How to collaborate and find an equitable divorce and financial arrangement
Going through a divorce is a painful experience for everyone, especially when children are involved. One of the biggest bones of contention is in a divorce is negotiations around financial support; even couples who want an “amicable” divorce can find it difficult to reach a settlement. You can reach an equitable arrangement, however, if you work together to ensure that everyone’s best interests are met. Family Plan offers guidance on how to collaborate and find a divorce arrangement that works for both parties.
Why is it so hard?
Aside from custody of your children, no issue is more contentious in a divorce than financial settlement negotiations. Coming to terms can be a challenge, especially when emotions are involved. Anger and bitterness can end up driving actions, making it nearly impossible to come up with a settlement that benefits the well-being of everyone involved.
An equitable outcome relies on checking your emotions and your mindset. Most divorces do require a transfer of money, and factors that affect this probability include whether there are children, the length of the marriage, and the gap between the incomes of the parties.
Financial negotiations in a divorce
Beyond physical custody of children, nearly everything else centers on the financial aspects of divorce. There are three main areas involved in financial settlements:
1. Child support
Determining the amount of child support has the most potential to produce bitter fights. However, the best place to start is by becoming familiar with state laws regarding the amount of child support and who is obligated to pay for what; the existence of these laws is mandated by federal law.
Some states set minimum child support obligations for both parents. Others don’t have minimum standards, which can make things more challenging. The key to remember is that your primary obligation should always be the safety, happiness, and wellbeing of your children. Determine what is equitable in order for your children to live comfortably and ensure their physical and emotional needs will be met.
2. Alimony/spousal support/spousal maintenance
It may actually be easier to come to an agreement on child support than alimony or spousal support. Individual states also have their own guidelines when it comes to alimony. Some dictate that assets should be divided in half, others set alimony based on the length of the marriage, and some states have no specific guidelines. Here again, you need to be aware of the laws in your state.
There are different factors that should come into play when determining alimony or spousal support/maintenance. A mediator – or judge, if you decide to go to divorce court – will look at the following.
- Duration of the marriage
- Financial needs of both parties
- Available resources
- Employment history
- Contributions to the marriage
Of course, if there is a prenuptial agreement designed to protect pre-marriage or family assets, the negotiations will be different as well.
3. Division of assets and liabilities
Assets earned and/or purchased during the marriage are generally divided in two ways: community property or equitable distribution. Here again, state guidelines will determine which method to use.
In community property states, “…you and your spouse would each get an equal share of your marital property. But only if you and your spouse couldn’t come to an agreement on your own and found yourself in front of a judge.” Only nine states have community property laws: California, Washington, Wisconsin, Arizona, Texas, New Mexico, Louisiana, Nevada, and Idaho. All others have equitable distribution laws.
Equitable distribution means the parties come to an equitable division of assets and debts. The amount may not necessarily be “equal” but they should leave both parties in a positive financial position. The sticking point with most couples is determining what “equitable distribution” means. Do you split everything down the middle, 50/50? Does one get more than the other, like 60/40? Plus, which party will pay more?
The division of assets can also become a sticking point as questions arise, such as …
- What about property you (or your spouse) owned before the marriage that was sold in order to buy your current home?
- Did you own a business together?
- Did you or your spouse inherited money during the marriage?
- What happens to retirement savings accounts that were started before the marriage?
Coming up with an equitable arrangement
Perhaps the best way to collaborate and determine an equitable financial arrangement is to take a hard look at your income, assets, expenses, liabilities, and taxes (Federal, state, local, property) now and post-divorce.
Remember, you will have to support two separate households, which means two sets of expenses. Create a budget that includes housing expenses (mortgage, insurance, property taxes, utilities, maintenance, repairs, etc.), school tuition, food, health insurance/expenses, auto expenses, credit cards, and clothes, etc. for both of you.
You can create a budget on an Excel sheet or use specialized budgeting software or apps like the Family Plan app.
The goal is for both of you to live comfortably and adequately provide for your children. Just because one parent might be the primary breadwinner does not mean he or she has the means and resources to fully support two households. At this point, you might both need to consider changes you can make in your lives, such as cutting back on discretionary spending, or job and/or lifestyle changes.
Who can help negotiate a financial settlement?
You can come to an agreement on your own, but most couples need help ending a marriage. Financial negotiations in a divorce can be a complex, confusing, and emotional process. When your emotions are in charge, it’s more likely that conflicts will arise that can derail your plans for an amicable divorce. The goal should be to end your marriage with the least amount of damage possible, particularly when it comes to your children. Everyone’s future happiness depends on it, including yours.
If you can’t develop a financial plan on your own, there are two avenues to pursue. You can choose to go to the court where a judge will make the final decision, or you can work with a divorce mediator.
Family plan and your plan for a post-divorce life
Take advantage of Family Plan before and after your divorce. We can help you get organized, improve collaboration as co-parents, and simplify payment obligations. We assist you in eliminating potential conflicts by giving you tools and knowledge to reduce stress and focus on what’s best for you and your children.
Family Plan helps keep everyone accountable by tracking support obligations, commitments, and other details of your post-divorce life, including:
- Compliance records
- Expense management
- Court admissible records without going to court
- Child support and alimony insurance built-in
- Integrated calendar with standard programs
- Communication logs through email or text
- Automatically ensures kids are always scheduled with a parent
- Educational services to become better co-parents
- Partnerships with trusted organizations and individuals
- Community support from other co-parents
If you have questions or need additional information, we have the resources to help. Download the Family Plan app and feel free to contact us.