Divorce Friday

Divorce Friday

The Podcast that answers your financial questions about divorce. This is a stressful time of life when normal rules don't apply anymore. The podcast aims to help provide clarity to people facing this life-changing situation. Hosted by Chris Chen CFP CDFA and Diane Pappas CDFA, we publish live on facebook.com/divorcefriday on ... Fridays at 11 AM ET

Income Complexities for Business Owners and Child Support
Jan 22 2022
Income Complexities for Business Owners and Child Support
This week we are welcoming David Consigli, a Certified Public Accountant. David is a partner with FAZ CPAs, where he works on business valuation and forensic accounting. David is specifically interested in divorce for business owners. In a previous episode with David Kellem, we addressed some of the intricacies of determining income. The Massachusetts Child Support Guidelines contain a long list of income sources that can be considered for child support calculations and provide guidance in some ambiguous cases. Income for business owners is more complicated because it can be more fungible. Whereas an employee gets a W2 annually that determines their income in the past year, it is different for the business owner. Business owners can get paid in several different ways depending on the organization type of the business, whether it is a C corporation, an S corporation, an LLC or sole proprietorship, or a partnership. Income can come in the guise of a salary, but not always. Income will usually include dividends, profit sharing, and also benefits. For example, cell phones used for business are usually paid for by the business but are also used for personal purposes. Sometimes, the list of items paid for by the business and used for personal purposes can be quite long. They need to be considered in the “real” income of the business owner and sometimes of the spouse. Some expenses can also decrease income on paper, but not in fact. For example, depreciation on equipment or buildings allows the owner to factor expenses that do not cost cash and reduce taxes on other income. However, these expenses have to be added back to the income of the business and the business owner. It’s easy to see at this point how delicate and time-consuming it can be to figure out income for business owners. You will find this discussion with David Consigli genuinely enlightening. Join us!
Definition of Income Used in Child Support Calculations
Jan 14 2022
Definition of Income Used in Child Support Calculations
In our second Divorce Friday podcast episode in our 2021 Child Support series, Diane and Chris have the pleasure of hosting David Kellem to address the determination of income for child support. A lawyer and mediator at Kellem Mahoney Family Law and Mediation Group in Hingham, MA. David spent 25 years representing clients in a wide range of areas that relate to family law, including divorce, real estate, business representation, litigation, and wills and estates. One of the critical aspects of the Child Support guidelines is that the financial end result is that one parent will pay money to the other. Usually, that is a factor of the difference in incomes of each parent and many other factors addressed in this and future episodes of Divorce Friday. For people who have a regular job, income is not difficult to determine: it is simply the salary you get for your job that ultimately results in a W2 sent in January to figure out our tax return. But, of course, there can be complications. For example, people can get bonuses, or they can benefit from executive compensation programs. Or they can have more than one job. Things can get complicated when one of the parties is a business owner. Determining income in this kind of case is not always straightforward. That is because business owners have the opportunity to affect their income depending on their goals. For example, there are business expenses that provide a personal benefit that is not included in the business owner's income. A simple example is the cell phone expense: it may well serve a business purpose, but the business owner also receives personal calls. Depreciation is another typical example, especially with rental properties. Depreciation is a non-cash expense that the IRS allows business owners to take. It reduces the apparent income of the business owner and, thus, can have an impact on the amount of child support that will be paid. Therefore, incomes may need to be adjusted to arrive at a fair representation of a couple’s resources and a fair amount of child support. Listen to this fascinating discussion of determining income in divorce!
An Introduction to the 2021 Child Support Guidelines in Massachusetts
Jan 7 2022
An Introduction to the 2021 Child Support Guidelines in Massachusetts
The Massachusetts Child Support Guidelines (CSG) are scheduled to update every four years. Although Federal regulations drive this, it is also very much needed. Because of the nature of the issue, Child Support Guidelines will always be imperfect. However, a mandated change every four years allows us to improve regularly. Child Support is the money paid from one divorced parent to another to help in the expenses of raising a child. The amount can vary based on many factors, notably the parents' incomes, where the child spends most of their time, and the number of children. The last update went live on October 4, 2021. It will be valid until the next edition, probably around the second half of 2025. In this episode of Divorce Friday, Chris and Diane host Fern Frolin, Esq, a prominent family law attorney and a member of the CSG Taskforce that developed the new guidelines. Fern has worked on the CSG Taskforce in 2012, 2016, and 2020. She has also been on the committee that helped craft the Massachusetts alimony law of 2011. Fern is an expert in Massachusetts child support. We are honored and fortunate that she agreed to speak with us at Divorce Friday. In this introductory podcast episode to CSG, we reviewed the major changes, their basis, and potential consequences. Among the changes, we noted that the amount owed by the paying party goes up significantly compared to the previous CSG, especially where multiple children are covered. Another dramatic change is the increase of the income subject to CSG. The combined income of up to $250,000 was considered for child support in the past. With the new rules, it is the income up to $400,000. One of the interesting aspects of our conversations had to do with the relationship of child support to alimony. The historical practice was to consider the income in excess of the amount assessed for child support for alimony. Therefore, the increase in income considered for child support to $400,000 could mean that for many people who cannot reach that income, alimony would be effectively eliminated. Fern made the point that it may not necessarily be the case. While child support is usually calculated first, it doesn’t have to be. For example, alimony could be calculated first instead, and then child support. In this situation, the reduction in child support could be offset by an increase in alimony. There are many other wrinkles in child support guidelines. In this episode, we barely scratched the surface. Let us know what you think!
What to do with the Marital Home
Sep 6 2021
What to do with the Marital Home
Will we have to sell the house? Where will the kids and I live? These are some of the most common questions that people have when they are first faced with the prospect of divorce. And because the home is such an emotionally charged issue, some people will do almost anything to stay in the home even if it is financially devastating for them. It’s a known fact that when emotions get in the way, bad decisions are made because one is unable to think logically. But since the home is also the biggest asset a couple has next to retirement, making a bad decision like this can have a significant negative impact on your financial future for years to come. So, how do you make sure you do the right thing? It comes down to exploring your options with the home and removing the fear of the unknown, so you can make the best, informed decisions for you and your family. A very common scenario is when the stay-at-home parent or the major caregiver of the children says to the other spouse, “I want to stay in the marital home no matter what.” What this typically means is that that spouse is giving up their rights in the retirement accounts so that they can remain in the home without buying out the other spouse. Unfortunately, this type of trade is rarely equitable and can be financially detrimental to the spouse who now has no retirement funds and who most likely, cannot even afford to stay in the home. This podcast covers the options you have when it comes to the marital home. Having a CDFA® illustrate the different options available to you, will allow you to make sound decisions based on financial fact rather than on emotions. You may find, that you do not have to sell the home right away. Maybe you wait a few years until your youngest graduates from high school to allow the family to adjust to the new changes. At that point, you agree to sell the home or maybe you will be able to buyout your spouse and retain ownership. But the only way to know for sure which option is best for you, is to explore all the options in the beginning of the divorce process so you can make the right decision.
Do you need a financial professional?
May 4 2021
Do you need a financial professional?
Divorce is complicated. It can be overwhelming and emotionally devastating. It can also be financially devastating if you are unable to make informed decisions throughout the process. There’s a saying that if marriage is about love, then divorce is about money. If you do not know what you or your spouse have for retirement assets or how much money your spouse makes, it becomes almost impossible to negotiate in your and your family’s best interest. Attorneys are legal experts, but when it comes to the financial and tax issues in a divorce, it makes sense to work with a financial expert, like a Certified Divorce Financial Analyst® (CDFA®). Working with a divorce financial professional from the beginning, ensures that the correct information is being obtained and analyzed so that any settlement being proposed is being based on facts and not on emotions. There are three questions that need to be answered during the divorce process: Where are you today? – What are your assets, liabilities, income and expenses that need to be considered in the marital division?Where you will be at the time of divorce? – Will there be child support and/or alimony and how will this affect your income and lifestyle post-divorce? What assets will you receive and will they sustain your needs and goals?Where will you be 5, 10 or even 15 years down the road after divorce? – Will it be a successful transition to post-divorce life? Are you going to be okay? If the above questions are addressed during the divorce, then you will most likely be able to sign your separation agreement with confidence and peace-of-mind. Only a divorce financial professional who is proficient in the divorce field can provide the clarity needed when answering these questions. Understanding the consequences of the settlement that is being proposed to you is key to transitioning to a successful post-divorce life. So, do you need a financial professional on your team when going through a divorce? In most cases, the answer will be yes.