Divorce Tax Tip!

The timing of your divorce could cut your taxes. Your tax bill could be significantly less or more, depending on your filing status as of December 31st.

Many people think filing status for filing their income tax return is prorated for the year; it is not. Your tax “filing status”, single or married, is determined on the last day of the year. In other words, if you are divorced on the last day of the year, your status is single; if you are married at the end of the year, your status is married.

Why is this important? Filing status determines your tax rate and how much you can take as a standard deduction. Tax rate and standard deduction vary greatly for each filing status and can greatly impact the amount of tax you owe to the IRS.

Washington has a 90 day waiting period after the divorce petition has been filed before a couple can be divorced. It may be too late to do anything about it if you did not file a petition before October 1st. However, if you did file the petition before October 1st, you should check now with a tax advisor to determine if it is better for you to be married or divorced on December 31st. I suggest you do this right away so you can schedule your final divorce hearing in time to get the benefits, if it is better for you to be divorced on December 31st. Or you might want to delay your divorce until after January 1st, if it is better to be married at the end of the year.

For information regarding filing status and other helpful tax information for divorcing couples take a look at the IRS Publication 504 “Divorce or Separated Individuals”.

~ Debra

Divorce and the House

Divorce is usually difficult. Emotions run high and at the same time divorcing couples have the added problem of figuring out the property distribution. This is particularly challenging when the market is down. Divorce clients I have seen in the past year have lost 15-30% of their home value, leaving the equity slim to none…or worse, negative. During a down market no one wants to sell their house, often times their largest asset; many divorcing couples are opting to keep joint ownership, hoping the market will turn so no one “sells” during a down market.

What about the flip side? What happens if you buy your spouse out of the house during an up market and are suppose to pay them back later when the market has dived? A Seattle colleague of mine told me about such a case like that recently. Here is the scenario:

Wife, wanting to keep the children in the home, keeps the house and agrees to pay husband his portion of the equity in the house in 5 years. Wife thought she could pay husband his $100,000, half of equity at the time, easily…or so it appeared 5 years ago. Then along came the severe economic downturn and the house lost $300,000 in value, more than the original equity at the time of the divorce. Property settlements are final so wife still owes husband $100,000 for his portion of the equity in the house. If wife sells the house now, she will be lucky to break even, but she will still owe husband the $100,000. She has no other resources, he wants his money. Now what?

The lesson is that home ownership is an investment and as with all investments the value may increase but the value may also decrease, each situation has its risks and rewards and these need to be considered when negotiating your property distribution.

For some information check out: "Minimize the Financial Pain of Divorce" and "Should you Keep the House in the Divorce?"

Please let us know your thoughts!

~ Debra

Don't Get Lassoed!

You are the best alternative to a litigated solution. Traditional litigation can make you feel like you have been hung out to dry.

The traditional litigation model, used by most divorcing couples, “fuels and feeds off of overwrought emotions”, states Philip Mulford in Contemplating Divorce? Consider Mediation.

Why is this? Divorce is not just a legal problem it is a family problem. Courts are not really set up for family problems. Using a judge to decide your case is like asking a rodeo rider to train a thoroughbred filly to run the Kentucky Derby. The rodeo rider is skilled at one set of rules and applications, but the horse probably would not end up being a winner….and most likely, neither will you, your spouse or your children, if you use traditional litigation.

Why? Because even the most conscientious judges use laws that are not unique to you and apply them using their own judgment to a very small amount of information…only what you manage to get into court. They do not really know you or your spouse, or your children for that matter, let alone the real situation. Ultimately you end up with their solution to your life issues based on a very limited amount of information.

There is another option. You and your spouse can work with a mediator to create your own, distinct solutions to your issues, based on your unique interests and needs. You and your spouse may have a difference of opinion, but you at least know your own real needs and interests, and you know at least most of facts. It only makes sense that the two of you are the best people to make the necessary decisions, you are the ones who care. As Mulford says, “clients in mediation remain in control of the decisions that will affect them and their children for the rest of their lives”.

You do not need to be lassoed by someone else’s decision; it could feel like a noose around your neck.

Please let us know your thoughts.

~Debra

Co-Parenting

Our very own San Francisco Examiner published an article recently called “10 Commandments of Co-Parenting. You can read it, here.

There is some great advice in this article, which is just as apt for parents who are together as well as for divorcing parents.

The commandments are:

1. Resolve conflicts without putting kids in the middle.
2. Treat the other parent with respect.
3. Observe appropriate boundaries.
4. Communicate regularly with the other parent.
5. Demonstrate positive conflict resolution.
6. Share with your co-parent what you need from him or her to do a good job of parenting.
7. Don’t allow all of the parenting tasks to fall to one parent.
8. Be consistent.
9. Help your children recognize the other parent with appropriate gifts or cards.
10. Don’t punish your in-laws by keeping your kids from them after a divorce.

The author’s premise is that children deserve the opportunity to be loved by both parents. Following these “commandments” can be hard for parents locked in conflict, but they are behaviors well worth striving for. Your children will be happier and more well-adjusted for your efforts.

--Nancy

Run Toward Fear

People in the midst of divorce are often extremely overcome with fear caused by the overwhelming change in their life. Pressure from fear of the unknown, triggered by questions such as: “How will the divorce affect the children?” “How will I survive financially?” “What will people think?” “Where will I live?”, coupled by anger and raw emotions, drives people to run away, looking for a place to “solve” the questions and expunge the fear. In their flight, divorcing clients regularly run to attorneys, hoping to be saved by the courts, only to find out that the situation then spirals even more out of their control, magnifying the fears, stress and trauma.

Running toward the source of the fear may be a better solution. While reading The World Behind the World, by Michael Meade, I was reminded of an old African story told to me by a guide when I was in Kenya several years ago, called “The Lion’s Roar”. The guide’s narrative was much more colorful, but the basic story is: Older lions, although not nearly as strong as the younger lions, have an enormously loud and ferocious roar. Out on a hunt, the older lions strategically wait for the prey in the grass away from the younger, powerful lions. Even though toothless ...the older lion’s enormously loud and ferocious roar sends the prey running away scared, right into the pounce…and teeth…of the younger lions. The moral of the story is that instead of following our first instinct to run away from the roar of the fear, it is better to face our fear head on.

Facing and even embracing the fear can help clients take control and navigate the situation. As Michael Meade points out, when we do not face our fears terror is given the space to grow. Mediation is a process that helps people face their fears and navigate the unknown, one step at a time. Step by step ambiguities are cleared up, solved and even transformed…and fear is released.

Please let us know your thoughts.

~ Debra

Who Decides Your Divorce...Umpire or You?

Clients often ask “Is mediation right for our divorce situation?”

A better question might be “Is litigation right for our divorce situation?”

Last week I attended a two day high school peer mediation training at CRU Institute . Nancy Kaplan, Institute Director, gave a quick test for whether a decision that is based on rules interpreted by an uninvolved third person is better, comparing it to litigation, or whether a decision made based on needs, interests and relationships by the people involved in the conflict is more appropriate, comparing it to mediation. The example she used was a baseball game….the game needs to go on, the decision needs to be quick and dirty, based on rules. In a baseball game future relationships, needs and interests, and feelings are not important; communication is not required and planning for the future is not considered. What is important is that the decision is made quickly so that the game can go on…..so the umpire or judge makes the decision immediately, based on rules, with no consideration of the players’ needs, interests or future relationship.

In contrast, when a decision affects people’s lives directly and people have significant personal needs and possibly a future relationship, albeit different, it is crucial to focus on communication and planning. Relying on a judge to make a quick decision based on rules applied to limited information is probably not in the best interest of the parties involved. Mediation provides an opportunity for divorcing couples to communicate, plan and reach an outcome that meets their individual needs given the circumstances.

Ironically, mediation has the added benefit of usually being a much quicker process than litigation.

The question is simple. Do you want to make the decisions regarding your future life or would you rather have an umpire make those decisions for you? Please let us know what you think!

~Debra Synovec

Asking the Questions

Choosing your divorce mediator is personal. Think about it. You’ll be discussing and making decisions about the things you care about most…..your children, your home, your money, your future, your security, your life. Interview the mediator, ask questions, and make sure they are knowledgeable, dedicated and compassionate. If they will not talk with you before you start, don’t hire them. I have never met a dedicated, compassionate, knowledgeable mediator that is unwilling to talk with a potential client.

Ask about the traditional “need to know” things such as:

• Process…What process does the mediator use? A facilitative process with the parties in the same room, even if it sounds hard, is the most productive and produces the most sustainable agreements and client satisfaction. Shuttle mediation with clients separated is often done for the benefit of the attorneys because they cannot handle client emotions themselves, so the clients lose the benefit of face-to-face dialogue.
• Experience…Have they mediated a substantial number of divorce and family cases? Have they had experience with the types of emotional situations you anticipate? Mediation is not therapy, but emotions will come up so the mediator needs to be able to guide you through these. Does the mediator have experience with the types of substantive issues (parenting, property, debt, spousal and child support, tax, legal)? If they do not have sufficient knowledge in these areas the mediator will either miss or sub the issue out, costing you more time and money.
• Education and Credentials….Is the mediator an attorney, a therapist? Don’t stop here. Where did they receive their training and have they kept on learning and perfecting their skills? No matter what the education is, make sure the mediator also possesses sufficient experience to mediate effectively. Many therapists have knowledge about financial issues and legal issues gained from legal peers, trainings and prior mediation experiences and may be better mediators than inexperienced attorney/mediators; many attorneys have knowledge about parenting and communication gained from trainings, child specialist peers, readings and prior mediation experiences and be better mediators than inexperienced therapist/mediators.
• Passion….is the mediator dedicated to mediation? The most effective mediators are the ones who believe in the mediation; they know it serves clients best.
  
  Ask the right questions….you will find the best mediator for you and your spouse.

~Debra