THE MARRIAGE ZONE:
Short Sale Of The Home – Tax Consequences
By
Christopher C. Meyer, Ruth Bolas, and Kristina Kesselring
2010
Recent disturbing statistics show that 30 % of the homes in our area are worth less than what is owed on the loans on those homes! Ruth Bolas and I wrote a previous article about real estate short sales for this publication. We thought it would be helpful to expand on the short-sale subject by commenting on tax consequences, so we brought in our tax expert, Kristina Kesselring, CPA.
Whether you are involved in a divorce, or are just struggling to keep up with your monthly house payments, if you are thinking about a short sale as a way to get out from under your house and the mortgage, you must be aware of possible tax consequences.
It used to be that the amount of the loan that was forgiven in a short sale became taxable income to the seller. Talk about adding insult to injury! If John and Mary sold their house for $50,000 less than the mortgage amount, they would get an IRS form 1099 from the lender showing that they received $50,000 in income from the transaction! The amount of the debt forgiven (not paid back) was taxable income to the borrower.
Thanks to the anemic state of the economy, recent legislation and regulations eliminate the tax on this phantom income. The catch is that certain requirements apply.
The part of the loan that is forgiven must be on a mortgage on a principal residence. Sorry, vacation homes and investment properties do not qualify.
The amount of the mortgage debt that is forgiven can only relate to the purchase or improvement of the principal residence. If you refinanced your home to pay off credit cards, purchase a car, etc., that amount that is forgiven won’t qualify and will likely become taxable income to you.
The maximum amount of the phantom (debt-forgiven) income that can be excluded is $1,000,000 for a single taxpayer and $2,000,000 for joint filers. You have our sympathy if you need to exclude more than this.
You must take care that the appropriate forms are issued after the transaction.
In most instances you don’t have to worry about all these requirements if you are insolvent or bankrupt. Insolvent means your debts exceed your assets or you are unable to pay your debts as they become due. Most folks contemplating a short sale are probably insolvent. However, even if you are solvent, you can take advantage of this opportunity to get out from under your over-leveraged home without painful tax consequences, but you must meet the requirements. Of course, the better your financial condition, the harder it will be for you to convince your lender to approve a short sale.
Short sales typically result in no taxable income to you if you meet all the requirements, or you are insolvent or bankrupt. However, short sales are complicated transactions and can result in horrendous tax consequences for the unwary homeowner or person considering this option for in investment property. At a minimum, you should consult with a real estate broker who has expertise in these transactions as well as a tax expert.
A short sale can be an effective damage control device for homeowners, but it requires patience, knowledge, and expertise.
This article is for informational purposes only and does not constitute legal advice about your case.
Chris Meyer is an attorney practicing family law in Northern El Paso County. Chris’ law practice is limited to domestic relations cases. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information and many other articles.
Ruth Bolas is a licensed Real Estate Broker with Keller Williams and is also an attorney. She grew up in the Monument area and serves the Front Range specializing in working with buyers as well as home sales and short sales. Ruth Bolas can be reached at ruthbolas@msn.com or 719-488-3026 or 303-437-6010.
Kristina Kesselring is a licensed Certified Public Accountant in the state of Colorado. She has more than 15 years experience in small to mid-sized business accounting and management. She specializes in tax debt negotiation, bankruptcy and divorce accounting, business planning and taxation. Kristina Kesselring can be reached at klkaccounting@msn.com or 719-290-9871.
Showing posts with label Financial Matters. Show all posts
Showing posts with label Financial Matters. Show all posts
Tuesday, January 3, 2012
Wednesday, May 5, 2010
THE MARRIAGE ZONE: REVIEWING YOUR WILL
THE MARRRIAGE ZONE: REVIEWING YOUR WILL
By Christopher C. Meyer 2010
This article is not about your personal determination. It is about your last will and testament. When should you review your will?
Generally speaking, you should review your will: whenever you have a major change in your personal situation; whenever you have a major change in your financial situation; or, annually, to determine if there are any changes in the law that should be reflected in your will. A divorce usually generates reasons to review your will because big personal and financial changes result.
If you already have a will, what happens to it if you get divorced? Married folks typically list their spouse as a beneficiary. Divorced folks rarely do this. After you are divorced, you usually don’t want much to do with a former spouse, much less gift them the property you have left after the divorce. Talk about adding insult to injury!
Fortunately for a lot of folks, the law assumes that you will forget to change your will after you are divorced and remove your now former spouse as a beneficiary. Absent an agreement between the parties or a Court order, a divorce invalidates testamentary (will) gifts to former spouses. The same is true for powers of attorney, insurance beneficiary designations, and pay on death designations for various accounts. The same is also true for folks who never had a will. If your estate passes via intestate succession, it is not going to a former spouse.
Situations may arise where there are good reasons to maintain a former spouse as a beneficiary in a will. An example might be to insure continued maintenance payments after a long-term marriage. The best practice in such instances is to make a new will after the divorce.
After you have exited from the marriage zone, you should make a new will. If you don’t, and your former spouse is your only beneficiary, when you pass away your property will be distributed according to the plan the legislature has determined for such situations (intestate succession) and involves your property being distributed to your closest blood relations.
This article is for informational purposes only and does not constitute legal advice about your case.
Chris Meyer is an attorney practicing family law in Northern El Paso County. Chris’ law practice is limited to domestic relations cases. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information and many other articles.
By Christopher C. Meyer 2010
This article is not about your personal determination. It is about your last will and testament. When should you review your will?
Generally speaking, you should review your will: whenever you have a major change in your personal situation; whenever you have a major change in your financial situation; or, annually, to determine if there are any changes in the law that should be reflected in your will. A divorce usually generates reasons to review your will because big personal and financial changes result.
If you already have a will, what happens to it if you get divorced? Married folks typically list their spouse as a beneficiary. Divorced folks rarely do this. After you are divorced, you usually don’t want much to do with a former spouse, much less gift them the property you have left after the divorce. Talk about adding insult to injury!
Fortunately for a lot of folks, the law assumes that you will forget to change your will after you are divorced and remove your now former spouse as a beneficiary. Absent an agreement between the parties or a Court order, a divorce invalidates testamentary (will) gifts to former spouses. The same is true for powers of attorney, insurance beneficiary designations, and pay on death designations for various accounts. The same is also true for folks who never had a will. If your estate passes via intestate succession, it is not going to a former spouse.
Situations may arise where there are good reasons to maintain a former spouse as a beneficiary in a will. An example might be to insure continued maintenance payments after a long-term marriage. The best practice in such instances is to make a new will after the divorce.
After you have exited from the marriage zone, you should make a new will. If you don’t, and your former spouse is your only beneficiary, when you pass away your property will be distributed according to the plan the legislature has determined for such situations (intestate succession) and involves your property being distributed to your closest blood relations.
This article is for informational purposes only and does not constitute legal advice about your case.
Chris Meyer is an attorney practicing family law in Northern El Paso County. Chris’ law practice is limited to domestic relations cases. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information and many other articles.
Tuesday, May 4, 2010
Military Retirement
THE MARRRIAGE ZONE: MILITARY RETIREMENT
By Christopher C. Meyer copyright 2010
A lot of military and former military folks live in our area. It is not surprising that I am often asked “If I get divorced, will I get part of my spouse’s military retirement?” Fortunately for the person posing the question, the answer is yes, you will receive part of your spouse’s military retirement if you were married to your spouse during at least part of the time your spouse was serving in the military.
Military retirement benefits, like civilian retirement benefits, are marital property to the extent they are earned during the marriage. Marital property will be divided between the parties by the Court in a divorce.
Military retirement, or “disposable retired pay”, is divided using a formula: months of marriage during military service are divided by the total months of military service; disposable retired pay is then multiplied by this fraction to arrive at the total marital portion of the disposable retired pay. Fifty percent of the total marital portion is then typically allocated to the non-military spouse.
For example: military spouse has 252 months (21 years) of military service; the parties were married for 216 months (18 years) during that military service. In this example the disposable retired pay is $2000 per month. Therefore, the marital portion of the retirement is $1714.28 per month (216 ÷ 252 × $2000). The non-military spouse’s share will be $857.14 per month ($1714.28 ÷ 2), and the military spouse’s share will be $1142.86 ($2000 – $857.14). Sorry about all the math, but it may be useful to you if you need to crunch some numbers.
If a divorce happens prior to retirement, some provision should be made to protect the non-military spouse in the event the military spouse should die. Payment of military retirement ceases upon the death of the retiree. A survivor benefit plan (SBP) is available through the military, or life insurance can be purchased to cover the amount of the anticipated retirement funds. Either method will insure that the non-military spouse continues to receive their share of the retirement after the retiree dies.
Keep in mind that flexible and creative solutions can be substituted for the actual division of the military retirement in certain instances when the parties agree. For example, a lump sum payment calculated on the present value of the military retirement can be substituted for an actual division of the retirement.
You may have heard of the “ten year rule”. Many mistake this rule to mean that the parties have to have been married for ten years during the military service to be eligible to receive a portion of the retirement in a divorce. This rule only means that the parties must have been married for ten years during the military service in order for the non-military spouse to paid their portion of the retirement directly from the military (DFAS). If the parties are married for less than ten years during the military service, the military spouse pays the non-military spouse directly, rather than the payment coming from DFAS.
Make sure you cover all your bases when you exit from the marriage zone, and don’t forget to arrange to receive your fair share of your spouse’s military retirement.
This article is for informational purposes only and does not constitute legal advice about your case.
Chris Meyer is an attorney practicing family law in Northern El Paso County. Chris’ law practice is limited to domestic relations cases. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information and many other articles.
By Christopher C. Meyer copyright 2010
A lot of military and former military folks live in our area. It is not surprising that I am often asked “If I get divorced, will I get part of my spouse’s military retirement?” Fortunately for the person posing the question, the answer is yes, you will receive part of your spouse’s military retirement if you were married to your spouse during at least part of the time your spouse was serving in the military.
Military retirement benefits, like civilian retirement benefits, are marital property to the extent they are earned during the marriage. Marital property will be divided between the parties by the Court in a divorce.
Military retirement, or “disposable retired pay”, is divided using a formula: months of marriage during military service are divided by the total months of military service; disposable retired pay is then multiplied by this fraction to arrive at the total marital portion of the disposable retired pay. Fifty percent of the total marital portion is then typically allocated to the non-military spouse.
For example: military spouse has 252 months (21 years) of military service; the parties were married for 216 months (18 years) during that military service. In this example the disposable retired pay is $2000 per month. Therefore, the marital portion of the retirement is $1714.28 per month (216 ÷ 252 × $2000). The non-military spouse’s share will be $857.14 per month ($1714.28 ÷ 2), and the military spouse’s share will be $1142.86 ($2000 – $857.14). Sorry about all the math, but it may be useful to you if you need to crunch some numbers.
If a divorce happens prior to retirement, some provision should be made to protect the non-military spouse in the event the military spouse should die. Payment of military retirement ceases upon the death of the retiree. A survivor benefit plan (SBP) is available through the military, or life insurance can be purchased to cover the amount of the anticipated retirement funds. Either method will insure that the non-military spouse continues to receive their share of the retirement after the retiree dies.
Keep in mind that flexible and creative solutions can be substituted for the actual division of the military retirement in certain instances when the parties agree. For example, a lump sum payment calculated on the present value of the military retirement can be substituted for an actual division of the retirement.
You may have heard of the “ten year rule”. Many mistake this rule to mean that the parties have to have been married for ten years during the military service to be eligible to receive a portion of the retirement in a divorce. This rule only means that the parties must have been married for ten years during the military service in order for the non-military spouse to paid their portion of the retirement directly from the military (DFAS). If the parties are married for less than ten years during the military service, the military spouse pays the non-military spouse directly, rather than the payment coming from DFAS.
Make sure you cover all your bases when you exit from the marriage zone, and don’t forget to arrange to receive your fair share of your spouse’s military retirement.
This article is for informational purposes only and does not constitute legal advice about your case.
Chris Meyer is an attorney practicing family law in Northern El Paso County. Chris’ law practice is limited to domestic relations cases. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information and many other articles.
Tuesday, February 23, 2010
Valuation of the Marital Residence
THE MARRIAGE ZONE: What is Your Home Worth?
By
Christopher C. Meyer and Ruth Bolas
January 2010
Your home is often your biggest financial asset. What your home is actually worth can be a major issue in a divorce case. The following discussion of home valuation methods is not limited to the family law context.
There are several ways of determining the value of your home. There is the “guesstimate” method, too often used by homeowners. This can result in erroneous conclusions due to faulty real estate data. Homeowners are not professional evaluators. Many of the valuation systems available to the public have incorrect data. Two other valuation methods that are often used are appraisals and comparative market analyses (CMAs). An appraisal is performed by a certified professional appraiser. A CMA is performed by a licensed real estate broker.
An appraiser analyzes recent sales of other houses and makes standard adjustments for differences between the sold houses and your house in order to arrive at the value of your house. A CMA involves an analysis of active, pending, and sold listings, original list price, final sold price, days on the market, and seller concessions involved, such as payment of a portion of the buyer’s closing costs.
The valuation method that is best for you may depend on practical matters such as the ultimate use of the evaluation. If a Judge is going to determine the value of your home, an appraisal may be preferable to a CMA. However, there is a trend for more acceptance of CMAs by Judges. A lender will demand an appraisal. Appraisals cost money (starting at around $350). Many real estate professionals offer CMAs for no charge.
The most accurate method will depend upon the evaluator. The results provided by a well-experienced professional appraiser and a similarly experienced real estate broker should be very similar. However, a real estate broker who lives and works in your community may have a better grasp of the market value of your house than an appraiser who does not live or have experience in your community. Similarly, an appraiser who lives and works in your community may be more accurate regarding your home than a real estate broker who lives and works in Fort Collins.
Good luck with your home valuation and remember that both an appraisal and a CMA are vastly superior to a guesstimate. Keep in mind that what your home is worth to you is not necessarily its market value. The market value, whether determined by an appraiser or a realtor, is simply the price your home is likely to sell for in the current market. You should also keep in mind that savvy buyers working with a realtor will almost always get a CMA before they make an offer!
This article is for informational purposes only and does not constitute legal advice about your case.
Chris Meyer is an attorney practicing family law in Northern El Paso County. Chris’ law practice is limited to domestic relations cases. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information and many other articles.
Ruth Bolas is a licensed Real Estate Broker with Keller Williams and is also an attorney. She grew up in the Monument area and serves the Front Range specializing in working with buyers as well as home sales and short sales. Ruth Bolas can be reached at ruthbolas@msn.com or 719-488-3026 or 303-437-6010.
By
Christopher C. Meyer and Ruth Bolas
January 2010
Your home is often your biggest financial asset. What your home is actually worth can be a major issue in a divorce case. The following discussion of home valuation methods is not limited to the family law context.
There are several ways of determining the value of your home. There is the “guesstimate” method, too often used by homeowners. This can result in erroneous conclusions due to faulty real estate data. Homeowners are not professional evaluators. Many of the valuation systems available to the public have incorrect data. Two other valuation methods that are often used are appraisals and comparative market analyses (CMAs). An appraisal is performed by a certified professional appraiser. A CMA is performed by a licensed real estate broker.
An appraiser analyzes recent sales of other houses and makes standard adjustments for differences between the sold houses and your house in order to arrive at the value of your house. A CMA involves an analysis of active, pending, and sold listings, original list price, final sold price, days on the market, and seller concessions involved, such as payment of a portion of the buyer’s closing costs.
The valuation method that is best for you may depend on practical matters such as the ultimate use of the evaluation. If a Judge is going to determine the value of your home, an appraisal may be preferable to a CMA. However, there is a trend for more acceptance of CMAs by Judges. A lender will demand an appraisal. Appraisals cost money (starting at around $350). Many real estate professionals offer CMAs for no charge.
The most accurate method will depend upon the evaluator. The results provided by a well-experienced professional appraiser and a similarly experienced real estate broker should be very similar. However, a real estate broker who lives and works in your community may have a better grasp of the market value of your house than an appraiser who does not live or have experience in your community. Similarly, an appraiser who lives and works in your community may be more accurate regarding your home than a real estate broker who lives and works in Fort Collins.
Good luck with your home valuation and remember that both an appraisal and a CMA are vastly superior to a guesstimate. Keep in mind that what your home is worth to you is not necessarily its market value. The market value, whether determined by an appraiser or a realtor, is simply the price your home is likely to sell for in the current market. You should also keep in mind that savvy buyers working with a realtor will almost always get a CMA before they make an offer!
This article is for informational purposes only and does not constitute legal advice about your case.
Chris Meyer is an attorney practicing family law in Northern El Paso County. Chris’ law practice is limited to domestic relations cases. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information and many other articles.
Ruth Bolas is a licensed Real Estate Broker with Keller Williams and is also an attorney. She grew up in the Monument area and serves the Front Range specializing in working with buyers as well as home sales and short sales. Ruth Bolas can be reached at ruthbolas@msn.com or 719-488-3026 or 303-437-6010.
Wednesday, January 20, 2010
Short Sale Of The Marital Home
THE MARRIAGE ZONE: Short Sale Of The Marital Home
By
Christopher C. Meyer and Ruth Bolas
copyright November 2009
What happens when you are getting divorced and your house is worth less than the loans associated with it? Is a short sale a potential solution?
A significant number of people who purchased or refinanced homes in the last few years are upside down in their homes. They owe more on the house than it is worth. In a divorce, the assets and debts are going to be divided between the parties. If the house sells for a net loss, that debt is going to be divided between the parties. Is there some way to avoid or minimize this debt without foreclosure or bankruptcy?
A short sale may be the perfect solution. Although it is not ‘short’ in duration, the short sale process involves a lender taking less or ‘short’ of what they are owed. In most circumstances there are two loans – a first and a second. To facilitate a short sale, the realtor would work with the lenders to negotiate acceptance of a lesser amount than what is owed. For example:
1st Mortgage $200,000
2nd Mortgage $50,000
Market Value $210,000
If the home could be sold for $210,000, then the first lender in this example could be paid in full and the second would have to accept a loss. Keep in mind this example does not include the costs associated with the transaction including commissions, title work, tax pro-rations, and closing fees (that are all paid by the lenders, not the home owners).If the property were foreclosed on, the second lender would get nothing, so better to accept a loss and recover some money in a short sale versus nothing in a foreclosure. Even where a mortgage holder in first position needs to accept less than what they are owed they typically will because in most foreclosures they will end up taking the property back for later sale as a bank-owned property. Banks make money by making loans – not by owning real estate.
Residual risk in a foreclosure or short sale is that the lender(s) could pursue a judgment for the ‘deficiency’ or amount still owed after the short sale or foreclosure, but this is not the general practice. In short sales, lenders used to issue a 1099 to the home owners for the deficiency, but now, with new legislation, in most situations the deficiency is not considered taxable income to the sellers/homeowners.
The lender’s motivation to accept a short sale is to get money quickly from the sale and avoid the expense of a foreclosure sale. The homeowners’ motivation is to avoid the adverse effect of a foreclosure on their credit ratings. When homeowners can demonstrate a legitimate hardship such as divorce, financial problems, loss of job, or health problems, lenders are very likely to work with them to facilitate a short sale.
If you struggling financially and you are upside down in your house, you may be able to avoid foreclosure with a short sale. A short sale is a complicated transaction and it can take a long time, but the credit damage is significantly less than that resulting from a foreclosure.
A short sale can be an effective damage control device for homeowners, but it requires patience and expertise. Keep this in mind if you are trying to minimize your losses as you exit from the marriage zone.
This article is for informational purposes only and does not constitute legal advice about your case.
Chris Meyer is an attorney practicing family law in Northern El Paso County. Chris’ law practice is limited to domestic relations cases. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information and many other articles.
Ruth Bolas is a licensed Real Estate Broker with Keller Williams and is also an attorney. She grew up in the Monument area and serves the Front Range specializing in working with buyers as well as home sales and short sales. Ruth Bolas can be reached at ruthbolas@msn.com or 719-488-3026 or 303-437-6010.
Tuesday, June 16, 2009
Dividing 401k Accounts In Divorce
The Marriage Zone: Dividing 401k Accounts In Divorce
By Christopher C. Meyer
© June 2009
What happens to your 401k account or your spouse’s 401k account if you get divorced? This question comes up routinely since the 401k has largely displaced the traditional pension as a retirement vehicle.
When dividing a 401k account in a divorce, just like with any other account, the first question that must be asked is whether the 401k is marital property. Assuming that the 401k funds were all earned during the marriage, the account is marital and subject to division by the Court. Marital property 401k accounts are usually divided equally between the parties in a divorce.
Since a 401k will be in only one spouse’s name, how does the other spouse get their share in a divorce? Most 401k plan providers like Fidelity require a “qualified domestic relations order” (QDRO) in order to divide the account. The QDRO is not difficult to get. The parties stipulate to the language of the order and the Court reviews and signs it usually within a few days of filing with the Court. The 401k account providers are very particular about the precise language they require to be in the QDRO. There are attorneys who specialize in drafting QDROs and your attorney will likely use the services of such a specialist to draft your QDRO.
After the Judge signs the QDRO, a certified copy of the signed QDRO is sent to the plan provider who divides the account as ordered. The plan provider often simply creates a new account for the other spouse and transfers half the balance to that new account in the other spouse’s name. So, instead of one account in John’s name with a balance of $100,000, there will now be one account in John’s name with a balance of $50,000 and one account in Mary’s name with a balance of $50,000.
Folks often wonder if there are any tax consequences if a 401k account is divided in a divorce. A 401k is a tax-deferred retirement account. However, there are no tax consequences of merely dividing a 401k in a divorce pursuant to a Court order. Keep in mind that there may be tax consequences after a divorce if you withdraw funds from a 401k before you are retired.
Just like any other marital property account, a 401k account can be divided in a divorce, but this will usually require some complicated paperwork.
This article is for informational purposes only and does not constitute legal advice about your case.
Chris Meyer is an attorney practicing family law in Northern El Paso County. Chris’ law practice is limited to domestic relations cases. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information and many other articles.
By Christopher C. Meyer
© June 2009
What happens to your 401k account or your spouse’s 401k account if you get divorced? This question comes up routinely since the 401k has largely displaced the traditional pension as a retirement vehicle.
When dividing a 401k account in a divorce, just like with any other account, the first question that must be asked is whether the 401k is marital property. Assuming that the 401k funds were all earned during the marriage, the account is marital and subject to division by the Court. Marital property 401k accounts are usually divided equally between the parties in a divorce.
Since a 401k will be in only one spouse’s name, how does the other spouse get their share in a divorce? Most 401k plan providers like Fidelity require a “qualified domestic relations order” (QDRO) in order to divide the account. The QDRO is not difficult to get. The parties stipulate to the language of the order and the Court reviews and signs it usually within a few days of filing with the Court. The 401k account providers are very particular about the precise language they require to be in the QDRO. There are attorneys who specialize in drafting QDROs and your attorney will likely use the services of such a specialist to draft your QDRO.
After the Judge signs the QDRO, a certified copy of the signed QDRO is sent to the plan provider who divides the account as ordered. The plan provider often simply creates a new account for the other spouse and transfers half the balance to that new account in the other spouse’s name. So, instead of one account in John’s name with a balance of $100,000, there will now be one account in John’s name with a balance of $50,000 and one account in Mary’s name with a balance of $50,000.
Folks often wonder if there are any tax consequences if a 401k account is divided in a divorce. A 401k is a tax-deferred retirement account. However, there are no tax consequences of merely dividing a 401k in a divorce pursuant to a Court order. Keep in mind that there may be tax consequences after a divorce if you withdraw funds from a 401k before you are retired.
Just like any other marital property account, a 401k account can be divided in a divorce, but this will usually require some complicated paperwork.
This article is for informational purposes only and does not constitute legal advice about your case.
Chris Meyer is an attorney practicing family law in Northern El Paso County. Chris’ law practice is limited to domestic relations cases. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information and many other articles.
Tuesday, February 17, 2009
The Sworn Financial Statement
The Marriage Zone: The Sworn Financial Statement
By Christopher C. Meyer
©July 2008
In a previous article I described the mandatory financial disclosure requirements in domestic relations cases. The most basic mandatory financial disclosure requirement is the obligation of both parties to exchange and file sworn financial statements. This requirement applies to all initial and post decree domestic relations cases that involve financial matters, such as child support, maintenance (alimony), and property division. The sworn financial statement is a seven-page form. You will enter your income, expense, asset, and debt information in the spaces provided.
The sworn financial statement provides each party and the Court with the basic information that is needed to determine the party’s financial status. This form is an extremely useful document. It is the prime source for quick reference as to what the parties can afford on a monthly basis and their net worth. The sworn financial statement is intended to be an accurate snapshot of each party’s financial status as of the date that the party signs the document. Your signature must be notarized.
The sworn financial statement requires a comprehensive listing of the parties’ monthly expenses. It shows the monthly budget for the parties. The income and expense information from the sworn financial statement will be used to determine child support and maintenance (alimony). After the form is completed, it is not unusual for parties to discover that their expenses exceed their incomes.
The sworn financial statement can also be used as a tool for projecting future budgetary needs. Most people’s financial situations change significantly after they are divorced. They will have less money to live on. You can use the sworn financial statement to project what your future budget will look like. You can use the form to project your future financial needs even if you are not involved in a court case.
You can download a copy of the sworn financial statement for no cost from the Colorado Courts website (www.courts.state.co.us.). You will not enjoy filling out this form. However, it is an extremely useful exercise because it makes you come to terms with your financial realities. It is also one of the best tools available for projecting your future financial status. Instead of worrying about your financial future, do something about it! Download the sworn financial statement, fill it out, and see what your future looks like.
This article is for informational purposes and does not constitute legal advice concerning your case.
Chris Meyer is an attorney practicing family law in Monument. Chris’s practice is limited to domestic relations cases. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Please see his website (www.cmeyerlaw.com) for additional divorce and family law information.
By Christopher C. Meyer
©July 2008
In a previous article I described the mandatory financial disclosure requirements in domestic relations cases. The most basic mandatory financial disclosure requirement is the obligation of both parties to exchange and file sworn financial statements. This requirement applies to all initial and post decree domestic relations cases that involve financial matters, such as child support, maintenance (alimony), and property division. The sworn financial statement is a seven-page form. You will enter your income, expense, asset, and debt information in the spaces provided.
The sworn financial statement provides each party and the Court with the basic information that is needed to determine the party’s financial status. This form is an extremely useful document. It is the prime source for quick reference as to what the parties can afford on a monthly basis and their net worth. The sworn financial statement is intended to be an accurate snapshot of each party’s financial status as of the date that the party signs the document. Your signature must be notarized.
The sworn financial statement requires a comprehensive listing of the parties’ monthly expenses. It shows the monthly budget for the parties. The income and expense information from the sworn financial statement will be used to determine child support and maintenance (alimony). After the form is completed, it is not unusual for parties to discover that their expenses exceed their incomes.
The sworn financial statement can also be used as a tool for projecting future budgetary needs. Most people’s financial situations change significantly after they are divorced. They will have less money to live on. You can use the sworn financial statement to project what your future budget will look like. You can use the form to project your future financial needs even if you are not involved in a court case.
You can download a copy of the sworn financial statement for no cost from the Colorado Courts website (www.courts.state.co.us.). You will not enjoy filling out this form. However, it is an extremely useful exercise because it makes you come to terms with your financial realities. It is also one of the best tools available for projecting your future financial status. Instead of worrying about your financial future, do something about it! Download the sworn financial statement, fill it out, and see what your future looks like.
This article is for informational purposes and does not constitute legal advice concerning your case.
Chris Meyer is an attorney practicing family law in Monument. Chris’s practice is limited to domestic relations cases. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Please see his website (www.cmeyerlaw.com) for additional divorce and family law information.
Protecting Your Credit In Divorce
The Marriage Zone- Protecting Your Credit in Divorce
By
Christopher C. Meyer
© February 2008
If you are planning to get a divorce or you are already involved in the divorce process, it is important to protect your credit from potential damage by your spouse. For example, if you have joint accounts, your spouse may be able to damage your credit even if he or she is ordered by the court to assume sole responsibility for the account.
What happens if a court orders one of the parties to be solely responsible for a joint credit account and that party defaults? The creditor is going to come after the other party, even though the court has ordered the first party to pay. How can this be? The contract clause of the United States Constitution prevents courts from interfering with contractual obligations. Credit is a contractual obligation between the creditor and the debtor (you). If you have a joint account with your spouse, and your spouse defaults on a court-ordered credit obligation, the creditor will look to you to pay, and your credit rating will suffer. A bankruptcy court is the only court that can affect your contractual relationship with a creditor.
Since you may be stuck paying for a joint debt, it makes sense to try to avoid placing yourself at such risk. If you are planning for a divorce, get all your joint credit accounts changed into separate accounts, you will need your spouse’s permission to do this. If you are already involved in the divorce process, eliminate as much of the joint debt as you can.
The same is true for joint bank accounts. If your spouse overdraws on a joint account, guess who the bank will expect to pay the overage – you!
Once you are divorced, you will be a single person. You will want to be able to the only person responsible for your credit rating. It pays to take the necessary steps to put yourself in control.
Good luck to you as you leave the marriage zone, and remember to get rid of those joint accounts!
Chris Meyer is an attorney practicing family law in Monument. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information.
By
Christopher C. Meyer
© February 2008
If you are planning to get a divorce or you are already involved in the divorce process, it is important to protect your credit from potential damage by your spouse. For example, if you have joint accounts, your spouse may be able to damage your credit even if he or she is ordered by the court to assume sole responsibility for the account.
What happens if a court orders one of the parties to be solely responsible for a joint credit account and that party defaults? The creditor is going to come after the other party, even though the court has ordered the first party to pay. How can this be? The contract clause of the United States Constitution prevents courts from interfering with contractual obligations. Credit is a contractual obligation between the creditor and the debtor (you). If you have a joint account with your spouse, and your spouse defaults on a court-ordered credit obligation, the creditor will look to you to pay, and your credit rating will suffer. A bankruptcy court is the only court that can affect your contractual relationship with a creditor.
Since you may be stuck paying for a joint debt, it makes sense to try to avoid placing yourself at such risk. If you are planning for a divorce, get all your joint credit accounts changed into separate accounts, you will need your spouse’s permission to do this. If you are already involved in the divorce process, eliminate as much of the joint debt as you can.
The same is true for joint bank accounts. If your spouse overdraws on a joint account, guess who the bank will expect to pay the overage – you!
Once you are divorced, you will be a single person. You will want to be able to the only person responsible for your credit rating. It pays to take the necessary steps to put yourself in control.
Good luck to you as you leave the marriage zone, and remember to get rid of those joint accounts!
Chris Meyer is an attorney practicing family law in Monument. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information.
Divorce Property Division - Basics
IT’S THE LAW: DIVORCE PROPERTY DIVISION – BASICS
By Chris Meyer August 2006
In Colorado marital property is divided in a divorce or legal separation by means of “Equitable Distribution”. “Equitable” does not necessarily mean “Equal”, but for most purposes, and absent unusual circumstances, it is useful to assume that marital property will be divided 50/50 between the parties.
The question then becomes what is the “marital property” to be divided. Marital property is all property acquired during the marriage such as the parties’ earnings and things acquired with such earnings. However, inheritances and certain gifts acquired during the marriage are not considered marital.
“Separate property” is property acquired prior to the marriage, or inheritance or certain gifts acquired during the marriage. The Court has no power to divide separate property. However, any appreciation of separate property during the marriage is marital.
Here is a simple example. A married couple save some earnings during the marriage and buy a house. The parties pay the mortgage with the husband’s earnings. The wife receives an inheritance during the marriage and is careful to maintain this bequest in a separate mutual fund account in her name only. The equity in the house is marital, as is any appreciation included in that equity. The amount of the bequest to the wife is her separate property, but any appreciation of the account is marital.
In most instances, determining what is marital and what is separate property is not difficult. However, the analysis can become complicated in some situations, especially regarding changes to title to real property during the marriage. If you own separate real property titled in your name only but change the title to joint tenants during the marriage (a common occurrence), you may have gifted one half the value of the property to your spouse. For example, Mary owns a condo in her name only, but changes the title to joint tenants after she marries John. John may now be entitled to one-half the value of the condo.
How you title marital property is not critical. For example, the parties buy a car during the marriage with money earned during the marriage, but place the title in the husband’s name only. The car is still marital property.
Even when determining what is marital and what is separate is relatively easy, calculating the proper shares can be difficult. This is true for retirement accounts and pensions earned both prior to and during the marriage. Special Court orders may have to be drafted to accurately divide such assests.
Property division law in a divorce is the same as other law. You must remember that: you may not understand the law; you may not like it; and you may not think its fair; but it’s the law!
Chris Meyer is an attorney practicing family law in Monument. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information.
By Chris Meyer August 2006
In Colorado marital property is divided in a divorce or legal separation by means of “Equitable Distribution”. “Equitable” does not necessarily mean “Equal”, but for most purposes, and absent unusual circumstances, it is useful to assume that marital property will be divided 50/50 between the parties.
The question then becomes what is the “marital property” to be divided. Marital property is all property acquired during the marriage such as the parties’ earnings and things acquired with such earnings. However, inheritances and certain gifts acquired during the marriage are not considered marital.
“Separate property” is property acquired prior to the marriage, or inheritance or certain gifts acquired during the marriage. The Court has no power to divide separate property. However, any appreciation of separate property during the marriage is marital.
Here is a simple example. A married couple save some earnings during the marriage and buy a house. The parties pay the mortgage with the husband’s earnings. The wife receives an inheritance during the marriage and is careful to maintain this bequest in a separate mutual fund account in her name only. The equity in the house is marital, as is any appreciation included in that equity. The amount of the bequest to the wife is her separate property, but any appreciation of the account is marital.
In most instances, determining what is marital and what is separate property is not difficult. However, the analysis can become complicated in some situations, especially regarding changes to title to real property during the marriage. If you own separate real property titled in your name only but change the title to joint tenants during the marriage (a common occurrence), you may have gifted one half the value of the property to your spouse. For example, Mary owns a condo in her name only, but changes the title to joint tenants after she marries John. John may now be entitled to one-half the value of the condo.
How you title marital property is not critical. For example, the parties buy a car during the marriage with money earned during the marriage, but place the title in the husband’s name only. The car is still marital property.
Even when determining what is marital and what is separate is relatively easy, calculating the proper shares can be difficult. This is true for retirement accounts and pensions earned both prior to and during the marriage. Special Court orders may have to be drafted to accurately divide such assests.
Property division law in a divorce is the same as other law. You must remember that: you may not understand the law; you may not like it; and you may not think its fair; but it’s the law!
Chris Meyer is an attorney practicing family law in Monument. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information.
Mandatory Financial Disclosure
The Marriage Zone: Mandatory Financial Disclosure
By Christopher C. Meyer
©July 2008
If you are thinking about getting a divorce or legal separation and you are concerned about whether the other party will provide you with financial information or how much information you’re going to have to provide to the other party, you must understand that Court rules require mandatory financial disclosure. As a practical matter, this means that you cannot hide or fail to disclose information regarding your financial situation.
Each party has an affirmative obligation to provide the other party with a sworn financial statement that includes all the information regarding your accounts and expenses. You also have an affirmative obligation to provide supporting information such as income documentation, tax returns, credit card statements, and bank and financial account information. “Affirmative obligation” means that you are required to provide the information without the other party having to ask for it. The Court will require that you exchange the mandatory financial disclosures prior to the initial status conference, that usually is scheduled within 40 days of the petition being filed.
You are under a continuing duty to supplement or amend your financial disclosures in a timely manner. If, for example, your income changes after you have provided your mandatory disclosures, you have to inform the other party of the change and provide documentation as well.
It is important to note that the parties are not limited to the information covered by the mandatory disclosure requirement. The parties are free to request additional information regarding the other party’s financial situation. For example, parties commonly request bank and financial account information covering years prior to filing the petition.
What happens if you fail to provide the mandatory financial disclosures? If you fail to provide the information and you have the ability to obtain it, the Court will impose appropriate sanctions. Don’t even think about trying to hide any assets. The other party will eventually discover it, your credibility will be irreparably damaged, and your case will suffer.
Remember that in the marriage zone, the rules require that the parties and the Court have the best financial information available in order that the parties and the Court can make the best decisions possible based on that information.
This article is for informational purposes and does not constitute legal advice concerning your case.
Chris Meyer is an attorney practicing family law in Monument. Chris’ law practice is limited to domestic relations cases. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information.
By Christopher C. Meyer
©July 2008
If you are thinking about getting a divorce or legal separation and you are concerned about whether the other party will provide you with financial information or how much information you’re going to have to provide to the other party, you must understand that Court rules require mandatory financial disclosure. As a practical matter, this means that you cannot hide or fail to disclose information regarding your financial situation.
Each party has an affirmative obligation to provide the other party with a sworn financial statement that includes all the information regarding your accounts and expenses. You also have an affirmative obligation to provide supporting information such as income documentation, tax returns, credit card statements, and bank and financial account information. “Affirmative obligation” means that you are required to provide the information without the other party having to ask for it. The Court will require that you exchange the mandatory financial disclosures prior to the initial status conference, that usually is scheduled within 40 days of the petition being filed.
You are under a continuing duty to supplement or amend your financial disclosures in a timely manner. If, for example, your income changes after you have provided your mandatory disclosures, you have to inform the other party of the change and provide documentation as well.
It is important to note that the parties are not limited to the information covered by the mandatory disclosure requirement. The parties are free to request additional information regarding the other party’s financial situation. For example, parties commonly request bank and financial account information covering years prior to filing the petition.
What happens if you fail to provide the mandatory financial disclosures? If you fail to provide the information and you have the ability to obtain it, the Court will impose appropriate sanctions. Don’t even think about trying to hide any assets. The other party will eventually discover it, your credibility will be irreparably damaged, and your case will suffer.
Remember that in the marriage zone, the rules require that the parties and the Court have the best financial information available in order that the parties and the Court can make the best decisions possible based on that information.
This article is for informational purposes and does not constitute legal advice concerning your case.
Chris Meyer is an attorney practicing family law in Monument. Chris’ law practice is limited to domestic relations cases. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information.
Joint Titles
The Marriage Zone – Joint Titles
by
Christopher C. Meyer
June 2008
If you are thinking about getting married or divorced, you may have questions about the importance of title to property. These questions usually involve real estate, vehicles, and financial accounts.
If you already own real estate, such as a home, and you are planning to get married, should you place the property in joint title with your new spouse? If you are going to stay married forever, it doesn’t matter much, but, keeping in mind that the divorce rate is around 50%, you might want to give serious consideration to this question. Welcome to the Marriage Zone!
In Colorado, if you change the title to real property that is titled in your sole name to a joint title after you are married, you have just given half the net equity in the property (market value minus any loans secured by the property) to your spouse. The only sure-fire way to avoid this is to have a valid agreement with your spouse saying that you are excluding the property from being marital property. If you acquire property during the marriage through your efforts, such as from money earned from your job, the title to the property is not important. For example, you and your spouse (you are married) save money you earn during the marriage and buy a home. You title the home in your name only. This does not mean that you get all the equity in the home in the event of divorce. It is marital property and will be distributed to you and your spouse in a divorce.
The preceding analysis applies equally to property that is not real estate. If you own a car in your sole name before marriage, but put it in a joint title after you are married, you have given half the net equity in the car to your spouse. If you buy a car during the marriage with money you earn during the marriage, but title the car in your sole name, the net equity will be distributed between you and your spouse in a divorce.
The same treatment will be given to mutual funds and other financial accounts. If you change your previously separately registered accounts to joint registration after your marriage, you have given your spouse half of the account value. If you keep the accounts separately registered, the pre-marriage basis in the account will not become marital property. If you open an account during the marriage with funds that you earned during the marriage, but title the account in your sole name, the account will be distributed between you and your wife in a divorce.
Good luck with your marriage, and be alert to the effects of title to property in the Marriage Zone.
This article is for informational purposes and does not constitute legal advice concerning your case.
Chris Meyer is an attorney practicing family law in Monument. His law practice is limited to domestic relations cases. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information.
by
Christopher C. Meyer
June 2008
If you are thinking about getting married or divorced, you may have questions about the importance of title to property. These questions usually involve real estate, vehicles, and financial accounts.
If you already own real estate, such as a home, and you are planning to get married, should you place the property in joint title with your new spouse? If you are going to stay married forever, it doesn’t matter much, but, keeping in mind that the divorce rate is around 50%, you might want to give serious consideration to this question. Welcome to the Marriage Zone!
In Colorado, if you change the title to real property that is titled in your sole name to a joint title after you are married, you have just given half the net equity in the property (market value minus any loans secured by the property) to your spouse. The only sure-fire way to avoid this is to have a valid agreement with your spouse saying that you are excluding the property from being marital property. If you acquire property during the marriage through your efforts, such as from money earned from your job, the title to the property is not important. For example, you and your spouse (you are married) save money you earn during the marriage and buy a home. You title the home in your name only. This does not mean that you get all the equity in the home in the event of divorce. It is marital property and will be distributed to you and your spouse in a divorce.
The preceding analysis applies equally to property that is not real estate. If you own a car in your sole name before marriage, but put it in a joint title after you are married, you have given half the net equity in the car to your spouse. If you buy a car during the marriage with money you earn during the marriage, but title the car in your sole name, the net equity will be distributed between you and your spouse in a divorce.
The same treatment will be given to mutual funds and other financial accounts. If you change your previously separately registered accounts to joint registration after your marriage, you have given your spouse half of the account value. If you keep the accounts separately registered, the pre-marriage basis in the account will not become marital property. If you open an account during the marriage with funds that you earned during the marriage, but title the account in your sole name, the account will be distributed between you and your wife in a divorce.
Good luck with your marriage, and be alert to the effects of title to property in the Marriage Zone.
This article is for informational purposes and does not constitute legal advice concerning your case.
Chris Meyer is an attorney practicing family law in Monument. His law practice is limited to domestic relations cases. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has additional divorce and family law information.
Debts in Divorce
THE MARRIAGE ZONE
Debts In Divorce
By
Christopher C. Meyer, Esq. May 2007
How are debts handled in a divorce? Debts are handled in the same manner as assets in terms of classification as separate or marital. If the debt is marital, it will be divided between the parties. If the debt is separate, it is the sole responsibility of one of the parties.
What happens if one of the parties fails to pay the portion of the marital debt they have been ordered to pay? There are two aspects to this problem.
From the creditor’s perspective, it does not matter that one of the parties has been ordered to pay. The creditor can still go after the other party for the whole marital debt. This is due to the contract clause of the United States Constitution. The contract clause prohibits states from “impairing the obligation of contracts.” From your perspective, you will be required to pay. This may seem unfair, but it’s the law!
If you get stuck having to pay what your former spouse was ordered to pay, you do have a remedy. You can go after your former spouse and make them pay. This process is called “indemnification”. However, you can’t get blood from a stone, and your credit rating can get clobbered. All you may wind up with is an uncollectible judgment against your former spouse. Welcome to the marriage zone!
A way to avoid the deadbeat former spouse (DFS) syndrome is to construct your settlement so that as much debt as possible is paid off from the marital assets. Another method is to have the other party refinance the debt to have you removed from it. This often happens with regard to mortgages on homes. Insurance should also be considered for security purposes if you are concerned that the other party won’t be around to make all the payments.
It pays to give some thought to protecting yourself from a deadbeat former spouse before you get divorced. The debt you rightfully thought was someone else’s responsibility can rise up and bite you.
Chris Meyer is an attorney practicing family law in Monument. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has a lot of divorce and family law information.
Debts In Divorce
By
Christopher C. Meyer, Esq. May 2007
How are debts handled in a divorce? Debts are handled in the same manner as assets in terms of classification as separate or marital. If the debt is marital, it will be divided between the parties. If the debt is separate, it is the sole responsibility of one of the parties.
What happens if one of the parties fails to pay the portion of the marital debt they have been ordered to pay? There are two aspects to this problem.
From the creditor’s perspective, it does not matter that one of the parties has been ordered to pay. The creditor can still go after the other party for the whole marital debt. This is due to the contract clause of the United States Constitution. The contract clause prohibits states from “impairing the obligation of contracts.” From your perspective, you will be required to pay. This may seem unfair, but it’s the law!
If you get stuck having to pay what your former spouse was ordered to pay, you do have a remedy. You can go after your former spouse and make them pay. This process is called “indemnification”. However, you can’t get blood from a stone, and your credit rating can get clobbered. All you may wind up with is an uncollectible judgment against your former spouse. Welcome to the marriage zone!
A way to avoid the deadbeat former spouse (DFS) syndrome is to construct your settlement so that as much debt as possible is paid off from the marital assets. Another method is to have the other party refinance the debt to have you removed from it. This often happens with regard to mortgages on homes. Insurance should also be considered for security purposes if you are concerned that the other party won’t be around to make all the payments.
It pays to give some thought to protecting yourself from a deadbeat former spouse before you get divorced. The debt you rightfully thought was someone else’s responsibility can rise up and bite you.
Chris Meyer is an attorney practicing family law in Monument. Chris has been practicing law since 1977. He is a former prosecutor and is licensed to practice law in Colorado, Florida, California and Wisconsin. Chris can be contacted at 719-488-9395. Chris’s website (www.cmeyerlaw.com) has a lot of divorce and family law information.
Friday, August 1, 2008
Protecting Your Credit
If you are planning to get a divorce or you are already involved in the divorce process, it is important to protect your credit from potential damage by your spouse. For example, if you have joint accounts, your spouse may be able to damage your credit even if he or she is ordered by the court to assume sole responsibility for the account.
What happens if a court orders one of the parties to be solely responsible for a joint credit account and that party defaults? The creditor is going to come after the other party, even though the court has ordered the first party to pay. How can this be? The contract clause of the United States Constitution prevents courts from interfering with contractual obligations. Credit is a contractual obligation between the creditor and the debtor (you). If you have a joint account with your spouse, and your spouse defaults on a court-ordered credit obligation, the creditor will look to you to pay, and your credit rating will suffer. A bankruptcy court is the only court that can affect your contractual relationship with a creditor.
Since you may be stuck paying for a joint debt, it makes sense to try to avoid placing yourself at such risk. If you are planning for a divorce, get all your joint credit accounts changed into separate accounts, you will need your spouse’s permission to do this. If you are already involved in the divorce process, eliminate as much of the joint debt as you can.
The same is true for joint bank accounts. If your spouse overdraws on a joint account, guess who the bank will expect to pay the overage – you!
Once you are divorced, you will be a single person. You will want to be able to the only person responsible for your credit rating. It pays to take the necessary steps to put yourself in control.
Good luck to you as you leave the marriage zone, and remember to get rid of those joint accounts!
What happens if a court orders one of the parties to be solely responsible for a joint credit account and that party defaults? The creditor is going to come after the other party, even though the court has ordered the first party to pay. How can this be? The contract clause of the United States Constitution prevents courts from interfering with contractual obligations. Credit is a contractual obligation between the creditor and the debtor (you). If you have a joint account with your spouse, and your spouse defaults on a court-ordered credit obligation, the creditor will look to you to pay, and your credit rating will suffer. A bankruptcy court is the only court that can affect your contractual relationship with a creditor.
Since you may be stuck paying for a joint debt, it makes sense to try to avoid placing yourself at such risk. If you are planning for a divorce, get all your joint credit accounts changed into separate accounts, you will need your spouse’s permission to do this. If you are already involved in the divorce process, eliminate as much of the joint debt as you can.
The same is true for joint bank accounts. If your spouse overdraws on a joint account, guess who the bank will expect to pay the overage – you!
Once you are divorced, you will be a single person. You will want to be able to the only person responsible for your credit rating. It pays to take the necessary steps to put yourself in control.
Good luck to you as you leave the marriage zone, and remember to get rid of those joint accounts!
The Basics of Property Division in Divorce
In Colorado marital property is divided in a divorce or legal separation by means of “Equitable Distribution”. “Equitable” does not necessarily mean “Equal”, but for most purposes, and absent unusual circumstances, it is useful to assume that marital property will be divided 50/50 between the parties.
The question then becomes what is the “marital property” to be divided. Marital property is all property acquired during the marriage such as the parties’ earnings and things acquired with such earnings. However, inheritances and certain gifts acquired during the marriage are not considered marital.
“Separate property” is property acquired prior to the marriage, or inheritance or certain gifts acquired during the marriage. The Court has no power to divide separate property. However, any appreciation of separate property during the marriage is marital.
Here is a simple example. A married couple save some earnings during the marriage and buy a house. The parties pay the mortgage with the husband’s earnings. The wife receives an inheritance during the marriage and is careful to maintain this bequest in a separate mutual fund account in her name only. The equity in the house is marital, as is any appreciation included in that equity. The amount of the bequest to the wife is her separate property, but any appreciation of the account is marital.
In most instances, determining what is marital and what is separate property is not difficult. However, the analysis can become complicated in some situations, especially regarding changes to title to real property during the marriage. If you own separate real property titled in your name only but change the title to joint tenants during the marriage (a common occurrence), you may have gifted one half the value of the property to your spouse. For example, Mary owns a condo in her name only, but changes the title to joint tenants after she marries John. John may now be entitled to one-half the value of the condo.
How you title marital property is not critical. For example, the parties buy a car during the marriage with money earned during the marriage, but place the title in the husband’s name only. The car is still marital property.
Even when determining what is marital and what is separate is relatively easy, calculating the proper shares can be difficult. This is true for retirement accounts and pensions earned both prior to and during the marriage. Special Court orders may have to be drafted to accurately divide such assests.
Property division law in a divorce is the same as other law. You must remember that: you may not understand the law; you may not like it; and you may not think its fair; but It’s the Law!
The question then becomes what is the “marital property” to be divided. Marital property is all property acquired during the marriage such as the parties’ earnings and things acquired with such earnings. However, inheritances and certain gifts acquired during the marriage are not considered marital.
“Separate property” is property acquired prior to the marriage, or inheritance or certain gifts acquired during the marriage. The Court has no power to divide separate property. However, any appreciation of separate property during the marriage is marital.
Here is a simple example. A married couple save some earnings during the marriage and buy a house. The parties pay the mortgage with the husband’s earnings. The wife receives an inheritance during the marriage and is careful to maintain this bequest in a separate mutual fund account in her name only. The equity in the house is marital, as is any appreciation included in that equity. The amount of the bequest to the wife is her separate property, but any appreciation of the account is marital.
In most instances, determining what is marital and what is separate property is not difficult. However, the analysis can become complicated in some situations, especially regarding changes to title to real property during the marriage. If you own separate real property titled in your name only but change the title to joint tenants during the marriage (a common occurrence), you may have gifted one half the value of the property to your spouse. For example, Mary owns a condo in her name only, but changes the title to joint tenants after she marries John. John may now be entitled to one-half the value of the condo.
How you title marital property is not critical. For example, the parties buy a car during the marriage with money earned during the marriage, but place the title in the husband’s name only. The car is still marital property.
Even when determining what is marital and what is separate is relatively easy, calculating the proper shares can be difficult. This is true for retirement accounts and pensions earned both prior to and during the marriage. Special Court orders may have to be drafted to accurately divide such assests.
Property division law in a divorce is the same as other law. You must remember that: you may not understand the law; you may not like it; and you may not think its fair; but It’s the Law!
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