, and people don't always know the terms, so I want to make sure that you know what that is.
The second thing is something called tracing, and tracing is a word that's used, it's a legal term, but the concept is very simple. And tracing is used in many aspects of the divorce process, when it comes to splitting up all of your assets and debts and such. And the idea is to figure out, well is to trace, to figure out, where money came from and where it went, oftentimes. And so tracing comes to prove the flow of funds from one place to another. I was watching an episode of Law and Order, it was on TV, and it was an older episode, and the judge, they had a family law judge on in Law and Order. And one of the characters, this is SVU, Elliot Stabler is in the middle of a divorce, and the family law judge says, "It's my job to figure out who I think is lying less." I wrote that down, as I thought that was a great quote, because it's very relevant when it comes to tracing. The goal of tracing is to figure out, well, one person's going to say the money came from one place, another person's going to say the money came from another place, and the real question is, who's right? And where did that money actually come from?
Much of divorce is he said, she said, and there's three sides to every story, where there's what one person says, what the other person says, and then the truth. And in order to prove wasting funds is that you need to have the evidence of the wasted funds, or be able to trace those issues and assets. And so it could be something like getting credit cards. It could be something like bank statements, could be retirement account withdrawals. But you have to figure out where the money went, and oftentimes it's not easy. Sometimes it can be a very tough process to trace or to follow up on every transaction, everything you're looking for, and it can be an expensive process, too. You might need the help of an accountant or a forensic accountant, and you're going to need to get lots of bank statements and account statements and start to try and put together a picture of where certain marital money went.
And it's not always obvious that something was, let's just say out of the normal course of business for your family, and it could be a challenge. Sometimes it could be five or 10 or 20 thousand dollars just to figure out where assets went, or more. And so you need to think about that as you are wondering about assets. Sometimes, and I'll work with you, and it's a smoking gun case of like, oh, well every time this person visited Miami, that was where the mistress or affair person was located, and it's easy to, Miami wasn't actually a business trip. It was only a play trip, and it's easy to figure out all the transactions that happened in Miami. But most of the time, nine out of 10 times, it's nowhere near that simple, and it's something that you have to figure out. And one of the questions is, how much money is gone and how much will it cost to try and find that money, and on top of that is, after you spent all the money on trying to find it, will it have been worth the time and energy? So that's tracing.
The last thing is not a technical term, but more of something for you to think about as you go through the divorce process, which is the timing of your divorce can be very important and very relevant when it comes to the wasting of marital funds. And what I'm getting at is, normally when you file divorce, it kind of stops any major transactions from happening, financial transactions from happening, between you and your spouse. And so what happens is if you file for divorce, basically you're not supposed to do anything suspicious. You're not supposed to make any big withdrawals, you're not supposed to make any big purchases that are out of the ordinary, you're not supposed to move a bunch of money around different accounts. You're not supposed to do anything that could be considered questionable once the divorce is filed.
But up to that point, I hate to say it, that's kind of fair game. You can kind of do whatever you want. I'm not going to say that you can get away with some of the stuff we talked about before, but it's a lot more of a gray area in terms of what's going on in your divorce. And so one of the things that I talk with you sometimes to consider is if your main concern is stopping a spouse from making a major purchase, or making a big withdrawal, or changing assets on something, then filing for divorce could be a great solution in order to prevent something bad from happening, at least from a financial perspective. Now, I don't ever encourage filing for divorce. I say my hope is that no one ever has to listen to this podcast again, and that would be great. But the reality is, is sometimes it's required, and that's why we're all here, and that's why we're listening, and necessary, and so one of the things to think about is if you are fearing, and I hear this every week, that your spouse is going to waste money on something else in a big sum, then that may be the cause or may be the reason you want to consider moving up the timing of a divorce filing.
Now, filing for divorce and the timing around it is a very sensitive subject, and there's a lot of moving parts and a lot of things to consider, but if you are putting together your list of reasons you might want to file sooner over later, and that is it, is to prevent a spouse from wasting funds, any more funds than they have already, on certain areas of the divorce. Because that way there would be recourse and very clear recourse for you to get that money back later, if a spouse is wasting funds.
Now, those are just three things to consider, and three ways to help stop your spouse from wasting money, and to get that money back, or at least try to get that money back, either during the settlement process or sooner. When you are dealing with the divorce situation, and the divorce process, I should say, if you can trace marital assets that have been dissipated ... Whew, a lot of words. You might be able to get some credit for those, and get more of your share of the assets later down the line, because one spouse wasted them upfront.
Thank you for listening! Find a transcript of this episode below.
In this episode, I want to discuss a question that came up recently, and it's a subject that while not exactly a specific divorce topic, it's very important when you think about planning for your financial situation, and has a big impact on how you think about budgeting and finances in general. It can impact what you think about agreeing upon as part of the divorce settlement. Many of you have retirement savings, or if you've listened to other podcasts, you might be getting a lump sum distribution or trying to negotiate a lump sum distribution as part of your divorce settlement, and as you may know, is one of the things I advocate for particularly.
I think it makes sense many times and is underutilized, a lump sum distribution, because both parties oftentimes benefit. If you're the person receiving that lump sum, that's great because you have all the funds. You don't have to rely upon your ex-spouse to make those monthly support payments, and if you're the person making that lump sum, you also get the benefit of, well, you don't have to make every month that support payment, and it's all kind of done upfront, and you can also end up paying a little bit less in the form of a lump sum, because you get to get those funds out early instead of over years.
I have some great episodes on lump sum distributions, but more broadly is if you have any kind of savings, be it retirement or investment accounts or cash in a bank account, the question that I want to answer on today's episode is, "How much can you plan to withdraw from your savings each year? How much can you plan to withdraw from your savings this year?" What am I getting at is, the question is, I like to keep things pretty simple. You have your income every year. You have your expenses, or I should say you have your income every month, you have your expenses every month. At the end of the month, hopefully your income is greater than your expenses, but oftentimes in divorce that's not the case and particularly in the beginning.
The situation where this came up is this person hadn't been working in 20-plus years, and they were in their 50s, and you know, you're not going to retire for another decade if you're in your 50s at least, and so the question was, "Well, can I just live off of my lump sum distribution that I'm trying to negotiate? How much of that can I spend each year and be okay?" Or if you just have general savings or if you're even already in retirement or thinking about retirement or planning for retirement, you need to understand, how much of your total bucket of retirement can you spend and be okay?
I'm going to give you just a very simple rule of thumb to make things easy and some other considerations to think about when you are considering how much money you spend from your assets. The first question is, of your savings, how much can you withdraw each year from your savings? Now, the perfect answer is you aren't withdrawing from your savings. In a perfect world, and very, very few people live in this perfect world, I'd say no one does, but in an ideal financial world, you are not withdrawing from your savings. Just to use very simple math, if you have $100,000, you're adding to your savings every year is the ideal for most people. But unfortunately, in practice, that doesn't work. If you start the year with $100,000, ideally you want to have $110,000 saved up by the end of the year, but you know, I understand that life happens. There's expenses and everything else. Sometimes your income and expenses aren't going to equal each other, and you're going to need to borrow or you're going to have to withdraw some money from that $100,000 in savings, and I just use $100,000 because it's a very simple number to do math from.
How much can you spend? I give a very, very simple rule of thumb, and it's 4%. So for every $100 you have saved, you can spend 4% of that a year and be okay. Why do I use such a low rate and such a low number? Well, if you get above 4%, then what ends up happening is it's going to be very hard to replace that money and you're going to be withdrawing from the principal. What do I mean? Put it a different way, is if you have $100,000 a year, I say it's safe to plan that you can earn $4,000 a year in dividends, interests, and appreciation over the long term, if you are just planning for that.
Now, hopefully your rate of return on that $100 is higher than 4%, but I wouldn't plan on it. You never know. I know the market's gone up quite a bit for the last decade as I record this, but there's always downturns. Interest rates fluctuate, the economy fluctuates, the market fluctuates, and if you spend more than ... If you plan on earning 8% or 10% or 15%, then that's probably not realistic, and that's a terrible plan from a financial perspective if you're making your budget and budgeting, because if you fall under those projected returns, then you're not going to have enough savings for later in life. The plan is, is, look, you can stay about even with your savings if you only spend about 4% a year.
Now, 4% a year is not a lot, and if you have $100,000 in savings, some people I know don't have anywhere near that amount. I know some people listening have many multiples of that amount, but if you have $100,000 a year in savings, then you can only plan to supplement your budget for $4,000 a year and expect to be okay. You know, if you spent $3,000 then that's even better, or zero, that's great, or even $1,000, but once you get over to $5,000 or $6,000 or $8,000 or $10,000 a year from your savings, it's going to be very, very hard to replace those funds. And so for all of you thinking about your budget and what you can spend and what can you live on, think about 4% a year. If you have $1 million, that would be $40,000 a year that you can live on and withdraw from your assets, or $100,000, I said it's $4,000, and it fluctuates to whatever number is relevant to you.
Now, second point I want to bring up connected to all of this is that sometimes when you have to, it's okay to spend a little bit from your savings for the first couple of years after divorce. I don't advocate necessarily for spending additional funds, but there's always practical realities and oftentimes it's easy to forget the reality of one's situation. If you haven't gotten a job or if you don't have a high paying career, or you haven't worked in a while and you're trying to reenter the workforce, for many people it's unlikely that you're going to be earning six figures as that first job, particularly over that first year, even when you're well educated. And sometimes maybe you are actually, and if you are, then more power to you. That's awesome, and make sure you have the other elements of your financial picture set up.
But if you're thinking about kind of reentering the workforce, which is a common scenario I deal with, or if your spouse is thinking about it and you're trying to present a persuasive case to your spouse, you have to kind of keep that in mind as well, is that maybe it might take them a year or two or three to retrain and get back on your footing. And so if you have that $100,000 pot, well, maybe you do need to spend $5,000 or $7,000 or $12,000 for a year. Yeah, that's a big bite and it does cut a lot into your savings, but if it's only for a year or two at the most, then you can use that and treat it like an investment to get yourself back on track, but treat it really like an investment, an investment in education, an investment in job training, an investment in some sort of resource or another asset that gives earning potential.
If you're spending that $5,000 or if you're spending $10,000 in a year just to keep up with your mortgage that's in a house that's too big, or if you're spending that extra money on a car payment that's too high, then I wouldn't really think that's a great use of funds because you'll never get that money back. But oftentimes you're retraining or going ... I have tons of clients who go back to school and become any number of jobs or need to kind of dust off the old degree. They might start at entry level, but since they have some life experience, they get to move up quickly, and it only takes them a year or two or three at the max to get really back in the flow of things in a pretty decent way. I mean, oftentimes won't necessarily be the CEO of a big company, but still earn a very good living for you and your family, and in those scenarios it's okay if you need to spend a little in the short term with the understanding that as you plan your budget and plan what you're thinking about, that that's a temporary thing and you should be working on or try to work on any other lifestyle adjustments you can to see how things are going on.
Also, you should be planning to not spend more than that 4% over the long term, but at the same time money is there for when you need it. It's just, try and save it for things you really need, not something frivolous like a vacation when you can avoid it, particularly right after or during or while planning for a divorce situation, because you don't know all the moving parts and the hidden expenses and just all of the things that happen during this process.
Then the third thing I just want to bring up is that when you spend more than 4%, you can start eating away at your principal. What does that mean? Well, what happens is you end up in a negative downward spiral. If year one, and I'm going to just oversimplify this a little bit, I'm going to use the number $100. Let's say you start with $100 in savings. You spend $4 of it, so you're at $96, but maybe you get some investment returns, so that gets you back to $100. So you kind of stay around even over the course of the year. Well, what if the next year you spend 7% but you only get 4% in investment returns? And if someone who's really good at math understands what I just said, you'll say that what I said is not exactly accurate, but let's just say you start at $100. Year two, you're still at $100, and you spend 7%, so you spend $7 and you only earned $4. Well, then you're down to $97. Well, to get back up to $100 is more than 4%. you have to get up to 5% or 6% to get back to that $100.
Now, if you spend more again the next year, let's just say you're down to $92. Well, getting from $92 to $100 takes a lot more effort and a lot more time. And if you spend, again, and let's just say you get down to $80, well, getting from $80 back to that $100 is a big amount, and without getting to the exact numbers and exact percentages, trying to stay even gets harder and harder and harder every year, and not only does it get harder every year, if you spend 4% of $80, that's only $3.2. So 4% of $80 is $3.2, where 4% of $100 is $4, so you have two things that are happening at the same time. One is that when you're spending your principal, you just have less overall money, and the second thing is, is an equivalent percentage of spending on a lower total amount of money is sort of a downward spiral, because you get, for every dollar you lose, you can withdraw less the next year, and then the next year and the next year, and you keep running out of money even if your percentage of withdrawal kind of stays the same, if you're above that 4% number.
Hopefully I illustrated that clearly for you. It's kind of a lot of numbers and moving parts, but the point is this, is that if you're withdrawing from your savings every year, it gets harder and harder and harder to catch up, and we don't want that happening to you. Does that make sense? I hope that makes sense.
The three points are, first point is, 4% rate for your savings. If you're planning about planning on budgeting, assume you can only spend 4% a year on your savings, or out of your lump sum, out of your savings money. And hopefully less than that. The second thing is, if you have to, it's okay in the short term to spend a little bit of money the first year or two after the divorce because practical realities necessitate that happening. But make sure it's only a short term thing and not something over the long term. Then the third point is that if you're spending more than 4%, you start eating away at your principal, which leads to a negative downward spiral, and you want to avoid that. So plan wisely as you think about your settlement and your divorce settlements, and it's a very important long term planning tool to keep in mind both while you're working and even while you're thinking about retirement.
To learn more about Janet McCullar and the custody process, visit her website at: https://janetmccullar.com/.
Thank you for listening! Find a transcript of this episode below.
Shawn Leamon: Shawn Leamon, here, M.B.A. and certified divorce financial analyst, here with Janet McCullar, board-certified family law attorney in Texas and author of the new book The Custody Lawyer. Janet, it's great to speak with you today.
Janet McCullar: Thanks, Shawn. I'm glad to be here with you.
Shawn Leamon: Why don't you give us a little bit of a background on you? You just wrote this great and informative book called The Custody Lawyer, but tell us a little bit about how long you've been practicing and why you wrote the book.
Janet McCullar: All right. I've been practicing for over 25 years. I was a teacher before that, then went to law school. Not too long after I finished law school, I started working in the divorce and custody area, and have mostly done custody cases in my practice.
Janet McCullar: I wrote the book because I noticed that when people come in to meet with me for their very first appointment, and they've got a custody case, and they have a lot of concerns, we have what I call an initial consultation. By the end of that consultation, I've seen their shoulders drop, the person's more relaxed, some of the fears that they have have been addressed, and some of the frequent misunderstandings that people have about the way a case works or what might happen to them goes away. I see [inaudible 00:03:54] relief. I love that initial meeting. I love that ability to really help somebody address those fears and concerns.
Janet McCullar: And so, I started thinking about all the things that I told to people in those first meetings and put it together in a book. Also, just tried to address how a trial works and some special areas like parental alienation, which I hear about from people all the time.
Janet McCullar: So that's sort of a little bit about me and why I wrote the book.
Shawn Leamon: No. That's great. I want to get into parental alienation at a high level in just a little bit, but for someone who doesn't know anything about custody, but they know it's going to be an issue. It doesn't necessarily have to be a divorce-related issue, though of course, custody issues, I imagine, are often happen in divorce context. But for someone who just knows that they're going to have a custody question or a custody battle on their hands, what's the first thing someone should be doing to prepare for that?
Janet McCullar: Well, I think the first thing you should do, of course, is contact a lawyer like myself, and set up a meeting with them. Even if you're not sure you're going to be going through a divorce, or if you're not sure you're going to be having a custody case, going and meeting with the lawyer will give you the opportunity to get some ideas about things to do in case that happens in the future. For example, I often tell people who just want to consult with me to keep a diary or a calendar where they're marking the things that are happening. So if they're having a dispute about when visitation should be or if they're having their child's coming back from a visitation with the other parents, and the child is acting out in some way, they're making a record of it. Over time, these kind of chronologies are extremely useful to me in putting together a case for somebody.
Janet McCullar: Also, going and finding out just some basic information about what happens and what do you need to plan for.
Shawn Leamon: To that extent, is there sort of a flow to how a custody case works or a specific process that one goes through when someone comes into your office? What does that look like? I know for most people, you have no idea what they're about to face or how that process even goes.
Janet McCullar: Right. So, there's usually two ways that people come to see me. Either they are splitting up with a partner and they have children, or they already have been divorced and they're going to be doing what's called a modification of the prior orders that were made by a court. But let's talk about the first instance when somebody's coming in for the first time.
Janet McCullar: Not everyone, these days, is married that is going through a custody case, but many people are. What happens first is you come in, you meet with me, we talk about what's going on in your situation, and I give some guidance on whether a case needs to be filed. Not everybody needs one. I sometimes recommend that people go and try some other things first, such as going to counseling. And then if that isn't working or somebody's ready to separate from their partner, then we will file a lawsuit, usually a divorce. In that, it's going to include the things that we need to figure out about the child or the children.
Janet McCullar: Once that process is started, which is filing some sort of lawsuit, which I think a lot of people don't really think about that, but that's just what it is. It's a lawsuit. A divorce is a lawsuit. Then it's a matter of are there urgent matters that need to be tended to right away or are we going to go through a process then where we're gathering information that will eventually lead us to a trial, where a judge will make decisions, or before a trial, a mediation, where the people will work together with a neutral third party to help them resolve the case through a process called mediation.
Janet McCullar: Along the way, a lot can happen. It just depends on how complex the situation is. If it's a very complex situation, for example, that say parental alienation is involved, we're going to have steps in between where we're going to be asking a court to appoint some professional to do, for example, an alienation evaluation to find out if that is going on. Or we're going to ask the other side for information through a process called discovery.
Janet McCullar: I try to go through in my book a little bit about what happens at each of those stages because it is a very mystifying process for most people because most people don't go through lawsuits in their lifetime.
Shawn Leamon: Yeah. That makes a lot of sense. The other thing you mentioned as well is modifications. That's something that I imagine comes up quite a bit, or often I imagine some people don't know that they can modify a previous order, or some people might be afraid that it does get modified. Could you talk a little bit about that process as well?
Janet McCullar: Sure. A modification is a change of a prior order. What that usually means, pretty simply, is that the divorce decree or the last order that was put in place is not working for some reason or another. For example, maybe somebody, you know, wants to move out of state. Maybe visitation that was ordered under the decree or the divorce decree isn't working. Maybe the children are refusing to come and visit the other parent. Maybe the other parent isn't facilitating visitation. Maybe sometimes something big happens like a parent was arrested for driving while intoxicated, or they have developed a drug problem that the parent is starting to affect their ability to parent. All of those are the kind of things that I see when people are coming to me and wanting to change or modify what the original orders were.
Janet McCullar: A very frequent request is one parent may have been the primary parent, and now, the other parent thinks there are reasons that they should be the primary parent. And so that can result in people going to court and asking the court to modify or change the orders.
Shawn Leamon: Now, that's very helpful.
Shawn Leamon: Let's shift gears to, you know, there's a lot of different topics in the book, and I'd like to cover all of them, but don't have enough time for today, but one that you've mentioned a few times is parental alienation. What is that?
Janet McCullar: Parental alienation is situation where there is a preferred parent and a rejected parent. It is not necessarily the case that the preferred parent is engaging in a conscious plan to remove the children, but their conduct can be so subtle. Eventually, it can lead to a child flat out refusing to see a parent. Often, what I hear the favored parent saying is, "Well, I can't make the child go see the other parent. They refuse to go." Which poses an interesting question to me because if your child came to you and said, for example, "I don't want to go to school," would you just throw up your hands and say helplessly to the authorities, "I can't make my child go to school"? Or if your child needed medical treatment, parents don't, I've never heard of a parent who says, "I can't make my child get the treatment that they need from a medical provider."
Janet McCullar: But so often, people will say that in terms of a custody. "I can't make them go." Of course, you can. Every parent can make their child go and visit the other parent. And they need to make them go. When that's not happening, that is one of the biggest signs that there's some alienation going on.
Janet McCullar: It can start off in a very subtle way, but so often, it starts with a gradual, you know, the child stops going to visit, or they don't like the circumstances of the visitation, or they, you know, act out when they come to the other parent's house. All those things can start a path towards alienation or, at a lesser degree, estrangement.
Shawn Leamon: And that last term that you use, estrangement, what does that actually mean?
Janet McCullar: Estrangement is a milder form of alienation. That's a situation where, I often see a parent befriending their child and sharing with the child information about the other parent that's not appropriate. You know, saying things like, "Daddy is divorcing me and leaving us," is something I heard a mother say once. You know that most parents when they're going through a divorce want their children to know "your dad and I aren't going to be together anymore, but Dad loves you and I love you, and time with both of us is important." But a parent who is engaging in an estrangement starts signaling to the child that it's not okay to spend time with the other parent.
Janet McCullar: They can do things like, you know, refuse to let the child talk about what's going on at the other parent's house, forbid them from taking certain belongings to the parent's or from the other parent's house. In public settings, not sitting with the parent or sitting across the room, and if the other parent tries to join them, getting up and moving. Things that are sending to the child a signal that there's something wrong. Often, it gets into a very complex dynamic where the child wants to please the parent who is rejecting their other parent, and they know that as long as Mom, for example, is around that they can't be friendly with Dad or it hurts Mom's feelings too much, and they start taking on a caretaking role.
Janet McCullar: But estrangement is just a milder form of alienation. The child may still go to visitation, but there's a lot happening that is undermining a healthy relationship between both parents and the children. Another way of ... Go ahead.
Shawn Leamon: Yeah. You said the word complex, used the word complex, and it sounds like it. One of the questions I have related to that is given all of the examples you just provided, how does one prove that something's going on? I mean, these are, at best case, it sounds like almost anecdotal examples, but how would you win a case or defend someone or go after someone, just depends on the situation, when these behaviors are being exhibited? It's not like someone, there was a police report filed necessarily, or there was a video recorder going on. This is very subtle human interactions.
Janet McCullar: That's very true, Shawn. A lot of people come to me and they're worried about a he said, she said. You can imagine in family law of context and divorce and custody context, that's almost always the case. It's a he said, she said. One, I work with my clients to establish a lot of credibility with the court. I like to say it is they're going to say, but we're going to show example after example. Usually, I work with my clients to come up with very specific examples of the other parent's conduct that we can talk about. So that's one way.
Janet McCullar: But then so often, the kind of interactions that are happening between the parents are also translated into text communications, emails, postings on social media, all of those are frequent types of documents that I use as evidence to show that something is happening and to bolster what my client is saying.
Janet McCullar: People who cannot talk in terms of specifics, you know, if I ask the parent, for example, "Tell me how you encourage and support a positive relationship between your child and the other parent?" And they can't give any examples, that's going to be a thing that undermines their credibility in front of a court. But I'm going to have a client who's prepared to talk about and give example after example after example so that we can demonstrate it. That goes back to keeping calendars and journals and emails and screenshots of things that are on social media, and so forth.
Janet McCullar: In some districts, people make recordings as well. Tape recording another person is something that can be tricky. In the state that I live in, you can record a conversation that you have with another person. Just like if you and I were sitting down having a talk, I could record that conversation. I wouldn't even need to let you know it, and that would be lawful in Texas. But it's not everywhere, and so, before a person makes recordings, they need to be careful about doing that.
Shawn Leamon: No. That makes a lot of sense. Going back to the book, The Custody Lawyer, you cover a wide range of topics from the custody process, visitation, a spouse that's violent or bullying, kids with special needs, and everything else. For someone who, and I know there's many, every day across the country, someone who needs some advice, what's the best way for them to contact you?
Janet McCullar: They can go directly to my website, which is janetmccullar.com. Right on my website, there's a lot of information and also, the ability to set up a consultation with me, and I can talk to anybody anywhere at almost any time to talk about the particulars of their situation. And then secondly, would be to try and find a lawyer, and to have somebody who helps you. I think that a lot of people can save the cost of a lawyer by talking to me first, seeing if they even need to hire a lawyer or maybe I'll have some tips or strategies that they can use to help them position themselves well before they hire a lawyer.
Shawn Leamon: Well, that's very helpful. Well, Janet, it's great speaking with you today.
Janet McCullar: You, too, Shawn. Thank you so much.
Thank you for listening! Find a transcript of this episode below.
In this episode, I wanna continue discussing creating a marital history. Now, if you didn't
hear the previous episode, you should go back and listen to that one because it has a lot of
good information about the overview on why you should create a marital history, and some
important questions you should be thinking about when you create said history. And also,
some alternative methods to create a marital history and why it's so important to do. And
in this section, I want to continue with the marital history and provide some other areas for
you to think about.
This next area is called the health history, the health section. And, what should you be thinking about in here to include? Well, if there are any mental or physical problems that have happened in the past few years, particularly for either of you, but particularly if it affects the work ability, and also if it affects the way this divorce may go. Have there been any hospitalizations or major surgeries that have happened? Are there any substantial prescription medications that you may need to think about and someone may have? Also, if there are large out of pocket medical expenses, which I've had several cases where that is a substantial portion of their divorce and negotiation, that is very relevant as well.
The next section is education. You should, just for the record ... Or, I shouldn't say for the record, but for our records, give us any information on your educational background, degrees, advanced schooling, no schooling at all, whatever the case may be. And also, this is an interesting section, particularly for those who've been out of the workforce for a while. One of the things that you should think about between us and between your lawyer is if you are planning a second career, a next career, what that might look like. So, I've had clients who've gone to coding school, become real estate agents, become paralegals, become a variety of things. And, one of the things that you should consider is, if you are thinking about those things, how much it costs, how long it takes, and what life might look like after you get that advanced education.
The next section is employment. If you've been working, tell us where you've been working, about how much you make, how long you've been working there, what your salary is, what your job position is, what your future prospects are at that company. And if you haven't worked, that's okay too. Let us know. Or, if you've had a break from employment. I know some people who worked for a while, then they stopped for a while, then they've restarted their career. Whatever the case is, that's fine. Just let us know what has been going on, and also do the same for your spouse.
The next section is real estate. And actually, I just had a client send me an email 'cause they have a bunch of real estate. I said, "Just give me a list of all of this information for all of your properties. I'm just gonna run down it." For every piece of real estate you have, tell us when you purchased it, how much you spent when you purchased it, where the funds for the down payment came, how much of a mortgage you may have had, who's been paying the mortgage payments, have there been any substantial upgrades. Like, if you remodeled the kitchen, or if you added a wing to the house, or a new bathroom, or whatever the case may be. And, how you paid for those upgrades as well. And also, whose name is on the property, as well as whose name is on any debt.
And then, finally, is there other income that we need to think about, or unusual income, or unusual things in your finances? Things that might be unusual or other include income from rental property, substantial dividend income if you had a settlement. So, a lawsuit judgment that you won. If there is a trust, a spouse has a trust. If a spouse gets substantial stock options, or you get substantial stock options, something to think about. Or, if a big chunk of the income occurs in a year end bonus, or if the income is lumpy, or if there's a business involved. All of those things you kind of can toss into the other section to provide any additional explanation. And, I'll say that most people have ... not everyone, but most people have some sort of other that they need to include as part of the process. So, something else to think about there.
And, those are the main items. And so, what you do is go through each of these to the best of your ability. And, you should start filling them out. Once you have everything written down, it doesn't have to be in my order, and sometimes attorneys will ask for them in different orders, to the extent possible, you need to start gathering proof of everything, or evidence of everything. As I said, to the extent possible. If there are particular wage items that we need to be thinking about, or if there is a bank account, or if there is a mortgage statement, or if there is a medical history that we need to know about 'cause it could become a good deal, or if there was a specific instance of abuse that may be relevant, or if you've been seeing a therapist for a while, either you singular or as a couple, start gathering up that information. Anything that can ...
As I say oftentimes on many coaching calls, I'll say, "I understand what's going on, but do you have any proof that what you're saying has happened? Something with the kids?" It's better to have as much documentation as possible that proves what you're saying is correct, rather than not having it at all. And so, as part of that, you just go section by section and start getting the evidence you need, particularly if there's going to be, or if you anticipate, a dispute over something. So, a good example, let's just say, is a bonus. Sometimes spouses manipulate what their income actually is. And so, what you'll do is you'll need to go get the tax returns and say, "Hey. On the tax returns, here's what happened over the last five years. Here's five years of returns. Here's a good way to verify what the income is, or what the income has been."
Or, if there is a medical issue ... I've had a few cases where almost 100% of the divorce is about medical things. And if that's the case, then you need to have evidence of what medical treatments you've been having, what the out of pocket has been, who your doctors are, what prescriptions you take, and what the future prognosis is of that medical condition. If you're on disability, why you've been on disability, what prompted it, what evidence you have of it, why it might mean you can't work. Or, if you're the spouse contesting the disability, which I also have some clients who are contesting a client's disability claim, why ... You don't think that spouse is as disabled as you think they are, and here's some evidence. Here's a Facebook post of them running a half marathon, or doing an adventure sport, or playing golf and walking around just like they're fine, where they claim they can't work and they can't get out of bed.
So, whatever that is, anything that you're going to anticipate contesting ... It could be something for the kids. I don't know. But, start getting in the mode of gathering evidence now and including that in the marital history.
Another common one that people forget about, but if you have text messages, or emails, or in some cases, a little bit more extreme end, recorded phone calls or conversations, that is also evidence, or potential evidence. Make sure you don't violate any laws. But, if you take a screenshot of a text message conversation, or if you have nasty emails or nasty voicemails, or Facebook messages, or whatever the case may be, all of that type of stuff is also potential evidence that can help you with your claim.
So, what do you do? So, let's take a step back. Just giving you a week's worth of potential work. You start answering all these questions. There's no set form, per se, that you have to fill out. It's just what makes the most sense for you, and what the major items are, and what you wanna include. You can always add to it or revise it later. But once you have it, what next? Well, once you have that information and you have the evidence, you need to take a step back from it and keep it all organized as possible. Have a friend look over it, and say, "Hey, friend. Here is some evidence that ... Give a look at this. Is there anything I'm missing? Does it all make sense to you? Is it clear?" If you have a trusted friend, show them everything you've prepared.
And then, once you have that all prepared, and everyone's reviewed it and it's good to go, it's nice and organized, share it with your attorney. Or, if you're gonna book a coaching call with me, or book a call with another certified divorce financial analyst, or someone else, prepare it as well. And, send that information over and say, "Hey. I want you to review all of this in advance of our conversation." Or if you're gonna go to a meeting, bring it with you to the meeting, or ask to have it reviewed in advance. I have a document review call that I recently started offering where we go through marital histories, and other relevant documents, in advance of the call so we can dive deep and really understand what's actually going on in the divorce. And so, I would start thinking about those things, and share it with the people who are your trusted advisors. Be as honest as you can, and we will interpret the information to the best of our ability.
Also know this, is that your spouse may be doing the same thing. And so, sometimes it's helpful to hear ... Or, maybe not even helpful. But, sometimes we will hear the other spouse's side of the story as well. It's not just a one-sided process sometimes. We always work for the person who hires us. But, if you're kind of going through a collaborative process and you're on good terms with your spouse, have your spouse prepare their version of the story as well. It can be very helpful for all of us as we figure out what the appropriate course of action is, and how do we get through this process in one piece and minimize the amount of conflict, and make sure everyone gets, to the best of our ability, the outcome that we hope to get them to.
There's no right or wrong way to do a marital history. The more information you can include, the more organized, the better. There's not a template. There's not a worksheet you can fill out for this one. But, start thinking about it. Start preparing it. I guarantee you your attorney'S going to appreciate it. I will appreciate it. Everyone you work with will be very appreciative of a marital history when you create one.
Thank you for listening! Find a transcript of this episode below.
I'm going to discuss a topic that I haven't brought up on the podcast before. And that is creating a marital history. Now, this is something that I've talked about on one-on-one coaching calls, but not something that I've brought up on the podcast and I think it's a really important subject that everyone should listen to. And perhaps, everyone should create. One of the challenges when you are getting divorced and you hire someone like me or you go to your attorney, is trying to catch up on everything that has happened. And of course, a lot has happened, particularly, if you are contemplating separation or divorce and are going through that process. And so, one of the things that can help us and help you and help everyone, is what I'm going to call a marital history. Some people might call it a marital history questionnaire, a lot of attorneys I know don't do this at all and they might just ask you questions.
But, this is one of the most powerful tools that I'm now a big fan of. That I think that everyone should do and should create and should work with. And do on their own. It's something that you can do individually. It's not necessarily going to be a fun subject, but it can be very important when it comes to settlement negotiations, if you have to go to trial, and just helping us understand the context of what's going on. One of the things that I ask, if you book a coaching call with me, there's always a questionnaire that covers some basic information on a marital history. But, for the sake of this episode, I'm gonna get into some really in depth issues that you might wanna create, or thinking about, or think about creating that will help everyone get on board. One of the biggest challenges when it comes to your attorney or comes to me or comes to an accountant or something like that, is that we don't know you.
And we don't know everything that has been going on. And even if we do know you for a while or work together for a while, there's stuff that we might forget or we might miss or we might not have it all in order. And so, one easy way to provide clarification in terms of your history and things have gone on, is to document it. Write it all down and create a marital history document. And I'm going to get into what goes into a marital history. And there's different ways that you can do it. But, what it does is in the span of 10 minutes for us, is we can read a few pages of information that you prepared and say, "Okay, I'm starting to get a feel for what's been going on over the last five or 10 or 15 or 20 or 30 years." And now, I can start formulating a strategy in terms of "Oh, your spouse is a narcissist" or "Oh, I understand that you've been a stay at home parent all of this time" or "Oh, you're the primary bread earner and this is what's happening" or "Oh, this spouse has money issues" they can't save.
Or "Oh, you've been or the spouse has been great, just things aren't working out and we need to get a divorce and this is what's gonna happen" or "There's been abuse and here's some examples of instances that this has taken place". Whatever the case may be, it's easy for us to come up to speed with what those things are. And it's in a marital history document. And so, what I'm gonna do over this episode and perhaps a couple of episodes is go through some of the things that should be on your marital history and some different ways to prepare it and some different considerations to do. Now, there is a ... There's sort of two methods to creating a marital history, and they're not exclusive, meaning you can do both of them. And the one that I normally go with, not because it's right or wrong, it's just the way that I think. Very analytical and I deal with of numbers.
And I like creating what I call a timeline. Or what many people call a timeline, in which I say, "Hey, if you wanna do a very simple version of this document that's only a page long", which might be all that you need for some people is, look, just create a page, or two pages at the most. Create a timeline for me. Tell me what day you got married. Tell me the big events that occurred in your marriage." So, if you bought a house on a particular date. Tell me that on May 1, 2002, you bought a house. And just give me like ... You can keep it that simple. You could say, "Hey, we bought a house. We both contributed $50 thousand each for the down payment. And blah, blah, blah, blah, blah." Or, if it's something more complex than that, maybe you could say, "Oh, well I contributed the down payment, spouse did not contribute, house is in my name only. And I pay for the mortgage. And have for the last 20-some years."
Whatever the case may be. I said, "2002", so I guess less than 20 years, last 15, 16 years. And so, you can do that or you could say, "In 2017, in June we had our first big argument and I left the house for a month" or "There was an abuse situation that occurred and police were called" or "Went to marriage therapy for the first time". But, what you do is you just take all the events in order, put them with dates and you list them on a page. And that's the simple method that can say, "Okay, I can see the big events. Here's some quick explanation in terms of what's been going one". I've had people who do it by hand. You can type it up. You can do it in excel document. Whatever is easiest for you. And just quickly layout the history and timeline for things that have happened.
Now, I'm going to go through a little bit more of a comprehensive method that can be paired with a timeline, but I'm gonna go through a lot of different questions and a lot of ways to jog your memory in terms of things that you should include on this marital history. Now, if you walk into almost any attorneys office they'll have a intake form for you to complete. Some of the questions on that intake form are helpful and will relate to a marital history. But, some of the stuff I don't really see on many lawyers intake forms, even at the best law firms in the country. But, this is the kind of information that can save everyone a lot of time and energy and questions. And provide a lot of clues in terms of how the divorce should proceed. And so, what I'm gonna do is I'm gonna go through a bunch of questions, a bunch of prompts for you to think about. You can ... I don't have them ... You can kinda just think through these.
You might wanna pause for certain ones. I'm going to just kinda read through them, some of the important ones. And start making some notes for yourself. And also just FYI, is I keep a transcript of all of the episodes on the podcast at DivorceInYourMoney.com. If you click on "Podcast" you'll see a transcript of all of the episodes, so if you miss a question or you can always rewind, but also, I keep a list of these questions for you. And I'll try and keep them separated pretty easily, so you can kinda copy and paste if you wanna look at some of these down the line. I know some of you listen to this while working out, some in the car, some at work, and sometimes you're not in a position to write these down at the moment. So, I'm gonna try and make these as easy for you as possible at DivorceInYourMoney.com. And if you click on the "Podcast" button, you'll see the transcript for this episode, in terms of the questions. And I'm gonna do this, probably over two episodes. So, if you don't get all of them now, the other episode will be up shortly.
Now, questions to consider. And let's go through these. These aren't gonna be fun, but you should write these down, type them out, whatever's best, so long as the information is in a position that you can communicate it and share with the people who want to help you. Me, your attorney, et cetera, 'cause this stuff is useful. So, first section is on marriage. There's lots of things to consider in the marriage category. Things to consider such as: Is this your first marriage? Why don't you tell ... You should write down when you got married. Where you got married. And if you had any previous marriages, make sure you write those down and document them as well. Was there a clear time that you separated? You should include that. Why did that separation happen? And if you think there's a clear time you separated, sometimes it's as simple as, "Well, my spouse moved out of the house on August 4th." That's a clear separation date.
But I know many of you are still living together or maybe you're still contemplating divorce. So, a formal separation hasn't happened yet, but you might want to say, "Hey, I think we kinda of ... I think the breaking point was this day." And, there always is a breaking point. You can say who left, what the circumstances were. Those types of things. The next section I would consider is kind of a loaded one, but we'll call it the Fault Section. And trying not to over communicate emotions into some this process. Just try and state the facts to the best of your ability. I've worked with clients on creating these before and sometime you'll say "Well ..." you might have a paragraph as to what you're explanation is, but really ... and what you're thinking, but really, only one thing happened. You moved out of the house and you moved out because there was a threat of something or it was just time or you finally found a new place to move.
Just write "Moved out of the house. Found a new place." Not, "Well, I've been thinking about moving out of the house for eight months and I was walking around the neighborhood and I took a walk and on that walk I was contemplating it and I saw my neighbor and the dog and we had a nice chat. Then I went and had a drink and then the wal ... and then ..." You don't need to do all that. When it comes to this next section, in particular, just try and state the facts to the best of your ability. Remember, everything I say in this process, to get the best outcome possible is to really look at the facts. So, here's some questions: Why do you think the marriage is ending? What did you do that may have contributed to the marriage ending? Sometimes that's an easy question like, "Well, I had three affairs, but those affairs might be because my spouse did not fill my needs in another way" or "We haven't talked" or whatever the case may be.
Now, what things did your spouse do that contributed to the marriage? If you're getting divorced, I know that list could fill a book. But focus on the big items, the breaking points. Are there any third parties that are involved. So, is there another boyfriend, girlfriend that's been involved in this process or that's the cause of this? Is there something, someone outside of just the two of you that is leading to the breakdown of the marriage? As I said, try and document the big things, not everything is of relevance, but to the extent you're willing to share it with your attorney or with me, write it down. Write down the facts and kinda keep it clean. Next area is on children. Make sure you have the ages of the children, where they were born, where they go to school. Do they have any medical issues?
I deal with a lot of people who have children who have special needs. And that provides or adds a layer of complication in the divorce. Is there anything unusual about the child's lives? It could be in relation to, well I have some kids who go to boarding school or who are exceptional musicians. When I say, "I", I mean I have clients who have kids who are like that. You should make those things known. Is your spouse a ... Could they still be a good parent? Is there a reason that custody should be ... And I hate to use the word "Custody", but is there a reason that one child should spend a lot more time with a parent than another? In some cases that's clear, in some cases that's less clear. But, if there are some things that need to be brought up, then by all means, start writing those down. And also, from the kids perspective, if you could guess, sometimes it's obvious, sometimes it's not. But if you could guess, do you think the kids would pick a particular parent to live with?
And if so, why? I know some people who have kids, they're in theory living in the same house, but one parent has almost no relationship with a child in the house for any number of reasons. And so, if that's important, then write that down. Has one parent been the primary parent in the relationship? That is very relevant. It's not a negative thing, if one parent has, usually in most relationships, or in many relationships, one person worked and the other person takes care of the household including the kids. So, it's not unusual if one person is, but it's good to be honest and as truthful as you can with your advisors. At the end of the day, even if something might look back for you, it is not something that we're making a judgment on. Our goal is to help get the information in the context, so that we can help you and help make the right decisions for you. And help you make the right decisions that you want.
And so, those are the first areas to start with. Is the marriage, why is it breaking down? Just some basic information about the marriage. Why it's breaking down. And tell us about the kids. In the next episode I'm gonna go through some other questions to think about, like health, education, employment, income questions that will help us get a better picture of your marital history and your marital status. And, just a reminder, you can write these down, you can type them out, whatever format is easiest for you to do. But, be as truthful, as honest, and as much detail as you can so long as it's relevant detail. Stay tuned for the next episode. A lot of good stuff coming in and a lot more questions I wanna make sure that you have answered, which will, I won't say make your divorce smoother, but will certainly help us and help your attorney, help anyone who helps ... help your mediator, whoever it is, in the divorce process present the best case for you.
Thank you for listening! Find a transcript of this episode below.
When you think about divorce, it is indeed a process, and as part of that, I get to work with you through all stages of the process. Sometimes it's months or years before you file, and you're trying to figure out the key items. Other times during the divorce, you're trying to figure out what path makes the most sense for you, and sometimes, it's even after divorce is over and whether or not it makes sense to pursue a modification or trying to enforce a part of the agreement that's not being taken care of promptly. In this episode, I want to give you some considerations for those of you who are still considering filing for divorce, and in particular, when you should file and whether you should file first. There are reasons that you might want to file first, but the end of the day, if you can control it, you should file for divorce when the time is right for you.
Now, sometimes that timing is enforced upon you by your spouse filing, but if you're in a position where you can control when to file, you need to wait until it makes the most sense for you and your family. Sometimes that might mean, well, waiting for the kids to get out of the house and go off to college or go off to their next career. Or I'm thinking about taking this job or my spouse is thinking about taking this job in another state, or whatever the case may be. Or maybe we're still in the trial separation phase, and we want to reconcile, and so maybe we shouldn't file for divorce quite yet.
Whatever the case is, you need to, if you can, wait until things are right. Now, sometimes you are kind of forced to wait. Maybe you're trying to figure out certain financial complications or other things as part of divorce. I mean, there's a lot to think about when you're filing for divorce. There's 200 episodes of this podcast, which just deals with the financial issues and doesn't even get into most of the custody issues in the legal process of divorce, oftentimes, as well, that's involved. And so there's just a lot to think about whatever the case may be. But in general, I would say my advice is this, is don't rush into divorce if you can prevent it.
Oftentimes when I talk to you and you're still in the early phases, you might be still trying to reconcile, and you might still be trying to do things to make things work for you. In that, case I'll say, "Hey. You know what? Here's what you need to be doing to prepare today just in case the worst case happens. But it's my sincere hope that I never have to speak with you again, and you reconcile, and you're able to work things out." That's my hope is that I don't have to ... If I didn't have this job, I would be very happy. But you know, things are what they are, and so we have to confront them head on. I want to make sure that you're protected.
That said, now there's some reasons that you may consider filing first. I'm going to go through three reasons on why you might want to file for divorce and might want to do it sooner over later. Now, sooner doesn't necessarily mean next week or next month or even next year, but when it looks like divorce is inevitable, there are some things and some reasons you may want to consider filing for because you can dictate a few key elements of the divorce process or maybe have some needs to dictate a few key elements of the divorce process.
I've been reading a lot of military books lately. I grew up in a military family, and I find military books fascinating. One of the things that's come up in a lot of the books I've been reading lately, particularly on the more modern wars, Afghanistan, Iraq, and some of the other conflicts that we’re involved in across the world, is these soldiers repeat a phrase that is actually pretty important in the divorce process. But they keep repeating this phrase, tactical advantage, and there are tactical advantages to filing first when it comes to the divorce process. What are those? These are things that give you a leg up against your opponent and unfortunately, your spouse becomes your opponent in the divorce process. Sometimes it's necessary to get the advantages you can have, particularly if you're starting at a disadvantage.
Here are the three reasons to consider. One is you get to choose where you want to file. Two is if there's immediate danger to you or your children. And three is to prevent the movement of assets or prevent further hiding of assets. I'm going to go through each of these issues.
Point number one is you get to choose where you want to file. Oftentimes, either one of you is moving out of the house or maybe moving across the city or the state or to a different state entirely, and that can provide or propose some potential complications when it comes to the divorce process. If you are in one state and your spouse is in another state, for example, I'm going to use the extreme version of this. Well, and you're both residents of your respective states, well, whoever files for divorce, well, that's likely where the divorce is going to be taking place.
So, if you live in ... I'm just going to make up these examples. Let's just say you live in Texas where I am, and your spouse is moving to Colorado. I have a situation right now where something like that is taking place. Your spouse lives in Colorado now. Well, if you file for divorce in Texas, then you get to have a Texas lawyer who's near you, probably in your town. You get to pick the court and the county and everything's better. But if your spouse files first and your spouse is in Colorado, well, many of the issues that have happened in this divorce are going to take place under Colorado law, and then you're going to have to get yourself an attorney in Colorado who can practice in Colorado. You're going to be going to court in Colorado potentially, if that's what's required. You know, you have a distance issue that adds some layers of complication to how this process may go for you.
So, if that's a concern for you, or it might just be a different city, if someone moves a few hours away, you have to be prepared to make that few hour trek whenever you want to have an in-person meeting on a particular issue. So, there's things to think about in that regard when it comes to divorce. If you have that issue, you may want to be the person who files first so you can dictate what jurisdiction you are in.
Now, second thing is if there's immediate danger to you or your children. I'm looking for some good experts in this area to talk about some sort of abuse things because it's something that comes up more often than I would like. But if you are in a position where you're afraid your kids could be kidnapped or abducted by your spouse, or if you're in a position where there's a lot of abuse going on, be it physical or emotional or otherwise, then you should consider filing for divorce first, and also, putting, implementing at the same time, some legal protections to prevent a spouse from further communication with you, direct communication, or to make sure there's supervised visits with the kids, or whatever sort of protection of custody there may be or that's required for your children or you so that you are legally protected.
You know, there are some tragic situations out there where a spouse doesn't protect themselves, and the worst case, either severe abuse can happen, or there's cases where you can be threatened with your life. And one of the ways to help protect that, it's not the only way, but one of the ways to take a step in the right direction is to file for divorce and for additional legal protections to prevent your spouse from communicating you or having certain contact with you in order to ensure that you're not threatened down the line. And if there are continual threats, that you have a legal recourse to protect yourself in those circumstances.
Then the third thing is to stop the movement of assets. So, one of the things that can happen is when you're getting divorced, they have these things ... Oftentimes, you have to ask an attorney what your local version of it is, but it's an automatic temporary restraining order, which actually, it doesn't have to do with a physical things, actually tends to deal with monetary things. Basically what it says is that you and your spouse or that you ... Yeah, you and your spouse, can't make unusual financial decisions anymore now that the divorce has been filed.
What do I mean? Well, because a divorce has been filed, you can't, all of a sudden, take a bunch of money out of a joint account and steal it, for all practical purposes, or your spouse can't go get a new loan to try and hurt one's credit or can't open up new investment accounts or can't move large sums of money around. When you file for divorce and you have these restraining orders in effect, then you have the potential to protect yourself if your spouse does do something suspicious and something fishy. And if they do it after the divorce is filed, that can really come back to haunt them and hurt them later. It gives you a layer of legal protection to say, "Hey. Your spouse is in violation of certain things, and therefore, you deserve to be compensated for those things."
This really comes into play a lot when ... I know I'm willing to bet almost all of you suspect ... Most of the people who listen, or many people who listen, suspect to some form of a spouse hiding money from them. Oftentimes, that is indeed the case. Now It's just the question of how much is being hidden from them. But when that is happening, one of the ways to provide some real consequences for that to continue happening or to prevent that from continuing to happen is by filing for divorce and having these orders in effect where it says if your spouse does something fishy, they get punished. But if you haven't filed for divorce yet, a lot of things that you can do while still just a normal married couple, like take a bunch of money out of accounts or take loans out or whatever the case may be, might be perfectly legal and perfectly normal until a divorce has been filed.
Now, as I said, whether it is choosing where you want to file, be it the state or the county or the city, be it your kids are danger or you're in danger or you're trying to prevent the movement of assets, ultimately, timing can be very important for you and the divorce process. Sometimes these things are very time-sensitive and super urgent, and you need to pursue them right away. And then other times, you're in a relatively amicable situation, and you're just trying to do the best for the family and the kids, and you're in a position when you can wait and kind of can figure out some things in advance. You can kind of wait on things and plan more carefully for some of the considerations that you have when you're filing for divorce.
Ultimately though, you have to file when the time is right for you. There's a lot of considerations, there's a lot of things you might need to think about and work through, but do it when you're ready. Don't do it sooner than you're ready. And as I say, if there's a chance ... The other thing I didn't really get into, but if there's a chance that you're still can reconcile with your spouse and you think that there some things that you can do, well, maybe you should wait a little bit longer. But you have to weigh the pros and cons of waiting versus filing now to determine what's best for your situation.
If it's one of those things ... One of the times I do a lot of coaching calls is for people who are still researching their options and trying to figure out, well, should I file? How should I file? What options do I have? You know, there's very different options for pursuing the divorce process when you're in an amicable situation than there are when you are in a highly contested and very adversarial situation. There's a way to preserve family relationships even though you're getting divorced, and there's other times where you have to kind of go all out. But if no one's filed yet, you kind of have some options in terms of talking through, or one of the things we can talk through is what makes the most sense for you and making sure that everything goes for the short and long-term in the way that you want them to.
Filing for divorce is a huge and complex decision. As you do your research and you're thinking, I want you to write out, weight out these different concerns. Hopefully, when the time comes, or hopefully, never comes, you will be making the right decision for you, your family, and your ultimate situation.
Thank you for listening! Find a transcript of this episode below.
As part of my job, just about every day I work with attorneys all across the country. And I wanna communicate as often as I can important lessons I learn from working with them, the good, the bad, the ugly. Since I get to see so many styles, and cases, and jurisdictions, is kind of telling you what's normal, or what to look out for, and make sure that you're making the appropriate decisions, and have a good working relationship with your attorney as you go through the divorce process.
Most of the people that I talk to and work with don't go through divorce every day, hopefully not, and it also means you don't have to interact with lawyers every day. So one of the things that is difficult at times is trying to figure out if the behaviors that you're sensing with your lawyer are correct. Ether or not you need a second opinion, whether they're doing a good job for you. And at the end of the day, even though I get to help you with many of the complicated issues in divorce. And as you know it's called Divorce and Your Money, and so I specialize in the financial aspects of the process.
A divorce lawyer is essential in the divorce process, it's ultimately a legal process. I wanna make sure that you maximize the relationship that you have with your attorney. One of the biggest complaints or comments I get, and I get this almost in ... And I would say it's about half of the people who call have the same comment, and that is, why is my attorney not fighting for me? Why is my attorney not advocating for me, not working on my behalf to the extent that they should be. And you're in the middle of the divorce process, this is your life that's at stake, your future, your kids life. And the question is, is why is this person you've paid thousands, if not tens or hundreds of thousands of dollars in legal fees, are they really advocating for you the way they should?
And you call, and you're saying, "Hey is this really in my best interest? Why aren't they pursuing X, Y, and Z?" And I'm just not comfortable, and I'm kind of wondering if this is normal behavior" And so on this episode I wanna discuss some important things you should keep in mind with the relationship with your attorney, and some ways to handle situations in which your attorney is not fighting for you. I'm gonna go over three points. The first is understanding that there are different skills of lawyers. The second is that you should address your concerns head on. And then the third is oftentimes you need a second opinion or have to make a change. And so I wanna get into all three of these issues as you consider your relationship with your attorney.
The other thing I wanna get into, just briefly, is I also get to work with some exceptional attorneys across the country that I recommend as often as I can. Now I only do that through coaching calls if I know someone in your jurisdiction. And if I don't know someone I can show you ways, show you some resources to find good attorneys, or you can listen to some of the other podcast episodes. But there are also some awesome attorneys out there that if I wanted family law help I would call immediately, and without any hesitation.
So let's get into what happens if your attorney is not fighting for you. The first thing is it's kind of a mindset question, and issue. You have to understand is even though your attorney is an expert, or hopefully and expert in family law, everywhere in the country there are good attorneys and bad ones, and some attorneys who are okay and in the middle. And so the point of that is that attorneys are just humans too, they're just like you or I, they just happen to, in the family law world, specialize in divorce, and custody, and family law issues. But, you should not treat your attorney as God. Sometimes attorneys have flaws, we all do, I have flaws.
There are good attorneys, there are bad attorneys out there, and even some of the most highly reputable attorneys actually, even though they have a great reputation, and may have a lot of experience, I know some very highly reputable attorneys that I would never send a client too, because they're not that good in my opinion. And if you're in a position, or maybe they're just not good with you, and your personality, and your case. And so if you're thinking about an attorney and your relationship with them, if you have issues, they might be real. You may have hired, I have some people who've hired and spend hundreds and hundreds of thousands of dollars on legal bills, and are very dissatisfied with their attorneys and rightly so. Because they're not oftentimes doing a good job representing them.
I also know people who spent $1000 on an attorney and who did a killer job for them. Or I should say a couple thousand dollars, it's very rare to get a $1000 attorney, but a very inexpensive relative to the cost of divorce amount, and attorneys do a great job. So it's not always money, or prestige, or anything else, just because they do a lot of branding or have a very nice office doesn't mean that they're going to be doing a good job for your situation. And so if you feel as if you're not being adequately represented, you should take stock of that feeling, and that intuition, and really understand and try to articulate what those things are.
The second thing is, once you understand that, is that you should address your concerns with your attorney. Now there's ways to address concerns without being confrontational. And what do I mean by that? Oftentimes if I have an issue with someone, particularly another professional, and particularly a professional that I have to work with closely, I will be very polite about it. And what I might say is, "Hey Mr. Smith," or, "Hey Miss Smith, here are some things I noticed about my situation. I have some questions about these, is this right?" And I'll say, "Here are my four concerns" or, "Here are my three concerns." One, two, and three, and I'll draft a nice E-mail. I'll make it very polite. And I'll say, "Hey, does this make sense?" Now if that person brushes off my concerns then that's a good indication in terms of what you should do. If they say, "Oh, those are very valid concerns. Let me address these for you," and they fix the situation, maybe that's all we need.
But maybe, you know you need to bring them up, and usually politely, to make sure that they understand what you're feeling, and make sure that they understand your perspective as politely as possible. Look, even though you've paid them and they're there to fight for you, every human has different styles, and attorneys have different styles. But you need to make sure that they understand your concerns, and you need to be forthcoming about them so they know that you have an issue. Sometimes, as I say, I'll talk to lawyers, or go to happy hour or something with an attorney, or dinner, and they'll tell me about this case or that case, and oftentimes they had no idea that a client had a concern with them, or that there was an issue that arose, or something else.
Or sometimes they'll say, "Man, this person really had unrealistic expectations and so we had to address these concerns one, two, and three." And it's one of those areas where if you say, "Hey I think on the house issue we're not doing a good enough job about protecting my interests. Are there some alternatives?" They might say, if you were to put that in an email, or put that into writing to your attorney, they might say, "Well, the law in our state says this is the way it's done. I understand your concern, but unfortunately the law is not on your side on this particularly issue," then that's a great way for the attorney to address your concern. However, if you were to send that same email saying, "I don't think we're doing enough about the house," and they were just to say, "Yeah well it is what it is. We need to focus on this other issue," maybe that's not ideal for you.
Or maybe they'll say, you wanna kind of test these issues and bring them up head on to really understand what is their reaction and are you justified. Sometimes, a lot of attorneys, and I do wanna defend them for a second, they do this all day, every day, and for a living, and they know the law inside and out, and sometimes they forget to communicate certain elements of it to you. And so you have to kind of usher them along in the sense of that relationship, and tell them your concerns, and bring up your concerns. 'Cause ultimately this is your divorce process, and you really wanna fix up and have a productive relationship with your attorney to the best of your ability.
Another thing I wanna bring up to that point is, you also need to make sure that your attorney knows what you want. Oftentimes in most of the calls I'll get is we'll talk for a little bit and I'll say, "Okay, well what do you want? Do you want this issue, or that issue. Or do you not want. What do you want to happen after explaining your concern." And if your attorney, or if I don't know what you want to happen, then it's hard at times for them to craft agreements in your interest, and in the interest of what you ultimately want and need.
Now the last thing is, sometimes you've done all this. And I know people in situations where they're having some concerns with their attorney, they've brought up, oftentimes over a series of coaching calls with me, we've gone through the relationship with the attorney. I've written emails for clients and say, "Hey, I hear what you're saying. Let me write up an email, you can copy and paste it, and change the language a little bit. But then you can send it off to your attorney and see what he or she says." But let's say we go through the steps and understand, and it turns out that your attorney is just not up for the job. Well, then you need to make a change. And making a change is very, very, tough, and it's not always easy, and it can be expensive.
But depending on your situation, if your attorney is not fighting for you, it only adds to problems over time. One of the things I like to say on coaching calls, I don't know if I've ever said it on the podcast before is, "A bad attorney does not magically get better just because you keep paying them." A bad attorney does not magically get better just because you keep paying them. And so oftentimes if that attorney is not doing a good job for you, you will get to a point where you need to make a change. I've worked with some people who had a bad attorney for years, and they keep paying the retainer checks, and bills, and bills, and bills, always with the hope that, well if they just do this it'll get better. And two, or three, or four, years go down the line and still the same situation, still the same poor representation. And you should have, when you first saw an issue, started to work on an adjustment then.
So there are things to be said about your attorney, and how things are going, and you gotta know that they don't magically turn around, and don't magically become better. And so you need to look for an alternative. Have a couple of consultations with some other attorneys in town, and get second opinions. Choosing an attorney is ... It's not something that you should feel bad about if you made the wrong decision. It is very, very, very, hard to choose an attorney correctly the first time. It's just tough right, you might've gotten a recommendation from a friend. You might've looked on-line. You might've this or that, but you never know, attorneys are people too.
I have an attorney friend, who one of the only negative reviews that they got, they're one of the best known attorneys in a very large city, one of the only negative reviews they got was, well my attorney got cancer, or this friend of mine got cancer right after they hired them. And well their case didn't go as smoothly as they would've hoped. But of course it wasn't going too. And that person, and that situation, probably should've gotten a different attorney for the duration of their case and it would've been okay. But it's one of those things where it's just tough, you never know, attorneys are people too, they have their own wishes, they have their own families, they have everything else. And it's hard to figure out what a relationship is going to be like with an attorney, during one of the most difficult times of your life, just from a few data points and writing someone a check for a lot of money.
And so you really just just need to kinda keep that in mind, and try to be objective, and professional about your situation. There's no need to scream and yell at your attorney. But if they're not doing a good job for you, you need to address and deal with those things upfront and clearly, 'cause it's going to have a big effect on your divorce and the rest of your life. As I like to say, "The decisions that you make today are going to affect you for the next decades," and so you really wanna make sure that you have a trusted team working on your behalf, and advocating for the things that you care about the most. And if there comes a point where they're not doing that, well, then you need to make a change, and find some people who will.
Thank you for listening! Find a transcript of this episode below.
This may be the one of the most important episodes that I've ever recorded. I spent a good chunk of my time in December at a conference for lawyers and a lot of the top family lawyers in the United States were there. And one evening we all went out to dinner and we spent three or four hours together, just discussing what's going on and what's going on in everyone's practice. What they're thinking about, whatever. It was fascinating because all of these lawyers, they're the top in their respective cities and states, from California to New York to Florida, and everywhere in between. They all universally had one big issue. One very important issue that they wish that their clients understood so people like you listening to this podcast.
They wish that everyone would get a better handle on and understand as it pertains to the divorce process. And what was that? That was you need to know who your judge is and how they think about decisions. Many times you come from this perspective thinking, well because we haven't come to a settlement I think we're just gonna fight it out in court and that's gonna lead to a judge listening to everything I have to say. They're going to take into everything into consideration my ex-spouse has done over the past year or 10 years or 20 years or whatever the case may be. Ultimately if they just hear my story that you are ... That that judge is going to listen, take it into account and rule in your favor.
It turns out that's not the case. What you really need to understand is most of the time if you can avoid court, you should. You need to understand how judges think, how they react, and how unique judges are and how much of a gamble going in front of a judge is for most people. I was talking with these lawyers at dinner and as I said we were together for three or four hours and it was just amazing how much time we talked about the judges and really a few issues came up when it comes to judges and thinking about what might happen in front of a judge. I wanna get into a few of these issues. The first is that many times in your county court you don't have a family law specific court. So if you are in certain ... Whatever county you're in, where your courthouse is, that county or the judge that you might see in a given day might have 10 other different types of issues that he or she may be dealing with on that same day.
That judge might be looking at traffic ticket cases. They may be looking at a criminal case. They may be looking at a business dispute. They may be looking at a neighbor dispute. Oh yeah, and then you stroll in and you wanna talk about this family law issue that you're having. Your divorce, this hugely important issue. But then as soon as you walk out of the room they're thinking again about the next five traffic cases. Then they have something with the police officer. Then they have some sort of meeting with attorneys and the point being is, they aren't just focused on family law often times. You can't expect them to know all the intricacies of the law, all the ends and outs and really understand and be able to critically analyze all of the things that you want them to think about because that's not their primary job.
They're either appointed in some places or elected or whatever the case may be. They have so many different responsibilities. Your case, even though it might be the center of your world is one of many things that they are dealing with and looking at on a given day. On top of that, there are some counties that do have family law courts. But what happens often times is what many of these attorneys were speaking with me about is that even when you have a family law court those judges often times don't come from a family law background. The ones that do, they might be there for a year or two before moving on to their next appointment or the next step in their career or different court entirely because family law issues can be exhausting and very tough to deal with day in and day out. So there's a lot of turnover there. So the first thing you need to understand is not all judges specialize in family law and the ones that do often don't have that much experience in family law.
So you shouldn't necessarily get your hopes up. The second, is I kind of eluded to this in the first point but judges don't have a lot of time. Almost in every courthouse across the country judges are overworked, underpaid and understaffed. And actually I'm gonna hold off on the underpaid part for a second. But I will say overworked. And so judges have an enormous case load of people that they have to get through on a given day and it's very tough for them to negotiate and deal with every intricacy of every case on a day because you might be one of 10 cases they're seeing that day. And maybe 50 different people they're seeing that week. Then maybe one of 200 people they're seeing that month. It could even be worse than that in terms of the numbers. And so trying to get them to really I don't wanna say care about you, 'cause not that they don't care but really be able to have the ability to get into the in's and outs from any judges is exceptionally difficult and nearly impossible.
Otherwise they'd be working 24 hours a day, 7 days a week and still not get through the amount of work that's on their plate and that's being required of them. Therefore it puts them in a position where you don't get to share all of the facts and consider all of the facts that are relevant to you. The third thing is that judges have bias. Judges are humans. I mean often times I hear from you and we talk and it sounds like you feel as if the judge is going to be your savior. You almost speak in terms like that. That's just not the case. I'll use an interesting example from Dallas 'cause I'm based in Dallas and I know a lot of Dallas family lawyers and I get to speak with them pretty clear. And I have a decent sense of the Texas court scene, you know I'm not there every day by any means but one of the things that's fascinating is in one of ... I think in Dallas county, there's something like 32 judges or something to that effect, I don't remember the exact number off the top of my head.
But point is if you were to go in front of, you could be assigned any one of those 30 or so judges and on top of that is you could end up with 30 completely different results from any one of those judges on any given day. Which means even though there is a family law, even though there are facts to the case you could present those same facts and those same laws to each one of the judges and end up with a totally different outcome. It could be very much in your favor, it could be very much opposite of your favor. The point is, is that you don't necessarily know what that judge is going to do and how they're going to rule. Judges are people and they have certain things that they like and they dislike. I call them bias.
You might go in front of a judge ... A judge might not like your lawyer. And because they don't like your lawyer for whatever reason, they rule against you. Or it may be the case that a judge doesn't like what you're wearing. Or it could be the case that a judge tends to think that the mom should have primary custody and most of the time, so that's how they think about decisions. And so even if you're the father and you should probably have primary custody and maybe even during the divorce you had temporary custody of your children, the judge might say, "Well I think it's better for the mom," and therefore the mom gets it. And you're like, "But wait a second." You're left totally confused 'cause in your situation that just wasn't the way things are working or it could be the exact opposite. Is the judge might say, "Well I think the father should have primary custody." Or a judge might say, "Hey, you know what. My default position is that whether or not it's good or bad, custody should be split 50/50."
And you are SOL as we say is, "shoot out of luck." If that is the bias that your judge has even if it's not appropriate for you. Then the fourth thing that is very important is that judges often make decisions on things that are totally irrelevant. What do I mean by that? Well it's interesting, I don't know if you ever watched one of those ... I'm going to switch from family law to the criminal law for a second. But if you ever watched television and you ever watch one of those shows that's like what happens after a big jury verdict in the courthouse. So if someone gets committed for a crime of if someone gets acquitted from a crime and they go and interview the jurors and they'll say, "Juror #7, why did you say that that person was guilty and you gave them the death penalty?" And the juror will go, "Well I knew when he walked in that room he was a bad guy." Then the interviewer will be like, "Well but, there was this evidence that says he wasn't even in town the day of the murder." And the juror will say, "Yeah, well. He must have done something. That's why he's in front of here, right?"
You're just like, well wait a second. That has nothing to do with the facts of the case. Unfortunately in the family law world judges can often be the same. Judges can walk in and they'll say, "Oh, well I saw this piece of evidence and therefore I'm just gonna vote this way and this is how we're gonna split things." Or if you have something super complicated they might not wanna think about it and so they'll just make a decision based on what feels right to them. Whether the facts support it or not. Some judges ... You know, I caution myself when I was talking about pay increase or don't get paid enough. Some judges, becoming a judge is pay increase for them. That's why they became a judge and they get paid more to do less work often times. Or at least to have a shorter workday. 'Cause their legal careers weren't necessarily going the way that they thought they would.
You just never know the motivations of the judge that you're going in front of. And you never know what is going to resonate with them. Maybe they grew up in a single parent household and therefore they identify with one parent more than the other. You might not know that going in. So the decision they come to might not make any sense to you or to anyone but it is because it is what is it, because that's what you signed up for and that's what that judge believes. And so it's something that you really need to think about. So what's the point? The point is this, is I have nothing against judges by any means. That's not the point of this episode. But the point is this, is that most cases settle out of court. There's a reason for that is because there's a lot of things you can solve and come up with most of the time a semi-reasonable agreement. If you settle out of court.
Now it's not always going to be the case, but your position shouldn't be, I'm going to fight this out and I want to take this all the way to trial and that's the way things are going to be. It's not necessarily going to beneficial to you. Going to court is a gamble and it can be a very big and very expensive gamble. I was speaking with someone just yesterday and I said, "Look. You, instead of going to court, you may as well just put $100,000 on the roulette wheel." Your odds are going to be better then ... And having a good outcome rather than you going in front of a judge." Because you're just taking up ... This person was very close to a settlement agreement but just couldn't quite get over the finish line and they're now thinking about spending a bunch of money on an expensive trial and I was like well, that's a waste of money. Just go to Vegas, gamble it, put it on black and call it day because that's basically what you're doing in this case rather than just agreeing to something that may not be perfect but it pretty dang reasonable from what they had said.
So you need to really be careful about whether or not going to court is good for you. Now sometimes you're in a position where you have to. It just is the case, your spouse is unreasonable and everyone's gonna be better off unfortunately if you go to court. My point only is that you should not use that as your default position. Because court is a very dangerous game that you're playing and very expensive gamble that you may be making. Judges are the ones who are in charge of this process when you're in front of a court. And judges aren't always going to consider all of the things that you have in your head in terms of becoming a final, in terms of becoming a great arbitrator towards your case. Some judges out there are great but you need to really understand what's going on in your local court and really understand what judge you may get assigned. And how that judge feels about certain issues and how they generally like to rule on certain things and if you're going to be in a good position or a bad one by going in front of this judge.
Thank you for listening! Find a transcript of this episode below.
Chris: Hey everybody, it’s Chris Denmon with Denmon and Pearlman out of St. Petersburg, Florida and today I’m with Shawn Leamon. Did I pronounce that right Sean?
Shawn: You got it right.
Chris: All right. Shawn Leamon, who is a certified divorce financial analyst and the host of a podcast which is Divorce and Your Money. Which is how I found Shawn and we’re continuing our series today. We’re interviewing tangential professionals in other professions that can help our clients get through the divorce process in the best possible way and help them move onto their lives in the best possible way. And so Shawn, you’ll be talking to some of my future clients and my current clients. And take it away, what did I miss? What else about you should we let people know?
Shawn: No, I think that’s great. I’m a certified divorce financial analyst. I get to work with people all over the country. My podcast, Divorce and Your Money is probably the largest divorce podcast that’s out there. I like to help people as much as possible because you know, divorce in many aspects, financially, legally and emotionally as well, is a very complex process for someone. So I like to help at least in my small segment where I can.
Chris: Absolutely. And yeah, the same idea, right? So when I’m a lawyer and I do lawyer things, and my clients are going through the process, they’ll come to whether it’s for a figuring out a budgeting issue, or whether it’s a tax issue and I’m not an expert at that. That’s not what I know best, and I turn to people like you to help me answer those questions, and a lot of times, it’s easier for me to just introduce my clients to somebody like you, or you to you because then you can help them get the answers they need better than I can do it. And you and I were talking before we started, and I know you from your podcast. I also know you because I was looking up an answer to something that here I am, the divorce attorney, I didn’t know the answer, and you had answer it on a very detailed, excellent blog post that I was able to get the answer for me and then share it with my client. And you’re able to help that way.
Chris: So, thank you for taking some time to chat with me today. I appreciate it.
Shawn: Thanks for having me. I’m glad to be here.
Chris: With my clients, I have two different phases where I think they need help and I’m going to kind of just mention that and let you kind of help educate in any way that you can. But I know that I have clients that right at the very beginning of the process, in anticipation of a divorce, or in anticipation really of a separation where they have one household and they’re getting ready to potentially move into two households, and they have to figure out how to budge for it. Plan for it and make the right decisions with their finances. That’s kind of one bucket where my clients need help.
Chris: And then the other bucket is when it’s all said and done, you know as a divorce lawyer I think we’re good at getting things done and then we shake hands and then we release our clients into the wild, right? And sometimes we have clients like maybe a needy spouse who for the last 20 years, she hasn’t really done any of the budgeting and I don’t want to leave them … I don’t want to shake hands and let them go off and have them ill-prepared. And that’s another, that’s an area where I think that they need help. Is that kind of your experience?
Shawn: Yeah. You know I think the main focus for anyone who’s thinking about divorce is already in the process, really boils down almost to two things. The first is knowing what you have. The number of conversations where people don’t know they have a retirement account, or you need to know … I mean, if you have a house, you need to know what it’s worth and have a good sense of that. If you have a mortgage, or if you have other debts somewhere. If you have credit cards. Regardless of whether you were the spouse who took care of the finances, or has never seen them at all, your first step is just to figure out, “Well, what are we splitting up?” And from that comes the second question which is, or a second answer that one should know the answer to is, what do you want?
Shawn: The other problem or other area I see everyday is that, well you know you have a house that’s worth a certain amount, you know you have these retirement accounts, you know you have maybe a little credit card debt or whatever the case may be, but you don’t really have a clear sense of, “Well, what do I want when this process is over? What will I need to live?” Most of the people, at least that I deal with getting divorced, I like to say, “Look, you’re going to probably die these days at 100 years old. So if you’re 50, you’ve got 50 years of thinking and planning to do. What are you going to be thinking about over the next two or three or five decades? And are the decisions that you’re making right now, splitting up your family and your assets and everything else, are these really kind of what you want for the long-term and are they working for you?”
Chris: Sure. And I mean, how do you help people engage in that conversation when … Because divorce is so life-changing, right? People tend to identify with what they’ve been for an extended period of time, especially in a long-term marriage. And then now, sometimes, am I right, would you say that sometimes they don’t even know what it is they want yet?
Shawn: Yeah, it’s a great point. And one of the things that I try and tell everyone, which is very hard to do in practice, but actually makes a lot of sense is to depersonalize what you’re going through when it comes to making your decisions. Or the way I like to phrase it is, pretend like you’re the CEO of this process and you’re the businessman, businesswoman and what would just a rational person looking from 30,000 feet think about and would recommend for you and your situation? Meaning, if you’re going through a divorce, there’s any number of overwhelming emotions that make it hard to have any sort of clarity of thought. You know you have got a million questions, you’ve got to figure out this process, let’s forget all of that for a moment. Let’s just pretend that we take … Or the way I do it, or the way I speak about it with people, is let’s just take at least the asset part, the financial part. Let’s just put it all on a piece of paper. Your name doesn’t even have to be on it. It can John Doe or Jane Doe. What would you recommend Jane Doe for their future given what they have right now? And what do you think makes sense?
Shawn: and once you kind of remove the you from it, I know it sounds weird, is to take yourself out of this process, but when it comes to making decisions, if you make emotions kind of cloud your judgment, that’s where people can go very far astray or end up making pretty poor decisions. Once you kind of depersonalize it a bit, you can really sit there and just treat them as X’s and O’s or numbers on a sheet of paper and say, “Hey! This person that I’m looking at on this piece of paper should probably do X instead of Y. Or take more of one asset or ask for more support, or ask for less support. And would be better off if we did whatever.”
Shawn: And it becomes actually, for most people, a lot clearer pretty quickly once they take the me out of it.
Chris: Sure. You got me thinking of the scenario where a party, they’re emotional to a home, and maybe the home is too big for the party by themselves,. The kids may be out of the house, the home might be too big already. But then you may have a, one of the party’s who are really attached to the home and they want to stay in the home but maybe the numbers don’t make sense and maybe if they were to keep the home, not only would they be keeping assets that are not going to generate any money for them in the future, I mean not really, unless you sell the house, it’s not a liquid asset.
Chris: But they’re also, their standard of living is necessarily going down because they’re not going to have enough cash flow to do what they want to do. You know, so that’s a … Is that something, is that a problem that you … Is that a scenario –
Shawn: That’s one of the most common things that I have to deal with on a daily basis. And the way that I teach people to think about it is before you decide what you want, start with your expenses. And so, the divorce process for most people, as painful as it is for most, is really only going to be a year or two of their life. And as I said earlier, you have decades to think about. Well, let’s start with, what is your life going to cost after this divorce? What is your mortgage payment or rent going to be? How much are you spending on cars and telephone bills and everything else. Once you kind of know – or your kids as well. Once you know what your expenses are, then you can start to say, “Well, all right, now I know at least how much income I need to stay even.”
Shawn: And also you can say, “Well how much am I …”, and then you can start thinking about bigger questions like how much am I going to need for retirement or whatever else. But if you start with your expenses, things like that house that you have an emotional attachment to, you can see very quickly and very clearly that in many cases it’s not affordable. And you’ll see, like wow, you know if you’re spending … I’m just going to make up a number but if you’re spending 3,500 dollars a month on a house, and your income for a given year after a divorce is only going to be 5,000 dollars a month, it becomes very apparent that you don’t have much money for anything else.
Shawn: And, once you just kind of map out – and when I say map out, I do things very simply. I take a blank sheet of paper and a pen and I say, “Let’s just do some simple math. How much is the house? How much is the car? How much are you spending on kids, clothes, going out, travel, vacations, whatever?” I just take a pen and a paper, nothing fancy, and just start writing down these kinds of things. And then once you have that kind of rough number, doesn’t have to be precise, you can start to think about is, well what is that really look like for me and start making the right decisions based upon that.
Chris: Right, that’s a great way to do it, because … I think a lot about the stay at home mom because we represent a lot of stay at home moms and they just … Their responsibilities for the family have traditionally been kid-related stuff, maybe. Maybe the stay at home mom hasn’t traditionally had dollars and cents responsibilities. I mean, they’ll go out there and they’ll do the work and they’ll go do the shopping and all that stuff. But they may not be doing the budget and then it comes time, they have to now figure all of this out and they also have the great unknown of what their income is going to be when this is all said and done, and you know alimony will often play a big part in that.
Chris: But if you don’t know what your expenses are, how are you going to know what is the money that you need outside of just saying, “We’ll get you the most amount of money possible.” Which is great, but it’s not really a great way to solve the problem. You just gotta know what you need and then try to get that and maybe some more. And I like your idea of just putting pen to paper with it because sometimes there are lawyers will do things that become a little cumbersome. Spreadsheets and it doesn’t really work. Sometimes simpler is better to help people, especially with so much else that’s going on in a divorce. So many other things to worry about, you know?
Shawn: Yeah. There’s a lot to say about that point, particularly with the stay at home moms. I also work with many and there’s a variety of issues oftentimes with the stay at home moms. Sometimes a lack of confidence. I said you have to be the CEO of your divorce process. I’ll always say, because I talk to stay at home moms every day, everywhere, and I’ll say, “Hey, so, while your husband was working, who took care of the kids? Who took care of the house? Who took care of every other daily detail that happened?” And it was always them. And they have all of these skills in terms of managing a very complex life. They might not feel like they do, but they’ve been doing it for 10, or 20, or 30 years. And this is just one other challenge in that process. But they already have everything they need. They just need a little bit of guidance in terms of focusing that same energy they’ve had for a very, very long time.
Shawn: And, as part of that, sometimes it’s, you know when I think about things that you need to do when it comes for planning for the process. Well, one big question is, we talked about the house. Sometimes I’ll say, “Well, let’s take some action towards it and find out. If you want to stay in the same neighborhood, why don’t you contact a real estate agent. See what houses are available in your neighborhood. You know particularly if your kids need to stay in the same school district.” I’ll say, “Go check out some apartments in the area. Are any of them feasible? Find out what the rent is for something that you could live with.”
Shawn: It might not be the same, but sometimes just gathering some basic information that’s free, no cost to anyone, to call up a realtor and say, “Hey, I’m about to get divorced, or I’m in the divorce process, can you show me what some options are in the neighborhood?” Or, walking to the apartment building or driving over to the apartment building and say, “Hey, what’s a three bedroom in this area cost?” And those types of little steps, not very hard, and you can also start to crystallize, and you can say, “Hey, you know what? This three bedroom apartment actually could really work for me for the next few years while I get back on my feet.” Or you might say, “You know what? I’m priced out of my neighborhood. I need to think about what the right option for me in the long term.”
Shawn: And it gives you the ability to confront reality head-on. Good or bad or anywhere in between. But at least you come through, or you start the process with some solid information so that you can make the right decision when it comes to going to mediation or talking with you or whatever else. It’s just you have a real, clear picture of what the future might look like, instead of just guessing and hoping for the best.
Chris: a little bit of information goes a long way on the path. So that’s a great idea. And do you find yourself encouraging people to do that early in the process? In the middle of the process? When?
Shawn: Yeah, it’s a good question. The answer is as soon as you can. You know, divorce is challenging of course, to understate it. And, you know, it’s not an instantaneous process even to get to the point where the D word gets dropped, much less serving papers and everything else. So, you know, it really depends. What I say is, the sooner you can figure these things out, the better. But, I have people who, and I actually am talking to someone in just a few minutes, who has to, has their proposals, their settlement proposals on the table. Right? And so the question is, well, does this make sense or should I be trying to make some adjustments? And some of the things that we’ve already discussed are going to be exactly that.
Shawn: It’s like, “Hey, did you check to make sure that you’re going to be able to afford the house? Or be able to move to another place? Or be able to refinance? Or whatever the case may – or your spouse be able to refinance? If you go with this proposal, and if not, we gotta get these kind of details done now, so we make sure that we’re not walking you in to something that is not ideal for you.”
Shawn: You know, the sooner you can plan the better. For the people that I get to work with before even papers are filed, I’ll say, “This is awesome. You’re going to go into your consultation with an attorney, with almost everything prepared, and your attorney is going to be able to take this job and do everything for you and I won’t need to talk to you again.” Other people, if you’re kind of still in the middle of the process, figuring things out, it’s okay, if you’re in the middle, so long as you’re starting to formulate that picture of what it is that you’re really aiming for.
Shawn: I mean what I’m trying to say is that, if you don’t have a goal, you’re not shooting towards anything and you really need to have a clear sense of what your goal is for this process, otherwise your attorney, you aren’t as empowered as you could be to help them get to be where they need to be when this process is over.
Chris: An awesome way of framing it. And we, again as an attorney, we’re always, we’re goal oriented. We have a process from the very beginning of getting them to conceptualize our clients and focus on their goals. But it can be easy to focus on goals that are more related to the divorce process and maybe kids, and sometimes, for however, it works out, because maybe our clients when they’re coming in, some of the issues we’re addressing at the beginning are more emotional. Sometimes the financial goals outside of minimizing my alimony payment, or maximize my alimony award, which isn’t very concrete, it isn’t very helpful. But outside of some of that stuff, we tend to maybe miss some of those financial goals from the very beginning. Whereas, if we have them from the very beginning, makes it easier to get people to where we need to get them to.
Shawn: That’s exactly right. And you know the only thing that I would add to that is also if you have the goals, I say this all the time, is, once you have your goals written down, now’s a great time to talk to your attorney and make sure that your goals are reasonable. Because, you know, I see people who might say, “I don’t want to pay a dime of alimony and no child support and I want 100% custody.” And you’re like, “Your spouse is a decent human, even though the two of you don’t get along. That doesn’t seem like a reasonable case. You might want to think about those a little more.” But, you know, it’s having kind of a sense of what that is, so you know, my job, the way that I do view my job is to make them prepared for you.
Shawn: And to, so that whatever time you spend with the client is maximized and you can do your job more effectively. You as the attorney and as the people listening are the people in charge of this process. And you know I’m sort of a support person, but you know, I want to make sure that what you’re doing and what I’m doing can kind of help them get to the best position possible.
Chris: Absolutely. Before we go Shawn, do you have any like any tips to help somebody, whether it’s the husband or the wife, when they’re in the beginning of the process, maybe they’ve contacted me, maybe they haven’t, and they’re considering separation. And so, from a financial perspective, do you have any tips to help somebody who is thinking, “Hey, I think I need to get … I think for my own emotional wellbeing, I think I need to be in a separate household from my spouse. Obviously I’ll talk to a lawyer about things like custody and stuff like that. But what do I need to pull off from a financial perspective? And how do I get there?”
Shawn: Yeah. I think the two things when it comes to separation. Some of the things that we’ve already discussed, but one is your credit report. Knowing what’s on your credit report. I have clients who make 100,000 dollars a year. I have clients who make 100 million dollars a year. You’d be surprised what’s on a credit report, and there are always surprises. And so just kind of knowing what that is. And then also, knowing what your expenses are. I mean look, when you’re separating, we’ve talked about expenses before, but, your income is going to be the same more or less, whether you’re married or in the separation process. The income part is semi-fixed. The expenses part is now all of a sudden doubling. And so you need to really understand is can you afford that? And what that looks like. Do you have enough savings? Do you have enough income? Do you have enough whatever the case may be that you need to separate.
Shawn: And actually might add a third thing to that, is, separation can have other effects on the divorce process and so I always encourage my clients before taking that separation step, to talk to someone like you. You know, consultations are confidential. It’s not like, you know I have some clients who are afraid to step into an attorney’s office. I say, “Look, attorneys are confidential. No one’s going to know that you’re there. No one’s going to sign, put a billboard up in town that says, ‘They met with Christian’. It’s just so that you can understand your situation, the implications of what you’re doing and making sure that you ultimately protect yourself and don’t unintentionally run afoul of something that might come back to hurt you later.
Chris: Absolutely. That’s right. I can help them with the legal pros and cons of separating, but you can help them with the practical if you separate, can you do it, and how will you make it work? And what’s it going to cost? Shawn, thanks so much man. I had a great time. I really appreciate you taking a few minutes to chat with me and ultimately chat with my clients and some people that are watching this just for advice. If somebody needs to reach out to you, what do they do? How do they do that?
Shawn: Yeah you can visit me at divorceandyourmoney.com, and there’s a podcast by the same thing if you search any podcast player called Divorce and Your Money.
Chris: Sounds pretty simple. Shawn, thanks.
Chris: I appreciate it.
Shawn: Thank you, Christian. Take care.
Shawn Leamon: I want to start this episode off with a quote from Yogi Berra, in which he says, “If you don't know where you're going, you'll end up someplace else.” I think that's a good theme, particularly as we're starting the year, and thinking about the divorce process, or regardless of where you are. I want to discuss a little bit about setting goals.
Shawn Leamon: It's the beginning of 2019, at least when I record this. There's almost 200 episodes of the podcast, and 100,000 people listened in 2018. One of the goals I have, at least for the podcast, is to help as many people as possible go through the divorce process, and make sure that I can do it in an affordable, cost efficient manner for most people. One of the ways that I can do that, is having regular coaching calls, and for some people working in greater variation, and more hands on with others.
Shawn Leamon: When it comes to the divorce process you have to have your own goals. A lot of times goals, particularly at the beginning of the year, come up in the context of, oh well what's your new years resolution? Are you going to lose weight, or exercise, or stop smoking, or whatever the case may be? Ideally I should say, you should attach something specific to that. If you're trying to lose weight, it might be, I need to lose 15 pounds.
Shawn Leamon: Well the goal setting process, is equally relevant when it comes to your divorce, and understanding what you should be doing, and understand really what you want out of the process. That way once you set your goals for the divorce process, both you, your attorney, your divorce team, myself, can help you get in the best way possible, to the place that you're aiming for.
Shawn Leamon: As I said, we started with the Yogi Berra quote, “If you don't know where you're going, you'll end up someplace else.” One of the most important things you can do during the divorce process, is really set your specific goals for the things that you want. There's a concept out there called smart goals. Smart goals stand for smart is an acronym. Smart stands for specific, measurable, achievable, relevant, and the t is time bound. If you look up smart goals, if you type that online, you'll find the acronym.
Shawn Leamon: You should be setting up smart goals for your divorce, and in terms of the things that you want, when it comes to the divorce process. A lot of times I might speak with you, and either you're still in the planning phase, or you're midway through the divorce phase, or even you're right at the final settlement proposal, and I'll say, "Hey, that's all well and good, but what do you want?"
Shawn Leamon: One of the issues is, sometimes you don't know what you want. You want what's best for you, and what's best for you really depends on what your dreams and desires are. When it comes to the divorce process, it's temporary. It can feel overwhelming, I get that. It can be a lot on your plate, and of course it is, but at some point for some of you in a few months or others in a couple years, whatever the case may be, this process will be over, and you will have moved on with the rest of your life.
Shawn Leamon: Well, what do you want the rest of your life to look like? What does it look like? Of course this divorce and your money, so what does it look like financially for you? Are you receiving support? Are you paying support? Are you working? Are you retired, or planning to retire in a few years? Are you living in the same home? Are you living in a different home? Are you starting a new career? Are you traveling more? Are you doing all these other things in life, that you'll have to ultimately try and figure out in the best way possible about yourself?
Shawn Leamon: And so one of the things I say, regardless of where you are in the divorce process is, don't necessarily ... Or one of the starting points, is actually start after the divorce. Sit down with a pen and paper. If you ever see me in person, and I get to see a lot of you in person across the country. One of the things I carry with me, 100 percent of the time, is a notebook and a piece of paper. My notebook, actually I love blank white sheets of paper, and bring a pen with me.
Shawn Leamon: What I do is, I want to make sure that I always keep on top of my goals. I keep them very simple. But I sit alone, sometimes on a plane, or a coffee shop, or in my office, and I make sure that everything is written down. Sometimes my goals are just for the day, what do I want to achieve that day. Sometimes they are, what's going on that week, that month, that year, and in life. That way, at least when I'm presented with different options, I can say, "Hey, does this fit within my goals, and ultimately what I think I would have liked to do with my life?"
Shawn Leamon: When it comes to the divorce process, you should be thinking in many ways the same thing. Fast forward, the divorce process is over, you're envisioning you, and your kids, and your family. Even thought it's split, how do you want things to look, from a financial perspective, or a custody perspective, if you have children that you're going to have to be dealing with custody issues with? Do you want partial parenting time? Do you want split evenly? Other things to think about, how do you want to plan for college? Is that's something that's relevant and important to your kids? What does that look like, for you specifically? What do the holidays look like? Or all of those types of things, and types of questions.
Shawn Leamon: Once you start at that end goal, you need to have it clearly written down. When I say clearly written down, you should be able to email me, or send to your attorney, or send to a friend for all that matters, and say, "Hey, here are the goals that I am achieving." You've got to have it written down, specific, and posted up somewhere that you won't lose it.
Shawn Leamon: Then when it comes to your team, and the divorce process, you can say, "Hey, here's the stuff that I'm shooting for, can you help me get to those points as part of the divorce process?" You're sitting down with your lawyer, one of the things you should be doing, is saying, "Hey, Mr. or Ms. Attorney, here are the goals for my life. How can I, during this divorce process, get there the best way possible?" Your attorney might help you say, "Well, I think these are pretty reasonable, and we can get you there."
Shawn Leamon: I just had a lunch with someone in person, and we were looking at her goals. It was very clear, I was like, "Look, you're goals are going to be fine, so long as you just do these two or three things, you should be able to achieve your financial goals, and move where you want to move, and live the rest of your life the way you want to live it." Other times, I'll hear from you and I'll say, "Hey, what are your goals for your divorce?" I'll say, "You might need to adjust some things." Or, "Hey, you're going to actually probably need to get a job." Or, "Hey, you might really need to think about it, if you can really afford this house, if you're planning on saving for retirement, and whatever the case may be. Maybe there's another property in your school district that might be okay, so you can keep the kids in the same school, but you might need to move, so your monthly expenses are lower, and therefore you can actually afford a good life in the long term for you."
Shawn Leamon: We start with your future goals, and I think that's a great place to start, particularly at the beginning of the year. It doesn't matter where you are in the divorce process, but knowing what you want is crucially important.
Shawn Leamon: The other thing that's very important, is knowing your goals. Once you know what you're aiming for, knowing the best way to get there through the divorce process, is also something that is very relevant.
Shawn Leamon: The approach can be very different, depending upon who you are. And so sometimes you are in a situation where perhaps there is an abusive spouse, and you don't really have the option of sitting in a room with them, and mediating the divorce in a very civilized manner, pursuing like a collaborative divorce process, and so you have to take a tougher handed approach, to get through your divorce in the best way possible.
Shawn Leamon: Other times, in many cases, you and your spouse are actually very civil with each other, and you know that this divorce process is coming, and you can still talk to each other. Basically, your job should be, hey lets minimize the fees, lets minimize the damage, lets not make this more difficult than it needs to be. Maybe we can work out 70 percent of this on our own. We still might need attorneys for another 30 percent, or a mediator to help us for this last 30 percent. That's okay, but I think we can get to a pretty fair place, at a much cheaper price, than both of us fighting it out in an adversarial divorce process.
Shawn Leamon: For you, that might be the goal for this process, and the approach that you take. For others, it might the case that you end up in front of a judge somewhere at the end of the day, deciding upon where the judge is the one, who after many months and potentially years of fighting, litigating, and everything else, the judge is the one who has to ultimately make a final decision. Sometimes that's the approach that you have to take too for this process.
Shawn Leamon: To the extent possible is, you need to think and set goals for your divorce process. It could be as simple as, if you haven't chosen an attorney yet, you can say, "Hey, here are my goals in the choosing of an attorney process. This is what I want. Here are the goals when it comes to how I want to interact with my attorney. Here are the goals for how long I hope this process takes or doesn't take. Usually it's as little time as possible, but for some there's reasons to extend it out a little bit.
Shawn Leamon: There are different ways to set those goals. For everything in this process, take a sheet of paper, map them out, make them very clear, look up the smart goals framework, and really understand where you're going in this process, and what you want to achieve from it, so that everyone is on the same page, including you. You need to know where you are going. If you start the year off right with your goals, and where you want to go, you can set up every action that you take from this day forward, to make sure that you're doing the actions that fit within your goals.
Shawn Leamon: I'll give you an example that came up recently, this is a family friend who got divorced. They didn't have very clear goals for their divorce process, and they ended up spending 10's of thousands of dollars on who got what silverware, which was a waste, it went to the attorneys, and many years later they regret the way that they handled that divorce, but neither of them went in with the appropriate goals, and process to think about them.
Shawn Leamon: One of things you should be doing, is just making sure you always stick to those goals. You do that, you'll put yourself up for ... I'm not going to say that this process is ever easy. I'm not going to say it's always going to go in the way that you think it will. It rarely goes the way that you envision. But my objective for you, is to make sure that you're putting yourself in the best position possible, to achieve all of the things that matter most to you, and to do it in the best way possible.
Shawn Leamon: And so, start this process, start this year, regardless of where you are on the divorce process, either making your goals or reviewing your goals, to make sure that you are on the right path.