Did you know that divorce may effect your credit score?* The change of marital status is not itself the reason but rather due to the Parties’ behavior. Some acts which are generally known to cause a negative effect:
1. One of the parties defaults on joint debt. While sometimes it’s purposeful or vindictive, payments could also just be overlooked (especially during an emotionally overwheling divorce process). While many Separation Agreements and the following orders include a division of marital debt, the language establishes an expectation amongst the parties but may not actually protect any claims from a creditor.
2. Closing joint credit accounts can have a negative effect on one of the parties ability to access credit. As it’s historically been said, many people are just one emergency away from a financial disaster that will wipe out their checking or savings. Given the current inflation, it is likely that many people do not even have that rainy day, emergency fund, making access to credit all that more important.
3. Removing an authorized user can be deterimental to the person who does not already have an established history of individual credit. Prior to closing accounts, the parties should discuss whether one of them should keep that account.
How can one best protect themselves? The answer is simple: parties should communicate and to treat one another with respect.
*Please note that we are definitely not experts in credit; however, the above-information is a general collection of what we’ve heard from our clients over the years. We’re happy to connect you with someone who can provide more specific information and planning.
Faye & John
Can you imagine purposefully living with your ex after you’ve separated? It’s not uncommon for couples to live together during the separation process, but cohabitation after the divorce is final has historically been very rare.
Prior to Covid, we can remember only one couple that lived together post divorce. The husband wanted to keep the marital home but he was unable to buy out the Wife’s share of the equity at the time of the divorce; typically, in this type of situation, the home would have typically been listed for sale but the wife graciously agreed to wait until after her 99 year old father in law, who also lived there, passed or was otherwise relocated. *
While this type of situation is still very rare, some couples do consider some form of cohabitation post-divorce. We recently worked on an agreement where the parties alternated use of the marital home depending on who had parenting time. We’ve also created agreements for parents who intend to live together so that they both could be physically present on a daily basis. While we always love the idea of providing a united front to the children and keeping things are “normal” as possible, we haven’t found any research to support whether these situations are actually in the best interest of the children.
If parties are going to even consider cohabitation post-divorce, there need to be some well established ground rules. How long will this arrangement last? What happens if one person decides that they no longer wish to cohabitate or wants to buy out the other? Who is covering each specific household expense? Who will be responsible for household chores? Will one parent be paying child support during the cohabitation period? Will they be able to problem solve and communicate better once divorced? What will happen when one person starts to date?**
There are a multitude of reasons that people consider cohabitation post-divorce, including:
1. The transition from a two income household is not always easily manageable if both parties are not self sufficient (with or without child support or alimony);
2. One party may have credit issues which may effect their ability to buy or rent; OR
3. Suitable housing may be difficult to find, especially if a person is hoping to remain in the same school district or needs an apartment with more than two (2) bedrooms.
While these reasons (and others) are certainly understandable, the traditional options are still the default: either you list the house for sale or one party buys out the other by giving them a portion of the equity in the marital home.
As always, we welcome your thoughts our newsletter or answer any questions!
Faye & John
* In this case, waiting actually increased the value of her equity in the home due to the spike in home values during this period.
** Do you remember this scene from The Break Up? Ironically, this is probably the least uncomfortable and complex situation that might occur:
Much to our disappointment, we are not actually Batman and Robin. We do not have x-ray vision, we can’t fly and we also can’t shoot webs at people to stop them in their tracks. Unfortunately, a “Power of Attorney*” has nothing to do with having super hero powers; it does, however, allow people to help you in your time of need.
Most people think about a Power of Attorney only being active when you are unable to handle matters on your own; to the contrary, it can be used when you don’t want to handle matters on your own. Think about these typical situations:
1. You have a financial account but you partner, daughter or nephew is more financially savvy than you. If you give the financial institution your executed document and a quick verbal confirmation that the document is still active, they are able to engage in conversations or perform transactions on your behalf.**
2. Your child reaches the age of 18. If you were to call your child’s college or university to discuss something, even tuition payments, the administration has no obligation to talk with you. Similar to above, an executed Power of Attorney and quick confirmation will allow for communication to occur between you and the administration.
3. Selling a house. This situation is usually slightly different because a Limited Power of Attorney is typically used rather than a “durable” one. The limited version only allows the person to help you for specific purpose rather than a more broad ability. We routinely have our sellers sign a Limited Power of Attorney so that we can sign closing documents on their behalf.
As always, please let us know if you have any questions or concerns about this or any other matter.
John & Faye
* This refers to a Durable Power of Attorney.
** This can also be accomplished by having the person listed as a co-owner of an account; however, once the person is a co-owner, they also have inheritance rights to that account.
ong, long ago, we were in a graduate school statistics class* as a precursor to beginning a Master’s thesis study. The most important take away from the class was understanding that how you manipulate numbers determines whether your hypothesis is supported or disproven. Whether by median, mode or average, we still love to look at data and determine how to best use it to our client’s advantage. We recently found some some statistics related to divorce** that we thought would be fun to share:
1. The divorce rate has dropped significantly over the years last 10-15 years. While it was previously thought that you had a 50% chance of getting a divorce, the current rate is thought to be around 39%. The reason for the decline could be due to so many things, including millennials getting married later or not at all.
2. Nevada continues to have the highest divorce rate in the United States. Apparently, what happens in Vegas does not stay in Vegas and regret does fit in a suitcase.
3. Massachusetts actually has one of the lower rates of divorce in the United States. It is thought that the divorce rate within the Commonwealth is approximately 2.6%; however, this statistic is slightly skewed because some states, including Georgia, Hawaii and Minnesota do not even report their statistics.
5. The global divorce rate has increased by 252% since the 1960’s. Russia is believed to have the highest divorce rate in the world; it seems reasonable that it will continue to maintain that top spot given the stress related to recent world events.
6. Second (and any thereafter) are more likely to fail than a first marriage. We often ponder if people who are married more than twice are really just hopeless romantics who aspire, but struggle to find ever lasting love.
Every four years, the Massachusetts Probate and Family Courts task force re-evaluates the child support guidelines to determine their effectiveness and what changes need to be made. Last fall, the court launched new guidelines which made the 2018 version extinct. Some of the notable changes can lead to a significant change for both the payor and the payee:
1. The minimum order has decreased from $25 per week to between $12-20 per week. While the change may not seem significant, the relatively small difference can be profound for a parent who is already receiving such a minimal amount and trying to feed and clothe a child.
2. By contrast, the maximum threshold for combined gross income to be used for calculations has increased from $250,000 to $400,000 per year. Depending on income level, the child support order can actually go up or down under the new guidelines even if the income used hasn’t changed.
3. Guidelines now allow for an order up to 40% of payors income under circumstances. In cases where the guidelines suggest an order in excess of 40%, then there is an opportunity for court approved deviation from those guidelines.
4. Orders which cover more than one child are generally higher than they would have been under the previous guidelines.
5. Child care expenses are now more proportional based on the parents’ ability to pay for the first $355 per week per child.
6. Social security benefits are now more defined. Under the 2021 guidelines, social security benefits and SSDI are now considered, especially if one of the parents are receiving benefits for one or more of the children.
7. Additional income can now be used in calculation of child support. Generally speaking, the parties can now include any stock benefit, incentives and overtime when determining a party’s income. We expect that the courts will continue to look at three (3) years of history to determine if that income is an expectation or a one time event.