10 Money Mistakes People Make in Divorce

This post was inspired by an ESPN piece about how rookies mess up their finances.   Now people are rarely buying tigers and Bentleys while they are contemplating divorce but they do make a lot of financial mistakes.    Here are 10 that I have personally seen.   They are in no particular order and some feed off the others.   With that said, here we go:

1.  Living the Same Way as Before the Divorce.   I know I just said no order but this is really number one.   Whether you were a two income family supporting one household, or a one income family supporting one household, you are now a two household family.   Somebody moved out.   That somebody has to pay rent, utilites, buy food for themselves, etc.   It's no more one mortgage/rent payment, one household grocery shopping trip.    What this translates to is that the same pot of money now has to go twice as far.   Just because you are getting divorce does not mean an infinite pot of money magically appears.   You are going to have to adjust your spending somewhere.   Which brings up #2.

2.  No Budget.   As noted, the same amount of money has to stretch to cover more things.   That means that you have to know where your money is going so know what is really a priority and what is a luxury.   You will have to fill out a financial statement of your expenses at some point if you are asking for alimony or attorney's fees (child support has a shorter easier form), so you might as well figure out those expenses now.    You don't want to be guessing on your financial form (more on that later).   If you tell me you alone spend $600 a month on groceries and you spend $300 on eating out, I am going to wonder what the hell you are thinking.   I am also going to be really less than sympathetic to any pleas of poverty.   And if I'm not buying it, a judge sure is not going to buy it.   Do you really need to spend $1200 a year PER child on Christmas?    Do you really need that mani/pedi EVERY WEEK?   Doing a budget lets your prioritize so you are suddenly not wondering how to pay the rent because you have no idea where your money went.  

3.  Using Credit Cards.    So money is short and you need to buy the kids' some new clothes.   No problem just put it on the credit card right?   After all it's for the kids and the judge will order your spouse to pay half of it.   Well, no.    There is no such thing as marital debt in Maryland.   If the card is in your name, you are responsible for paying it.   The judge may consider credit card debt when deciding how much alimony you need, but there is no guarantee.   Besides, getting alimony is months away and now you have to pay at least the minimum balance on the card each month.   You were short money before, where is the money to pay the credit card going to come from?   Should you never use credit cards once you are in the process of divorce?   Of course not.   Sometimes you have no choice.   Do what you gotta do.   But, be careful what card you are using.   If the kids need clothes and you are claiming you are broke, don't be shopping at Nordstrom's.   Sears is just fine.   Thrift stores are even better.   Again, do you want the judge wondering why you had to buy the kids clothes at Nordstrom?  

4.   Not Knowing About Retirement/Investment Accounts.   This is a toughie.   Your spouse may be secretative and keep the information from you.   That's fine.   But you should know how much is in YOUR accounts.   There is absolutely no reason to not have the current balance, the name of the account and the account number for things in your own name.   If it is a joint account, you have just as much right to have this information as your spouse.   If your spouse refuses to give it you, go right to the source,   Your name is on it, they can't refuse to give it to you.   Knowing this information will help you decide what you really want in a divorce and to plan somewhat you are getting.  

5.   Buying a New Car.   Yes people do this. And by new I mean current model year.   Which is the worst thing you can do.   Now you owe car payments, plus your car just lost value the minute you drove it off the lot.   A decent used car is a better use of your money if you need a car.   Definitely don't lease a car.   It is not marital property, which you might think is a plus.   But, when the lease ends you still need a car.   You might not have the funds for it.   Again, budget how much payment you can afford and find a nice used cards.   Believe it or not, you can get great deals on last year's models from everyone who didn't listen about not leasing.  

6.   Not Filling Out the Finanical Statement Correctly.   As noted you will have to fill out a statement regarding your income, expenses, assets and liabilities.   This is 9 pages in Maryland.   There is a lot to fill out.   But, it is very important to get it right.   Over inflate your expenses and the other side will pick them apart at trial.    Under inflate and you might not get the alimony you need to support yourself.   Be honest.   If you spend $600 a month on the family for groceries, explain why.   Food allergies, acceptable.    I only shop organic because it's in the best interest of the kids is not.   Trust me, the chances that the judges' kids ate non-organic food and are just fine are pretty high.   "Best interest of the kids" is not a magic formula that excuses everything.   Also, you are signing the statement under penalty of perjury.   If you get caught materially misrepresenting anything on that form, the court can and will hold it against you.  

7.   Going on Trips.   This doesn't mean never take a vacation while the divorce is pending, but think about your trips.    Are you claiming you can't keep the lights on but you take the kids to Six Flags a couple a times a month?    Are you going to Disneyland in California but claiming there is no extra money for alimony.    Or the worst, are you paying for trips with your new significant other -- and that person's kids -- but claiming no money to take your own kids anywhere?   Again, do you want to explain these expenses to a judge?   If you have a family reunion in NYC every year, fine.   No one should miss a family reunion that you have attended every year of the marriage just due to divorce.  But no one wants you just going "Hey I'm FREEE I am can anywhere I want now and no one can tell me otherwise."   While techinically true, is that the way you want to spend some of your finite pot of money?  

8.   Not Paying the Mortgage.    Regardless of whose name the house is titled in, both parties have an interest in the property.   If you have been paying the mortgage continue to do so.   Not paying it hurts your credit.  If the mortgage is in the other person's name, if you contribute and you stop and the other person can't make the payment, it makes you look like a jerk.   Judges hate jerks. It may even be foreclosed which means everyone -- including you -- loses your interest in the home.   The value of the home may be the one chunk of money you have to start life over, don't mess it up.   

9.  Over Housing Upon Moving Out.   For some reason people think they need to have the exact same lifestyle after separating as they had before.   If they had a 4 bedroom, two bath house and every kid had their own room, they must have that when they separate.   Then they wind up moving some place they can't really afford.   Evictions are never pretty.   Thnk about what you really need.   Are the kids grown up and out of the house?   Then why are you hanging onto the house for dear life?   Get yourself a smaller place.   Easier to clean, cheaper, and probably newer.   You can get a spare room for when the kids visit, but you don't need to maintain their rooms exactly as they were.   The kids are not moving back in (one hopes).   If you have young kids, how much room do you really need?   How often will the kids be there?    Every other weekend from Friday night to Sunday night?   Can you sleep on the couch a couple of nights?   If you have joint custody you might need more room.  But again, finite pot of money.   Your life has changed, your home is not going to be exactly the same every again.   So don't try to recreate it.

10.  Taxes.   Oh my.    If you always filed jointly, make sure you have copies of what was filed for at least the last couple of years.   Look it over yourself.   If your spouse won't give it to you, request it from your accountant or the IRS.   If your accountant refuses to give it to you, get from the IRS.  Then don't use that accountant again.   Yes, people will still continue to use the same accountant they always had even after finding out that accountant had been favoring the other spouse all along.   Get an accountant who will protect your interests, not your soon to be ex spouses.   Talk to an accountant about the effect of filing separately.   Make sure you are clear over who gets to claim the kids.   No, just because you are paying child support does not automatically allow you to claim the kids.   In fact, physical custody determines the child tax credit.   If you filed jointly and you owe back taxes, find out why.    Joint tax debt may be allocated by a court (may, possibly, maybe).   If your spouse didn't file taxes and you were waiting to file jointly -- stop waiting.   File separately.    Let your spouse deal with the IRS, keep your own self out of trouble.

Basically this all boils down to think about your money.   Know what you are doing with it and why.  Know what and who you owe and why.   Know what is coming in and what you have as a cushion.   The more you know the less stressed about money you will be during the divorce process.

Daily Fantasy and Divorce

No this is not a post about sex.   I hear enough about sex as it is, since the no fault grounds requires the parties not to have lived under the same roof or had sexual relations for at least 12 months.   Then there is the adultery grounds.   Just no more sex, please.

This is about Daily Fantasy Sports sites.   They've been in the news lately and Congress is investigating.   Oh goodie.   How many boxes of reports will that be?   Can we bet on the over/under?   Ooops sorry.   Anyway ...

That's the first issue.   Is it gambling or not?   Technically no.   The NFL and other major sports slipped in an exception to the Internet Gambling Bill that said fantasy sports is not gambling because it requires skill.   So does poker, but we can't have that on the internets anymore.   Besides, you really want to go into court and split that hair?   You think a judge is going to be amused?   You are putting money down on proving you can pick better players than the other people in your "league."   You can lose that money or you can win it back and then some.   If it looks like a duck, it quacks like a duck ...


So, you actually have some skill at DFS and won big.   Yeah right.   The sites pay for all those ads with the losers money.   Chances are you paying for their kids to go to private school instead of your own kids.    You really want to explain to a judge that you didn't pay the mortgage because LeSean McCoy went out with a pulled hammy?   Or the guy who hit it big last week so you all picked him up was benched this week?  

Okay, okay, some people win so they can keep enticing people to play.   Guess what?   That is now income.    No wait it's not because I have losses too, you say.   Sure.   Still income.   As my good friend, Taxgirl pointed out in her great article on DFS, you will get a 1099 from the site at the end of the year with your winnings.   1099 is income for tax purposes.   And it darn sure is for child support purposes.   The Court likes to find money for child support and takes a broad definition of income.   In fact, it Maryland, Sec. 12-201 of the Family Code specifically states that "prizes" may be considered income based on the case.   So you can argue it's not gambling, but it is still a prize for winning.    Do it on a regular basis and I can almost guarantee a judge will consider it income.   And I give very few guarantees about things.

Fine, okay, it's income for child support, but surely not alimony right?    Well, maybe not.   But alimony is based on ability to pay after your basic necessities are taken care of.    Or as one judge put it in a case involving gambling, but not DFS, this is a luxury.   Luxuries you can skip altogether and use that money to pay your ex-spouse alimony.   Again, if you got money to put down on your "team" that means you have money to spare.    If you have money to spare, you can pay to help your spouse out.  It is that simple. Or you can put it away for your kids' college education.   Even with the low interest rates we have now, it's more a sure thing to grow over time than hoping that your favorite player doesn't get hurt.

Should you never use DFS sites?   Well, until Congress gets done, I wouldn't.    But, putting a couple bucks down for fun every once and awhile is harmless, if you can afford it.   Never ever bet the rent money.   And if you do it all the time, not only will you lose in the long run, but it will be considered income.

Everything You Needed to Know about Family Law You Learned in Kindergarten

Well, okay, not really.   But that famous essay has one very important line in about sharing.   It says something about learn to share your toys.    Guess what happens ina  divorce/custody situation.   You have to share.   You must share.   If you don't you will be unpleasantly surprised at the outcome.

Yes we all learned about sharing at a young age.   But something about a break up turns people into 3 year olds.   All I hear is "mine, mine, mine."   You never hear "ours, let's figure out how to split it up."  

But the law says you must share.   In a way that is fair.   That is what equity means.  It's doesn't mean one person gets to keep all the goodies because they paid for them.   It doesn't mean one person gets to control the other parent's access to the kids just because of gender, time spent with the kids or some other things.

You know what judges hate to hear the most in custody cases?   "My child, my child, my child."   As one judge put it in one of my first cases "I wasn't there but I am pretty sure it took both of you to make this child."   I was dying of laughter at how bluntly the judge put it, but he had a point.   The child has two parents, who both have rights.   By saying "my child" you are denying the existence of the other parent.   Really not a good way to get custody.  One of the factors a judge uses in deciding custody is which parent is going to foster a relationship with the other parent.   If you are a "mine" parent, a judge is not going to think you will share with the other parent.  

The same with property.   This includes pensions.    Have I heard this a million times "But it's my money."   No it's not.   It's money you both planned on living on during retirement.   It's money that was saved rather than spent on family purposes like new furniture or a family vacation.   It's marital funds and must be shared.

The other one is "but I bought it with my money."   The court doesn't care who paid for something.   Your money, your spouse's money, its all marital funds.   That is funds earned during the marriage through the parties' efforts.   Who brought home the actual dollars is not relevant.   You bought it as a family, it gets shared when the family splits up.  

Now there is a rationale for all of this marital property/ both parents in the kids lives stuff.   For the kids, its pretty simple.   You are both the parents.   You are both responsible for how this little angel turns out.   In general, it is better if the kids have both parents in their lives.   So be prepared to not have the child all the time.   After all, you aren't living together, the kids can't be with both of you all the time.

For property, it is still pretty simple, if historical.   Many years ago, when women stayed home and took care of the kids and the men went out and earned the money, the husbands would then kick the wife to the curb.   She got the kids, of course, because that was her job.   But all she got was child support.   After all, insisted the husband, it was HIS money that paid for everything.   He bought the house, the car, paid the bills etc.  It was HIS.   Except he forgot who cleaned that house, made the meals, kept the kids out of his hair so he didn't have to take time off from work to take the kids to the doctors or run them around to their activities.   This became known as "non-monetary contributions to the marriage."   Just because she didn't earn a paycheck didn't mean the wife didn't work to make the family and marriage successful.   The court then took the concept and added in the utterly common sense idea of "sharing."   You shared the kids, you shared the property.  

This is not a tough concept when you look at the reasoning behind it.   The sooner you remember that you need to share, the easier your court case will go.   The hardest cases are where someone is resisting sharing, and the other party is also fighting for more than their fair share.   Listen to your attorney on what a fair settlement is and you will save a lot of time, aggravation and money in attorney's fees.   Because fighting to keep "mine, mine, mine" just because it is "yours, yours, yours" gets really expensive.

Orders Are Not Magic Wands

This issue has been popping up a lot lately with my clients, clinic clients and in talks with other attorneys.   So I thought I would write about it in so I can just print it off and save my vocal cords.   

If you are involved in family law litigation there is a reason for the litigation.   A relationship is breaking up.   Sometimes it is just two people deciding they are not comptatible.   But those cases mostly don't involve litigation.   They work out an agreement and a hearing is only necessary to formalize the agreement in an order or, in Maryland, the divorce requires a final hearing with testimony even if uncontested.   I'm talking about the ones where there is a not so amicable break up of the relationship.   

What I've been hearing lately is "I've got the Order requiring the other person to do something and they aren't doing it."    Sure you can file for contempt if you want, but if the person doesn't really want to do it, you are going to be in court A LOT until the Court finally gets irked enough at the behavior to throw the person in jail for contempt.   Basically, an Order tells someone what to do, but it doesn't change who  that person is fundamentally.    

Some examples:

If the other parent skips for job to job, has long periods of unemployment, was irresponsible about paying bills that sort of thing, a Child Support Order is not going to make the person go "Oh wait, I am required to financially support my child, I better get and keep a job."   If the parent was a deadbeat before the Order, they are going to be a deadbeat after the Order.   That parent will not suddenly become financially responsible.   What I get with this is "Why doesn't he/she pay the child support.   It's an Order."   The answer usually is "If they were going to pay it, even if unemployed they would be paying what they could."  

The above goes for alimony too.   If the person wanted to pay alimony, there wouldn't have been a fight over it.   And some people are just hopeless with money.    An Order will not suddenly make them manage their money better.   If they didn't pay their bills on time before and always faced late fees, guess what is going to happen when it comes to paying you?   Sure you can judgments for nonpayment of alimony and child support.   But if the person has no money and no job, what good is a judgment?   Or as I say "judgments make lovely wallpaper."

If the other parent never went to school functions, doctor's appointment, kid's sports games, or even wanted to spend time with the child, a Custody Order will not transform him/her into parent of the year.   Really, it won't.   If the parent always wanted to go out partying with friends on weekends rather than do stuff with the kids, that is not going to change just because that parent has the kids every other weekend.   A bad parent will just be a bad parent with a Custody Order.   Here you can't even get Contempt.   The court is not, I repeat, not going to order the other parent to take the kids if the parent really doesn't want to take the little angels.   It is not in the kids' best interest for that parent to be forced to take the kids, only to have them ignored.

If the other parent always puts the kids in the middle during the ltigation and played mind games with the kids, same thing will happen with the Custody Order.   You can have an Order that says don't mentally abuse the kids, don't talk about the other parent in front of the kids, etc.   Guess what?   They don't care.   They really don't.   They do not care how much that hurts the kids.   If they cared, they wouldn't do it in the first place.   Here, if the problem persists long enough, you might be able to get custody changed so the kids spend less time around that parent.   But the kids are still going to spend some amount of time with that parent.  The parent will just have fewer opportunities to expose the kids to the behavior.   Also, how do you prove it to the court?   "Oh the kids will tell me what is going."    Can you say "hearsay?"   I thought you could.   Yep, anything the kids tell you is not admissible.   And you are not going to the parent who forces the kids to come to court to talk about the situation.    Not unless it is an extreme case.   Because if you do, guess who is putting the kids in the middle now?   So all you got is hearsay.   The court might admonish the other parent but that is about it.   The behavior is unlikely to change until the other parent wants it to change.

In summary, you can get the Order, but don't expect miracles.   I am not saying don't try to enforce Orders but be realistic about what the court can do.   The court cannot magically transform someones personality (from the conversations I have had with masters and judges, they wish they could sometimes).   You have to accept these limitations and decide if trying to force the other parent to change is worth your time, effort and money to pay an attorney to be constantly going after the other parent.  

The Power of Two

One night at clinic, I was chatting with a client and I realized how much in family law revolves around the number 2.   Which makes sense.   In family law, you are taking 1 family and splitting it into 2.   Fortunately, that is about all the math I have to do.    But let's talk about some of the way 2 pops up in a typical case.

First of all is Custody.   Oh boy, custody loves the number 2.   There are two types of custody  -- residential (often called physical) and legal.   Residential is where the child puts his/her head at night.   Legal is the big decisions like non-emergency medical, or religion to raise the child.  Both of these types of custody also have a 2 -- joint (sometimes called shared) and sole.   Those are pretty self-evidence.   Joint, does not mean 50/50 though.   It just means substantial time with both parents.  You can get very creative with joint residential custody.   One thing the courts tend to hate in Maryland is the week on and week off.   Parents seem to think that is the most natural way to do it, Courts do not.  

Alimony.   In Maryland we have 2 types of alimony -- rehabilitative and permanent.   Rehabilitative is what is needed to get the recipient back on their feet and on with their post marital life.  Permanent is one where the marriage was of such a length (usually over 20 years) or the receipient because of training, education or disability, or age will never be self-supporting.   The court prefers rehabilitative.   Neither one is meant to mean equal lifestyles.   Just because you were living at the lifestyle of a millionaire before the divorce does not mean you get to live like one afterwards.   And rehabilitative alimony means you are expected to get a job at some point.   No more having a job that consists of collecting your alimony check each month.

Even the grounds for divorce have a 2 component.   In Maryland most of the grounds for divorce require a 12 month separation.   And they mean SEPARATE.   Not just living in different rooms of the same house, they mean separate roofs.   There is a case where the husband was living in the garage apartment but because it was an attached garage that didn't count as separate and apart for the 12 month period.   But, there are 2 grounds that do not require at least 12 months separation -- domestic violence and adultery.   Which makes complete sense.   Both are of such a nature that they destroy any legitmate marriage.   Domestic violence is wrong and you should not have to wait a year to divorce someone who dares to treat their spouse in such a manner.   Adultery is a little different.   It's the 21st Century people have sex.   But not everyone approves of sex outside the marriage bounds.   If both spouses want to have fun, or approve of an open marriage - no adultery.   But if one believes in no extramarital relations, then the legitimate ends of marriage are destroyed by someone cheating.  

That pretty much covers it.   Today's post was brought to you by the Number 2.