Michele and I will be working together to help families who feel that they will benefit from the guidance of a financial neutral during mediation. Below Michele explains the role of a divorce financial analyst:
If you are new to the mediation process, you may be feeling a bit overwhelmed with questions. Many people wonder how can they make ends meet in two homes. How do they know if they can afford to keep the house or buy a new place? How do they decide what to do about the retirement accounts? Sometimes even trying to figure out a budget can be a daunting task. But where does one look for help? You will need someone who specializes in finance to give you some direction.
I am a financial advisor who specializes in the issues surrounding divorce and separation. For many years I have been helping my clients empower themselves to make the most out of their lives and money. I have personally been through a divorce and understand the impact of divorce on your life and your financials. I have a degree in business with a specialization in finance. During my divorce in 2009, I experienced some financial pitfalls of my own. Shortly after, I received specialized divorce financial planning training as a Certified Divorce Financial Analyst (CDFA), Certified Divorce Financial Specialist (now also CDFA), Master Analyst of Financial Forensics (MAFF) and Certified Valuation Analyst (CVA). My divorce led me to start my firm, Divorce Dollars & Sense so that I can assist with the financial portion of those families who are going through the divorce process.
I feel that sometimes solutions are difficult to see when you are close to them. As a financial neutral during the mediation process, I can assist in a number of ways depending on your needs. I feel strongly about trying to remove the emotions from the financial decisions. We can have discussions regarding your individual concerns and how we can best address them. The most common issues I look at are the best way to divide debts, pensions, retirement accounts and child expenses. We also look at making sure there is enough life insurance in place if support is paid out and the value of closely held businesses. As your financial neutral, I can assist in trying to maximize your marital estate and attempt to minimize tax implications. I try and look at creative solutions when possible that fit each individual’s objective for the future. We can look at some current and future projections of what different financial ideas may look like. Many clients feel they have more confidence in making their decisions after they have examined the true short and long term impact of those proposed financial solutions.
As a financial neutral, I am part of your divorce team. I may not need to participate in all mediation sessions and some of my work is behind the scenes working on report preparation and analysis. Even though I am not always present, I am always available to help with any financial question or concern that may arise. I am excited to serve Ellice and her Little Falls Mediation clients where they feel my expertise would be of benefit to them.
I just spent the last week in downtown San Diego talking and learning with other dispute resolution professionals, including lawyers, mediators, financial planners, and marriage and family therapists. The Academy of Professional Family Mediators (APFM) and the Association of Divorce Financial Planners (ADFP) joined together to host the 2018 Catalyst Conference.
For the first 3 days, I barely left the hotel since there were so many seminars and panel discussions from which to choose. It was tough to sit in meeting rooms when the sky was so blue, the sun was shining in a cloudless sky, and the temperature was in the 80s with no humidity! Did I mention that one of the meeting rooms was really really cold inside?
On the first day of the conference, I went to breakfast at 8:00 a.m. and did not return to my hotel room until 8:00 p.m. I was exhausted and exhilarated. After the conference, I took time to take in the beauty of the beaches and hiking trails of La Jolla. I continued to think about and process all of the concepts discussed over the past week and the people with whom I connected and had really great conversations and interactions. I will be planning to incorporate this wisdom, as well as new ideas and methods, into my mediation practice as the practice of mediation continues to evolve in exciting ways!
Here is a recap of some of the wisdom I heard over the last few days:
Perspectives of Experienced Divorce Mediators
Chip Rose: We need to make our clients feel comfortable and safe on macro and micro levels. Do they know what they need to know to make important decisions? In mediation, everything is organically connected. Let’s maintain a level of calmness and safety and talk about one issue at a time. Educate our clients about strategic thinking and settlement maximization.
Amanda Singer: Let’s provide clients with the resources they need. Also: ask them what are their 3 main goals of mediation?
Jim Melamed: Focus on what we can deliver for our clients.
Using the Power of Your Brand to Support Your Clients
Katy Goshtasbi: Our goal is for our clients to have positive client experiences and that we have success and happiness in doing the work that we do. Does our brand sell happiness at some level? What do I want to be known for in 2018?
How Mediators and Financial Professionals Work Together
Susan Miller/Rachel Goldman: A divorcing couple can feel very supported by 2 neutral professionals. It can be more effective to have a financial neutral and a neutral mediator sit down with the couple than for a mediator to send the clients to meet separately with a financial professional. Taking time to build the relationship and trust between the professionals is key. (Interesting sidebar: people who work in the field of conflict resolution are often conflict adverse!)
Chip Rose: Realized that he needed to incorporate financial professional and mental health professionals into his mediation practice.
Stacey Langenbahn: Create your team, prepare your clients to ask questions, sometimes it may be appropriate for clients to see financial professionals outside of mediation – for example, you don’t want to see the financial team zoning out during a mental health discussion during a mediation session
Chip Rose: Use a team model approach where appropriate – or use different portals of entry. Figure out a way for the necessary professionals to work together.
Rachel Goldman: Be flexible depending upon the needs of the clients. (She will mediate remotely via zoom and skype since she lives on the West Coast and her financial neutral lives on the East Coast.) Don’t say to them: that’s not how it works!
An Experienced Mediator’s Favorite Techniques
Jim Melamed: Rapport is essential. Help clients reach greatest possible satisfaction of their interests. Ask clients what they like to do in their free time and speak their language. Meet people where they are. List what both parties agree upon easily. It is hard to overcome the reluctance to engage in unilateral concessions. Ask clients: do either of you have any other ideas that would make this agreement better? If not, it’s as good as it gets!
Mediator Mishaps: Avoid the Nightmares and Sleep Easy
Terri Breer: Ask questions early and often regarding real property, retirement values, surviving spouse issues, QDROs, pensions, tax matters such as capital gains, unpaid taxes, deferred compensation. Understand that certified divorce financial analysts do not give tax advice.
Why Clients Don’t Take Our Advice
Michel Zelnick, CPA, JD, MFT: Ambivalence surrounds change. Here are the 6 stages of change: pre-contemplation, contemplation, determination, action, maintenance, relapse,.
Your Agenda or Mine?
Bill Eddy: With high conflict clients be extra structured. Focus on tasks and not on how they feel. The agenda is up to them. Help them to make lots of small joint decisions. Proposals become building blocks of their agreement. Work on smaller issues first which will build momentum for bigger issues.
Recently I participated in the I Am CEO podcast with Gresham Harkless (thanks Gresham!) I am CEO is a short podcast that features and provides information for CEOs, entrepreneurs, startups, and business owners. Gresham is a Media Consultant for Blue 16 Media and the Blogger-in-Chief for CEO Blog Nation. CEO Blog Nation is a community of blogs for entrepreneurs and business owners.
Gresham asked me why I started Little Falls Mediation (LFM) and asked me to describe what services I provide. He asked what makes LFM unique. He also asked me what one favorite resource or life/business hack has helped me as a CEO. He asked if I have a golden nugget to share with other entrepreneurs and business owners. Last, he asked what being a CEO means to me. Here are some of my responses to his questions:
I started LFM because friends of friends and acquaintances were asking me to help them with their family issues, such as how to go about separating and divorcing, and I was referring them to lawyers and other mediators because I didn't have my own business. I was a lawyer/mediator handling court referred cases in D.C. Courts. At first it didn't occur to me to start my own business. I didn't think of myself as an entrepreneur. After Northern Virginia magazine ran a cover story on divorce that mentioned mediation and praised my work as a mediator from a happy client, I started getting calls from people I didn't know seeking my services. The funny thing is I had no idea that the magazine was publishing a story and that my client was talking to a reporter about mediation until after the issue was on the newsstands.
My unique selling point is rapid response and kindness. It's really important to me to create an atmosphere that is warm and welcoming to clients. When people call me, they are under great stress. Divorce, death, illness, and unemployment are very difficult. So when clients reach out to me, I get back to them right away and I listen attentively to what they have to say. Everyone wants the opportunity to be heard. Mediators are trained to acknowledge emotion but lawyers are not. So if a client is really upset, I don't ignore the emotion.
My favorite resource is Awesome Women Entrepreneurs, formerly known as Arlington Women Entrepreneurs, my networking group headed by Karen Beauregard Bate and Evelyn Powers. We socialize, network, and support one another in members' homes or local businesses. My golden nugget is to mentor others and to find a mentor. Collaboration is key. I love to work with and learn from other lawyers and mediators. I also wish I had taken a personal finance class in college. Finance classes were not offered in law school!
Last, being a CEO to me means I work really hard all the time and I also get to have lots of flexibility, autonomy, creativity, and freedom. Listen here to the podcast:
Guest blogger Lisa Herrick, Ph.D. is a licensed clinical psychologist who offers collaborative divorce coaching. She works as a parenting coordinator for high conflict, divorced parents, and sees both individuals and couples in her psychotherapy practice. She has co-authored two books with Kate Scharff: Navigating Emotional Currents in Collaborative Divorce (American Bar Assoc. Press 2010) and Mastering Crucial Moments in Separation and Divorce (ABA Press, 2016). Lisa has helped several clients of Little Falls Mediation understand that children need both parents; her wisdom and guidance are exceptional.
Most of us remember the story of King Solomon: faced with two mothers, each claiming the same baby to be her own, he says to the mothers that the only compromise is to split the baby in half with his sword. One mother cries out in fear, and tells the other woman to take the baby, in order to protect his life. Solomon names that woman the true mother, as she was willing to give up her son in order to save him.
This story has many other versions going back in history. The Chalk Circle is a play considered a classic in China, written at some point during the Yuan Dynasty during the 14th Century. The verse describes a judgment made by Bao Zheng, an 11th century aide to the Emperor who symbolizes honesty and justice in Chinese culture. The verse describes two women fighting over possession of a baby. They are placed in a chalk circle and told to tug on the child, one holding his feet, and the other his hands with a goal of pulling the child out of the circle and into her own possession. The true mother lets go of the child, weeping, in order to prevent the child from pain and harm. Bao Zheng then gives the child to that woman, knowing that is the mother who cares most for the child.
Wikipedia notes that scholars have tracked down 22 other stories from folklore and literature that focus on the same theme. Humans evidently don’t really change that much over the centuries in terms of their capacity for conflict. In our own society, we have family court judges still forced to make decisions about who gets the baby, so to speak, when parents are battling for custody and time. Clearly, though many families remain together to rear their children, and many others are able to share time and responsibility amicably when the parents split apart, we still have parents who end up in the “chalk circle”, each tugging on one end of their child’s life while the other parent tugs in the opposite direction.
How does the theme of Solomon’s sword, and Solomon’s wisdom play out today?
In custody battles that end up in court, judges often order custody evaluations of the parents and children. They are interested in assessing – among many other factors - parental behaviors that social scientists have named “gate keeping”. If a parent withholds access to a child for vengeful, or selfish reasons, the gate keeping is seen as “restrictive”. If a parent promotes access to a child in order to help their co-parent strengthen his or her relationship with the child, or become more available to the child, that is called “facilitative” gate keeping.
While court decisions are often unpredictable, and sometimes downright dumbfounding, judges theoretically are trying to determine which parent is most likely to support, and help maintain the relationship between the children and both parents. Judges are, in effect, trying to use the Solomon’s sword idea to figure out which parent should have custody, or more custodial time, with the children. This is because research suggests, and the attachment literature indicates, that infants develop attachments to both parents who care for them regularly, and that children tend to thrive in life when they have ongoing relationships with both parents.
Custody disputes can be complicated, though; judges, evaluators, mediators, litigators and Collaborative professionals alike often have great difficulty determining the true reasons a parent might insist on, or wish to, restrict access by their co-parent to the children.
Let’s say one of the two women in the chalk circle had previously been accused of abusing the baby, or of behaving in frightening ways. What would the right decision have been for Bao Zheng? Would letting the child go to the suspected mother be the safest act?
Sometimes, when parents are in conflict, one parent feels he or she is more “fit” than the other, or actually fears that the other parent is dangerous to, or neglectful of, the child. In those cases, when one parent prevents the other parent from access, some professionals see that prevention as “protective gate keeping.” The question for the professionals helping the family becomes whether the protection is warranted, or is actually unnecessary – and ultimately harmful to the child.
The nuances of situations in which parents are in conflict are essential to attend to. Perhaps one parent (let’s call this parent Parent #1) insists that they are supportive of their co-parent’s time with the child – as long as the time is spent in the home where Parent #1 lives, or is spent in small chunks of time (dinner and a movie). In this case, the question we must ask if we are to remain focused on the children’s needs (and “protection of the baby”) is whether that behavior is protective or restrictive. We need to find out whether, in fact, Parent #2 has a history of caring for the child in attentive and careful ways, or has a history of substance abuse or addiction, or has been neglectful or abusive, or has been absent.
A common situation in divorcing families is one in which one parent has been the primary caretaker, while the other has been the primary breadwinner. Sometimes, the breadwinner has had very limited time with the children, in part because of work demands, but perhaps in part because that parent has been very unhappy in the marriage, and unhappy within the stress of the home. A Solomon’s dilemma arises once the parents have separated, and each parent wishes for their own individual time with the kids. Often, the parent who was primary caretaker believes they are the only parent who can adequately care for the children. This is because they have witnessed, in their own history, the disconnection or even apparent disinterest of their co-parent in the day to day lives of the children. However, a confusing reality surfaces when the breadwinner-parent realizes all they have missed out on in terms of parenting, and once they are parenting in their own space they realize they actually want to be connected to their children. They find they want to become the involved parent they have never been.
So which parent should Solomon favor? The parent who has looked after the children’s needs for years? The parent who has been missing, but now, painfully, wants to develop a strong bond with the children? What is best for the children?
When I work with families in mediation or Collaborative, or am meeting with the children directly, I am always trying to listen for the “real story”. While I am not a judge and I don’t provide custody evaluations to the courts, I do work with many parents and many children in families in which there are custody disputes. In order to help parents figure out a way to share the time, and live together somehow within the chalk circle, I strive to learn – along with the family – whether both parents are ready and able to be available, responsible, and caring parents. I work with parents, listening closely, to figure out – and then to help them recognize – whether protective or facilitative gate keeping is most appropriate. My toughest clients are those who are coping within a restrictive gate keeping dynamic – especially when the parent restricting genuinely believes he or she is being protective.
The good news is that most parents are able to recognize, over time, the needs of the children above their own. Sometimes parents who were previously uninvolved need to “walk the walk”, not just “talk the talk”, and slowly build up their connections to their kids, and build co-parenting trust in the historically caretaking parent. Sometimes parents who have historically struggled with substance abuse, or mental illness are able to achieve sobriety, engage in treatment, and evolve into wonderful, able parents who then need significant time with their children. Sometimes a restricting parent needs time to grieve the loss of the marriage before being able to “let go of the baby” for the child’s own protection and become more facilitative.
In the end, I do believe children need both parents. And though I do not own a sword, I do believe that when both parents are fit, the parents who are truly looking out for their children are the parents who are able to share their children despite the pain of having to – sometimes – let go of them.
I asked my friend, poet, and colleague Laura McCarty to guest blog about gratitude this month:
The mediation process, while leaps and bounds more amicable than arbitration or litigation, can still be emotionally-charged. Change can stir up feelings of loss, anguish and grief. Moving away from those feelings sometimes takes more effort than we feel possible. But shifting your attitude is easier than you think. With a daily ritual that can take less than five minutes, your mindset can transition from a place of loss to one of abundance. It’s as easy as saying thank you. Studies have shown that expressing gratitude or being thankful for what we have in our lives can lead to greater happiness and overall better health. The simple act of showing gratitude can become your own source of healing and empower you. So don’t delay. Harness that power and all the abundance within you to make the changes happening in your life work for you.
Here are some tips to getting your gratitude on:
Guest blogger Laura McCarty is pictured in Glacier National Park on the Grinnell Glacier trail. Laura lives, writes and teaches yoga in Arlington, Virginia. She's grateful for her two inspiring daughters, her dog Ginger, her huge circle of friends, and more people, places and things she can list here.
All the families with whom I work are unique. Many have young children and others have children who are 18 and older or no children. Some couples are extremely amicable and remain good friends. Other couples are cordial but do not wish to spend time together. Some couples cannot be in the same room together. For many parents, developing a parenting plan during mediation is difficult because parents do not want to go from living with their children all of the time to sharing their children with an ex-spouse. Co-parenting is difficult for some families and easy for other families. Here are some suggestions for how to make co-parenting work well:
Would love to hear from you on positive co-parenting tips that work for your family!
I recently mediated a divorce case and emotions were running high. At one point, the husband said to his wife that he was truly sorry if he had not articulated his appreciation for his wife's contributions to the marriage. I was able to see firsthand how a sincere apology changed the dynamic between the parties and allowed them to finish discussing all of the issues that they had identified as important to them in that particular session.
According to dictionary.com, an apology is a written or spoken expression of one's regret, remorse, or sorrow for having insulted, failed, injured, or wronged another. Rabbi Amy Schwartzman of Temple Rodef Shalom says that she has learned that apologies can be complex, that they often require many conversations, and that forgiveness cannot be expected immediately. And according to Beverly Engel, apology has "the power to repair harm, mend relationships, soothe wounds and heal broken hearts" (Psychology Today, The Power of Apology, June 9, 2016).
So does apology have a place in mediation? I think that apology can be an effective tool in mediation that helps to allow the parties to reach closure. Here is an example of a case where apology was the turning point in mediation:
Scott Krueger arrived for his freshman year at the Massachusetts Institute of Technology (MIT) in the Fall of 1997. Five weeks later he was dead of alcohol poisoning after fraternity initiation. Scott's parents intended to sue MIT alleging a culture of alcohol abuse and a housing arrangement that steered new students to live in fraternities. MIT's lawyers saw this case as one that could be won through litigation but the university chose to offer to mediate instead.
During negotiations, Scott's parents angrily asked MIT's President why he attended their son's funeral but did not seek them out personally to extend his condolences. The President responded that he had consulted with people about whether he should approach the Kruegers and was advised that, in light of their anger at MIT, he should not do so. That advice was wrong, he said, and he regretted following it. He went on to apologize for the university's role in what he described as a terrible, terrible tragedy. "We failed you," he said and then asked "What can we do to make it right?" This apology was the critical moment in the case, and the mediator channeled the discussion toward what the Kruegers wanted and what the university could do. No court could have compelled this personal, unconditional apology.
In the end, MIT paid the Kruegers $4.75 million to settle their claims and contributed an additional $1.25 million to a scholarship fund that the family would administer. At the conclusion of the process, the President and Mrs. Krueger hugged each other. The mediator's greatest contribution was to allow the emotion to be directed to him and then re-directed to the President and the university. MIT felt that the agreement minimized the harm that litigation could have caused the university and that the settlement made sense. MIT leadership recognized that MIT policies regarding student use of alcohol could have been better. University leadership also felt that a narrowly drawn legal response would not be in keeping with MIT's values. (Golann and Folberg, Mediation, The Roles of Advocate and Neutral, Third Edition, 2016..)
How do we ensure that apologies are sincere? Rabbi Schwartzman quotes from the book "On Apology" by Aaron Lazare in a sermon she delivered on Rosh Hashanah in 2013. "The first step in apologizing is to recognize our offense and also to recognize its impact on the person hurt. We also have to show we truly regret what we did. We have to actually ask for forgiveness and be prepared to do whatever it takes to mend as much as we can. Finally, an apology is not really complete until, after resolving to refrain from the transgression in the future, we do indeed refrain from repeating the offense when the opportunity arises."
Compare the MIT President's apology with an apology made by Justin Timberlake after the Super Bowl halftime show when Janet Jackson experienced a wardrobe malfunction. A week later, the following apology was made: "I know it has been a rough week on everyone and, umm, what occurred was unintentional, completely regrettable, and I apologize if you guys were offended."
Golann and Folberg believe that mediation provides a setting in which disputants can apologize more easily than in direct negotiation -- perhaps because the mediation process is confidential and allows people to speak without concern that the apology will be used against them in a courtroom at a later date. It is thought, though, that a partial apology will be heard as insincere and thus will lower the chance of settlement. Ultimately, Golann and Folberg conclude that how an apology is made is crucial to its effectiveness.
Mediator Carl D. Schneider quotes E. Kastor from The Repentance Consensus: A Simple Apology Just Doesn't Cut It and and says that "An apology may be just a brief moment in mediation. Yet it is often the margin of difference, however slight, that allows parties to settle. At heart, many mediations are dealing with damaged relationships. When offered with integrity and timing, an apology can indeed be a critically important moment in mediation. Trust has been broken. An apology, when acknowledged, can restore trust. The past is not erased, but the present is changed." (What It Means to Be Sorry: the Power of Apology in Mediation, January, 2006.)
On Wednesday, my colleague Renee and I finished teaching our last Mediation class of the semester at George Mason Antonin Scalia Law School. It's hard to believe we have finished an entire year of teaching; we taught an Alternative Dispute Resolution class last fall as well as our Spring 2018 Mediation class.
During our first three classes, we focused on teaching our students basic negotiation skills, using the wisdom of Roger Fisher and Bill Ury's Getting to Yes. The book focuses on interest based negotiation rather than position based. The premise is to: (1) separate the people from the problem, (2) focus on common interests, not positions. (3) invent options for mutual gain, and (4) use objective criteria. We had our students participate in a negotiation where one party needed the seeds of a sunflower and the other party needed the petals -- and there are a limited number of sunflowers available. Neither party knew the need of the other party, and our students focused on trying to buy as many sunflowers as possible! Our students also participated in a negotiation involving the purchase of a used car from a work colleague and development of a Best Alternative to a Negotiated Agreement (BATNA).
We sent our students to Multi-Door Dispute Resolution, which is located in D.C. Courts, to observe mediations of Small Claims cases which are disputes under $10,000. Our next few classes were a combination of exploring the various stages of the mediation process (including introduction and orientation, understanding the parties and issues, problem solving, caucusing, and agreement writing) and practicing mediator skills such as active listening, reframing, and paraphrasing. We spent a good portion of one class discussing how to manage emotions in mediation by using Bill Eddy's "So What's Your Proposal" and EAR (Empathy, Attention, Respect) methods. Our students participated in a role play involving a landlord/tenant issue and another one involving college students in a dorm who were trying to resolve conflicts over noise and items borrowed without permission.
We had three wonderful guest speakers visit our class: mediator and lawyer Rick Shapira, retired judge Honorable Paul Sheridan who is with the McCammon Group, and litigator/mediator/substitute judge Brian Hirsch. Rick focused on the importance of the attorney role in mediation, while Judge Sheridan spoke about the McCammon Group's particular style of mediation. Most mediators at McCammon are retired judges. Mediations can go for many hours until all issues are resolved in just one session, and attorneys are always involved as part of the process. Brian spoke about evaluative mediation, which he says is at the intersection of mediation and litigation. He contrasted the evaluative approach, which is typically practiced only after a judge has at least 10 years of experience on the bench, with facilitative mediation, which is the type of mediation that I practice. Our class participated in one final role play, Waltham Construction versus Foster Fuels, a lawsuit between two companies over an allegedly defective product. Last, our class concluded with an ethics discussion.
Our students kept journals that they wrote in weekly after each class. They had to turn in two separate journal reflections in class with no advance notice. Students turned in all thirteen of their journal entries yesterday, and it was fascinating to read their impressions and thoughts about what they were learning in each class and how they were applying these principles in every day life. We are looking forward to reading their final research papers which are due in one week. We have really enjoyed getting to know our students and teaching them about mediation!
Thank you so much, Arlington, for voting me Best Attorney in the Sun Gazette 2018 Best of Arlington Poll! I very much appreciate this honor.
This week I've been busy reviewing, proof reading, and editing the final draft of a new book by Larry Gaughan called Concepts, Strategies, and Skills for Divorce Professionals. I think of Larry as the Father of Mediation in the Washington, D.C. metropolitan area. Larry has been involved with the alternative dispute resolution (ADR) of family law cases for over thirty-five years. Larry is a lawyer and mediator and is also certified for collaborative practice. He has studied family systems at Georgetown University, and he has taught ADR seminars as a professor at George Mason University law school. I had the pleasure of meeting Larry at the Academy of Professional Mediators conference a few year ago, and he has been guest speaker at the ADR class I currently co-teach at George Mason's Antonin Scalia Law School.
Larry's book is about the roles of divorce professionals in helping divorcing spouses resolve the details of their divorce while avoiding the frustration, expense, delays, and stress of litigation. It is also about obtaining individuals who are separating and divorcing the assistance they need for effective personal, financial, and vocational planning and in managing the various transitions of divorce. Stay tuned for its upcoming release this year.
Have a wonderful spring break. Enjoy the sunshine and the start of a new season. Happy Passover and Happy Easter! "The first blooms of spring always make my heart sing." -- S. Brown.
I asked my friend and colleague Christine Searle of Searle Business Solutions to guest blog about the impact of the new tax law and its impact on divorce negotiations:
Divorcing couples already had a lot of tough financial decisions to make before the Tax Cut and Jobs Act was passed. Those decisions got more complicated with the stroke of a pen on December 22, 2017. The new tax law impacts almost every U.S. taxpayer. Divorcing couples and their advisors need to learn a whole new set of rules to make informed financial decisions.
Every situation is different, so getting the right advice requires input from a qualified tax professional. At a minimum, divorcing couples who are planning for an equitable and informed settlement negotiation should be aware of four areas that changed under the new tax law:
1. Tax Brackets and Filing Status -- Marginal tax brackets are now lower for most taxpayers. Filing status income levels for “married filing separately” and “head of household” were adjusted to eliminate the marriage penalty and to increase tax advantages for qualifying heads of household versus filing single. Separated couples still face the daunting task of deciding which “married” filing status results in a lower tax and provides for equitable tax deduction allocation.
2. Alimony and Spousal Support -- For divorce or separation agreements effective after December 31, 2018, alimony and spousal support or maintenance payments will not be deductible for the payer and taxable to the recipient. Removing the tax impact for both parties eliminates the need to “right size” spousal support or maintenance payments to make after-tax amounts equitable for each party. Existing agreements can be renegotiated to capture this provision.
3. Standard Deduction and Itemized Deductions -- Deciding which spouse gets to take the mortgage interest and other itemized deductions requires careful assessment, in light of the higher standard deduction amounts and new limits on some itemized deductions. Separated couples who elect the “married filing separately” status should be aware that if one spouse itemizes, the other spouse must itemize, too, even if his or her standard deduction is higher.
4. Personal Exemptions and Child Credits -- The $4,050 personal exemption is eliminated and the child tax credit is doubled from $1,000 to $2,000. These changes can be material in deciding which parent reports a child for tax purposes, on top of factors that remain in place -- accounting for any disparity in spouses’ income and tax brackets, the ability to deduct medical expenses, and use of the preferential “head of household” filing status.
The 2017 Tax Cut and Jobs Act changed more for taxpayers than we can fit into this blog post. Have more questions? Gain a better understanding of these significant tax changes by attending my workshop, “Planning Under the 2017 Tax Law”. Check upcoming dates on my website www.searlebzllc.com or contact me at Christine@searlebzllc.com to schedule a workshop for your group.
Ellice Halpern, J.D., is a Virginia Supreme Court certified general and family mediator.