Proper Planning in Divorce for the Family Home | real estate divorce family home

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Proper Planning in Divorce for the Family Home
Written by:  Cheryl Nielsen, Certified Divorce Financial Analyst™, Forensic Real Estate Divorce Strategist™

The family home is often times the biggest financial asset in a divorce and for that reason it deserves the utmost consideration and planning. Unfortunately, some will cling to the idea of keeping the family home wearing emotional blinders not realizing they are setting themselves up to fail financially not having all the facts. They may be unaware of the true costs of maintaining the home. Or, that the foundation is built on an underlying tax bomb in the form of capital gains upon sale. They in essence don’t know what they don’t know. Often, it is the spouse that didn’t handle the finances during the marriage or pay the bills that is unfamiliar with the total costs to financially carry the house. Perhaps too they never sold a home before and don’t understand how capital gains work or that proper planning utilizing the divorce tax rules could mitigate the tax ramifications upon sale.

I have found a lack of proper planning in many divorce cases that fail to address all the scenarios and ramifications to bring clarity to the decision making process. After the divorce is over, some get the “wake-up call” too late–when they file taxes the following year after selling the family home. Now a divorce settlement may have a big chunk of money missing after they cut Uncle Sam in for capital gains. Another spouse may have benefited from a gross equity equalization and spared the tax consequence.

If one spouse is unwilling to part with the family home and this creates an impasse in reaching a settlement agreement, due diligence is needed to bring a dose of reality to the table. One spouse’s concern over a clean break from the jointly held mortgage (if your spouse can not qualify for a new loan) is valid. Maybe the numbers don’t add up. Maybe the spouse that wants to keep the family home will drain his or her financial resources (divorce settlement) setting him or her up to fail in the not so distant future. Especially after alimony or child support ends. The instability in your spouse’s financial future that keeps the home has the potential to impact your financial stability. In the event he or she defaults on a jointly held mortgage, your credit reputation could be impacted not to mention placing you in a situation to stabilize the home financially if the mortgage becomes in arrears. If your agreement is to sell after the youngest child reaches 18, where is the real estate market projected to be? A declining market can erode equity and if your agreement guarantees one of the spouses a set dollar amount, it could end up an uneven division.

So how can clarity be gained over the housing circumstance to show the financial reality of decisions with the family home? Clarity comes through knowledge and this can be achieved through some essential real estate planning that explores all the options for the family home and the consequences of each option. A professional that could help with this is a 1) Certified Divorce Financial Analyst™ (CDFA™) & 2) Forensic Real Estate Divorce Strategist™.

Here are the basic considerations that need to be addressed:

Determine the total cost to maintain the home. This includes the mortgage(s) property taxes, insurance, home owner association dues, utilities, pool cleaning, housekeeping, maintenance, lawn care, etc. It’s easy to plan financially just on the mortgage payment, but the other costs associated with keeping the home can add up quickly and the total cost might be an eye opener. In all fairness, the mortgage interest and property taxes are tax deductible, so the net cost of these expenses can be allocated to the monthly expense.

Determine the current market value of the house. A Certified Real Estate Appraiser could make this determination and provide an appraisal or you could request a comparative market analysis from a local real estate professional which will give a snapshot of sales in your area and a general idea of values for similar properties. If you think you might have to litigate regarding the family home, opt for the appraisal and hire an appraiser that can also act as an expert expert witness in court if necessary.

Determine the Equity Value of the House. After the value of the house is determined (or a close estimate), deduct the liabilities from it such as the mortgage balance, property tax liens, judgment or mechanics liens. If you are unsure if there are any liens on the house, you or your professional can hire a title insurance company to run a title search, or you can visit the records office in the city or county where your deed is recorded and ask for assistance.

Determine the cost to sell the house. Consider agent commissions, closing fees, and fix-up costs to prepare the house for sale. If you are unsure of these fees, you could seek out a real estate professional for assistance.

Determine the tax basis for the house. Generally speaking, the tax basis is the original purchase price plus the cost of any improvements minus any tax benefits realized from deductions made perviously. This is an important number and should be calculated by your tax or CDFA™ professional. The basis is used to estimate the capital gains upon the future sale of the property. The IRS provides specific tax rules surrounding divorce. These rules are not necessary widely known even within the divorce community. It could prove advantages to know them, before reaching a settlement, to be in the position to benefit from them. You may also need to express your intentions clearly in your settlement agreement to demonstrate your qualifications. Before reaching an agreement with the family home, coordinate with your attorney or mediator and tax professional and/or CDFA™ to solidify the tax planning. One of the biggest areas these rules come into play is when planning the sale of the house. If you have moved out of the family home and the divorce drags on, you may not qualify anymore for the maximum exclusion of profit ($250,000 for individuals and $500,000 for married couples) because you do not meet one or both of the rules of owning and living in the property for two of the last five years. However, you may still qualify under tax rules that allow you to use the occupancy of your spouse to meet the occupancy requirement and therefore still qualify for the maximum exclusion if both parties are on title. If that doesn’t line up, you may fall under specific event “safe harbors” that provide for a reduced maximum exclusion as a result of divorce. This is why prior planning is essential. Unless you want to cut Uncle Sam into your divorce agreement, make decisions with the family home with favorable tax results. Know the divorce tax rules and structure them properly before drafting or finalizing your settlement agreement.

Determine if your spouse qualifies for a mortgage. It’s a good idea to know if the spouse contemplating keeping the family home would qualify for a new mortgage. The last thing you want to do is just request that your spouse re-finance the property in your agreement in the future allowing her to take title and later find out she does not qualify. It is important to know that there are mortgage professionals that are certified divorce lending professionals (CDLP®) that understand the unique circumstances surrounding divorce and are knowledgeable about specific mortgage products and guidelines that work well for divorcing spouses. If you simply apply at your bank, the guidelines may not be suited for your needs. This specialized lending professional could make the difference in finding the right program to fit your needs.

After the above considerations are addressed, and you know where you stand on each of them, you can begin to consider options for the family home.

Selling the house and splitting the proceeds. This is most likely the “cleanest” option to eliminate joint mortgages and capture the maximum exclusion on capital gains. This option will still take tax planning to capture the maximum exclusion–especially if you have not been living in the house for two of the past five years.

One Spouse keeps the house. With the above considerations addressed, it will be easy to determine what a 50/50 split of the equity value is in the home. Your spouse should now have a clear understanding of the total cost to maintain the home and the costs to sale and taxable event upon sale. If your spouse does not qualify for a new loan and you are willing to agree to your spouse keeping the house with the existing joint mortgage, have an end date in mind. At some point, your spouse will either need to obtain a new mortgage in his or her name only or sell the house. You can stipulate this in your divorce agreement. I recommend checking the status of the mortgage on a regular basis and make sure the property taxes are being paid.

You both agree to jointly own the house after divorce. A big consideration is how you hold title. Holding title as joint tenants is different than tenants in common. Understand these differences and choose accordingly. The person paying the mortgage is the person taking the tax write-off for the interest. The same holds true for property taxes. You may need an equalization plan on how this impacts each person’s share of the proceeds upon a future sale. Will the person paying the mortgage and property taxes be entitled to reimbursement? Also, will the person who gave up the use of the house be entitled to half of the rental value for reimbursement? This is something you can discuss and agree upon ahead of time and stipulate in your agreement.

As you can now see, the family home deserves the utmost consideration and planning and you owe it to yourself to do the right planning. With knowledge, the emotional blinders can be removed and the reality of decisions are crystal clear. Numbers can speak for themselves and aren’t biased or one-sided, they simply are what they are–neutral advocating for both parties. With the right professionals on your team, you can make decisions that are based on fact and not emotion. The right decision can save you, the wrong decision can break you. Wrong decisions can have financial ripples for many years after the divorce is final. Once good decisions are made, everyone can move on with a peace of mind. Remember a house is an investment, a home is where your heart is. You can make a home anywhere you live–so don’t hold on too tightly to the family home, sometimes letting go is the right answer.

 

My EX drank like a Merlot–flat and unresponsive

When you get married, it’s much like wine tasting. You sip many, some you swallow, and some you spit out. The one you create a marriage blend with is that prized bottle of wine that taste so great it blows your palate so much so you realize you need never drink anything else again. When you blend with another, you expect them to show up as the varietal you fell in love with with those great tasting notes. Yet sometimes over time, the tasting notes change. All those heated debates aren’t the right temperature to store wine. Wine can’t survive a fever pitch.  It starts to go bad. 

When I married, my EX drank like a Cabernet Sauvignon with bold and complex characteristics not to mention very yummy. Much to my surprise, he started drinking like a Merlot—flat and unresponsive. I wanted to throw him into a barrel and reproduce him but he was too heavy and I couldn’t find a barrel big enough. Surely, I thought, I could revive those original tasting notes. My palate longed for a taste of my favorite wine.  Other times, I thought maybe it was my palate that needed to be cleaned of the underlying disappointments that spoiled the taste. Whatever it was, we were a blend that no longer blended well together.

I’ve come to realize that Marriage is nothing more than knowing that great bottle of wine that took you so long to find has corked (okay maybe I corked too).

krispy pair

In marriage, you can drink only one which is great if it’s your favorite bottle and you can rely on it to deliver a consistent experience. In divorce, you get to drink around as much as you like in the form of wine tasting.  It can be fun, or it can be expensive wasting time and money on bad tasting wine.  Not to mention you have to be careful not to catch any sediments along the way.  Try not to buy the case until it delivers a consistent experience that stands the test of time. After all, you know what bad wine tastes like and you don’t want to end up there. However, if worse comes to worst and your new bottle corks, you can always spit it out and dump the bottle.   

Remember to part amicably respecting each other for the varietals you are. It’s okay if you don’t make a good blend. There’s another varietal out there that might make a better blend.  Personally, I don’t recommend a Pinot Noir, very fickle. They will love you and leave you.  Very slippery.  Not much depth either. Charming but not satisfying. 

Cheers, may your glass runneth over and your wine never cork.
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Divorce Quotes for the Wine Lover this Holiday Season

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Tis the season to be jolly and if you are getting divorced, it can be the season to be tipsy. No matter where you are in your divorce this holiday season, remember, it is just that-a season. You can create joy and peace in any circumstance. It is a state of mind in the stillness, wonder of the season, that divine glass of wine, the smile of children, nature, and the warmth of others.

I wish you peace, joy, and happiness this holiday season. May your wine glass never be empty, your heart fully decanted, and your palate open to new experiences.

A few light-hearted quotes to make you (hopefully) smile this holiday season:

” There are two things you should never do alone: One is get divorced, the other is drink” – Cheryl Nielsen

“You’re not dead, you’re dormant” – Cheryl Nielsen

” In marriage you can drink only one, in divorce you can drink around as much as you like but be careful not to catch any sediments along the way” – Cheryl Nielsen

“Divorce can be a great gift. After all, if the marriage corked, wouldn’t it be nice to drink something good for a change?” – Cheryl Nielsen

“Divorce offers an opportunity to expand your palate-taste many, spit out even more, and swallow only what delivers a consistent experience” – Cheryl Nielsen

“How do you make divorce more palatable? WINE about it!” – Cheryl Nielsen

“An amicable divorce is when two varietals respect each other for their differences but realize they don’t make a good blend” – Cheryl Nielsen

“Divorce is like drinking a cheap bottle of wine. You take a sip and think you’ve survived it until the aftertaste sneaks up on you” – Cheryl Nielsen

“Today I will look at life through wine colored glasses, if the day doesn’t go well, it will end on a positive note with a glass of wine” – Cheryl Nielsen

Cheers, wishing you many blessings this holiday season.

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Divorce Professionals for your Team

Divorce is like learning a new language given all the legal jargon and terms not to mention the specialized professionals out there and trying to learn which one can help you. Going it alone in divorce would be like driving your car with a blindfold on hoping you don’t run off the road.

I have found that some divorcing spouses are under the assumption that their attorney can provide all the expertise they need to work through a divorce settlement. An attorney by definition is an expert in legal matters. Unless they have other qualifications they are not going to provide tax advice, or come up with a valuation of a business, or real estate, etc.

Overlooked and under resourced items in your financial make-up could land you in a pothole in the road. You may not even run into the pothole until after the divorce is final and the tax bills come in for overlooked taxable events. It’s important to pick a good divorce team that will address your particular situation. Here are some players for your team:

Certified Divorce Financial Analyst™ (CDFA™) – A professional that can forecast the long-term financial effects of the proposed divorce settlement – including the tax liabilities that often times can be overlooked.

Forensic Accountants – They investigate and analyze financial evidence; communicate their findings in the form of reports, exhibits and collections of documents; and assist in legal proceedings including testifying in court as an expert witness and preparing visual aids to support trial evidence. A good team member if you think there could be hidden assets.

Forensic Real Estate Divorce Strategist™ – Analyzes options for the marital home and other property and the tax consequences of each option. Builds housing transition plans that take into consideration divorce tax rules. Estimates costs to sell, capital gains, and looks for opportunities.

Certified Public Accountants – Plays an important role in determining if you have structured your agreement and taken in all the tax considerations and utilized the IRS divorce tax rules. Note: Not all CPAs are well versed in divorce tax rules. You might have to specifically ask them to research these rules and apply them to your set of circumstances. Your tax preparer would have access to perhaps your prior return which could prove helpful.

These are a few good players that will be able to spot hidden “potholes” in your divorce settlement. It is better to involve them sooner than later so they can help with strategy and the structure of your agreement.

When the divorce is over, you should be comfortable driving knowing you won’t hit any potholes in the road. You can focus on your new destination.

Considerations when Keeping the Family Home

FAMILYHOMEIf you kept the family home in the divorce, hopefully you did so with a full understanding of the entire housing circumstance. It is common tohave an emotional tie to a home for all kinds of reasons. If a decision was made based on emotion, you could have some blind spots in your understanding of some important factors. What is needed is complete clarity of the financial circumstance of owning the home. This way you can manage it as you would any other asset in your portfolio and make appropriate financial decisions for it in the future. After all, owning a home is one of the largest financial investments most of us make. There are three parts to consider in the housing circumstance.

The first part is to have an understanding of the total costs to own the home. In addition to the mortgage, there are property taxes, utilities, maintenance, repairs, insurance, perhaps homeowner association dues. You might have to pay a separate land fee in some cases. These expenses represent the total cost of owning the home. If you will receive child support for a few years, and rely on it in part for housing expenses, you could be faced with a hardship in the future and unable to afford to maintain the home at which time you might consider selling as an option.

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Part two is an understanding of the tax base of the home. This was established when the property was purchased and includes the purchase price and some of the costs to acquire the property. Your tax base can increase with qualified capital improvements that add value to the property. Knowing the tax base will help you manage the taxable event upon sell and more specifically, if there is a gain on sale and the tax treatment of that gain. It would be advantages to glean an understanding of capital gains and qualifying for exclusions since being single and holding title as an unmarried woman changes the exemption amount. Equally upon re-marriage and joint ownership with a new spouse, the exemption could change again. A tax professional can assist you in this calculation.

Part three of the housing circumstance is to understand the loan that is currently on the property. Whether that loan be the original loanbefore divorce or a refinance loan in your name only. Is it a thirty year fixed rate loan or an adjustable loan? If adjustable, do you know when the adjustments occur and the potential increase in the interest rate that will change the payments? This could change the affordability factor in the future.

All the parts of the housing circumstance work together to manage the financial implications of owning the home. The last thing you want moving forward after divorce is unexpected financial surprises. Being truly empowered in your financial future depends on being well informed.

God wants me to be a Cabernet Sauvignon

Before I can become a great Wine, I must first recognize the essential backbone begins with the grape – the divine essence for which all wine is produced.  Without embracing it, I could only be a WINE wannabe and never reach my full potential as a Cabernet Sauvignon.

God gave me intelligence and the desire for expansion and left me in charge of the wine making.  The grape wants to turn into wine.  God is routing for me because he too enjoys drinking the good stuff – after all life is too short to drink bad wine.

Sometimes during my life, I will need to get stomped on like a grape to get my divine juice out.

woman in wine glass

I will also need to expand my character by spending time in the barrel of life.  This is where some of the necessary work will be done to awaken my consciousness to a new reality and level of being.  No longer a two buck chuck at level one.  I’ll climb the charts on wine spectator to a more drinkable level.

The time I spend in the barrel will have a profound effect upon the wine I become.  Tears of sorrow will enhance my flavor, my personal growth and self-reflection, will deliver character and the tannins of my backbone will become smooth with perspective, compassion, and humility.  This process is essential to become a mature and drinkable Cabernet Sauvignon and it is my hope that people will want to drink me up for the richness of flavor, matured to perfection – perhaps with a little pepper around the edges for distinction.  My aging will make me smooth on the palate and softer on the finish.

With age, I will only get better and in life I will enjoy getting in my bottle and going on the tasting appointments of life.  I now deliver an authentic expression because I am in alignment with my higher self and my divine essence – the two perfectly balanced.

The journey has produced what I have always wanted to become – a Cabernet Sauvignon.

Divorce, Real Estate and Taxes

You’re didivorce housevorced, sitting in the family home drinking a glass of wine.  You think you’ve won.  You got the house.  Fast forward a couple of years and Johnny has graduated high school and is off to college.  You no longer need to live near the high school and you feel like you need a new beginning. You consult with a real estate professional that informs you your house has a market value of $800,000.  That’s fantastic you think because your loan balance is $500,000.  You list the property and it sells quickly.  You have nearly $300,000 to go towards your new home.It comes time to file your tax return and you learn that your property had a basis of $200,000 which is the price you and your EX paid for it several years ago.  You re-financed and pulled money out since the purchase and that increased the loan balance to $500,000.  You find out you have capital gains of $600,000  and you only qualify for a maximum exclusion of $250,000.  You have to write a huge check to the IRS that erodes a large portion of the proceeds.

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What went wrong?  How did you miss this?It was missed during the divorce.  Part of the strategy with the family home should have been to consider your intentions to sell after Johnny was out of high school.  Had you indicated your intention in your marital settlement agreement and kept your EX on title for a couple of years, you both may have qualified for a $250,000 exclusion for a maximum of $500,000.  Sure it takes some cooperation and advance planning, but we are talking about tens of thousands of dollars here. I recommend planning your exit strategy with your legal council, tax professional, and financial planner, and a certified real estate divorce specialist® so you can prepare for what the future holds and also structure your settlement with favorable tax consequences.For more information on Divorce and Real Estate, and Taxes, download Publication 523 (IRS), familiarize yourself with it, and ask your divorce professionals for assistance.

Life is too short to drink bad wine or pay for unnecessary tax consequences as a result of a lack of planning.

Think of all the wine you can buy with the savings.

 

A Drinkable Divorce Team

hervey vineyard pinotContemplating Divorce requires blending a team of professionals together that rely on each other for their unique characteristics to support a balanced experience for your particular divorce palate.  Blended properly and you will have a more drinkable experience – overlook an area and the aftertaste will sneak up on you.

In order to create a good blend, you need to choose the professionals that are appropriate for your situation.  The following is a list of options:

1) Divorce Attorney, Mediator, or Collaborative Divorce Specialist – to handle the legal issues.

2) Divorce Coach – Great resource to help you choose your team of professionals and for on-going support

3) Certified Divorce Financial Analyst® – Generates solid financial projections for your community property division, alimony, and child support allocations

4) Financial Planner/Advisor or Certified Financial Planner – A financial partner for your divorce settlement and future financial planning goals

5) Certified Real Estate Divorce Specialist® – Specialized real estate planner to build strategies around the appropriate legal, tax, and market timing of real estate and “what if” scenarios in retaining the family home, title, and tax consequences

6) Therapist – To support emotional and mental health needs

This is a short list to create some structure to your professional blend.  Each professional on your team adds a unique specialty to provide a balanced perspective and support.

It is impossible not to hit some Tannins in the divorce process, but if you blend the right team it will help make your divorce smoother and more drinkable.

So if you are getting divorced, it’s okay, go ahead and WINE about it, you’ll feel better.

 

 

 

Broken Hearted this Valentine’s Day – Choose LOVE

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Celebrate YOU this Valentine’s Day.  For every ending, there is the possibility of a new beginning.  But first, healing a broken heart takes time – and much of that time is alone time.

Give yourself the gift of love.  After all, love begins with loving ourselves.

Let’s look at some ways you can love yourself – start by eliminating the chatter of your mind –  those tapes that play the same lyrics of shame and blame or unworthiness.

AFFIRMATION OF LOVE

Give yourself an affirmation of love when negative thoughts enter your mind.  Write one down that speaks to you.  It might be something like “I am worthy.  Today I accept where I am and know that I am in a place of peace, hope, and love.  I deserve happiness and I delight in the abundance of my life, my health, and prosperity.  Today I will love myself.”

GIFTS OF LOVE

Indulge in ultimate self-care.  It could be a massage, or a body scrub, facial, or to get your nails done.

Maybe you’re ready for a new look and a hair cut is calling your name – or even a new hair color. Shop for a new outfit with a different style than usual just for fun, break out of the old mold.

If you need to rejuvenate…try a beautiful hotel for the afternoon along the coast.  Treat yourself to your favorite glass of wine.  Or sit at the beach and watch the waves while you repeat your affirmation of love.  Take in a nature hike, or pick up some flowers for the house or plants for your yard or patio.

VALENTINE’S WITH KIDS

Pick up art supplies and make Valentines for each other.   Come up with a day of loving kindness.  Drop Valentine’s off to a nursing home or make Valentines for a children’s ward at a hospital.  Demonstrate loving acts of kindness to teach your children how love can be shown in ways that give people hope, joy, and can help heal a heart, a body, and nourish a soul.  Your kids will learn that giving love in a selfless way brings joy.

GRATITUDE FOR LESSONS

At the very “heart” of pain is love.  Pain provides us with the chance to grow, learn forgiveness, and life lessons that evolves us into loving people with the opportunity for more compassion, love and kindness.  We grow a bigger heart if we let go of bitterness and embrace our full capacity.  Use the experience of a broken heart to choose love.  Love yourself.  Forgive, and look for opportunities to give and receive more love in your life.

Make your VALENTINE’S DAY full of LOVE.

 

 

 

 

 

Dating after Divorce Through WINE Colored Glasses

Dating after divorce gives us a chance to better understand our likes, needs, and preferences in a partner.  Think of it like wine tasting.  You can swirl it, smell it, taste it, and spit it out if you don’t like it.  But don’t get too intoxicated or drunk on the experience. You know what corked wine tastes like.  Divorce is nothing more than knowing your great bottle of wine has corked.  You’ll eventually land the right bottle but let it open slowly.  Good wine takes awhile to decant.  Let it linger on your palate before swallowing and make sure it doesn’t have an aftertaste.  This takes time.  Then, when it is right you can take the bottle home. Swirl many, sip few, and never by the whole case until it passes the taste test time and time again.

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To increase your chances for success: Don’t judge a person by his or her label and be open to trying a different varietal than usual.  You never know what you might acquire a taste for.  Be open to new experiences but do not sacrifice on quality.  Always be your authentic self!

If you are a Cabernet, don’t show up as a weak merlot.  Open up!  Remember not to whine/wine about your ex.  If you are leaving your ex in your wine glass, you have no room to pour a new wine in!  One last thing–divorce does not define you, it refines you and realigns you!  You are a new wine and you have new blending options!   Cheers.

 

Credit Score drinking like a WINE gone bad after Divorce?

Credit Score drinking badly?

There could be a fairly simple explanation. Your credit worthiness may have been achieved during marriage as a financial blend thus creating a co-dependence of balanced elements in order to be drinkable. Eliminate one of the wage earners and you are standing alone as one varietal with nothing to smooth out the tannins if you fall short in earning capacity, credit history, and other less than desirable elements. Now you are viewed as undrinkable or they ask you to pair yourself with high interest rates, increased security or deposits. This raises your cost of borrowing funds and the same goods and services end up raising your cost of living. Does it make sense that one spouse moved on increasing his or her credit drinkability while the other is running the risk of being poured out? No! Something can be done. A credit damage expert can equalize the cost of credit damage in a divorce. They are the credit winemaker that will calculate the cost to restore your drinkability. That means that the one that looses the most can be awarded damages to equalize the disparity so they can at least experience to some degree the same credit economic advantages as the other spouse. Just one more way to preserve your economic stability so you can get on with the wine life you deserve.

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I interviewed Georg Finder an Independent Credit Damage Evaluator to learn more.  Here is our interview:

Cheryl: Why does credit capacity or as you like to call it “credit reputation” change with divorce and is there anything that can be done to establish equality among divorcing spouses?

Georg: The divorce in and of itself will impact credit because marital status is a factor in credit scoring. It takes some doing to leave the two parties with “equal” credit capacity. This can only be accomplished if care is taken to measure the disparities arising from the way credit is scored.

Cheryl: Can you give us a few examples of how the disparities in credit scoring arise?

Georg: As a practical matter, the lower earning spouse, or the spouse controlling fewer assets, will suffer far more than the higher earning spouse since credit granting and scoring institutions place such importance on assets, debt exposure, and income streams. Some scores will remain intact to the extent that one or both spouses had already been using personal credit, or no marital credit had been established.

Cheryl: What will the impact of the divorce most likely do to the lower earning spouse?

Georg: The lower earning spouse will most likely experience a drop in credit scores based on the loss of his or her biggest asset—the income from the higher earning spouse. Hence, this becomes a problem for divorce practitioners: Divorce usually means dramatically unequal outcomes upon the credit scores of the parties.

Cheryl: What impact, if any, will the impact of divorce have on the higher earning spouse?

Georg: Often times the higher earning spouse seeks to reduce liabilities and in doing so reaps the benefit in most cases of an increased credit capacity and score.

Cheryl: Fast forward after divorce, it appears that the lower earning spouse will most likely see a loss in credit privileges and this concerns me as it may make financial recovery even more difficult.

Georg: You are correct. Divorce and the loss of authorized user privileges on joint credit accounts may leave the lower earning spouse without a credit identity. If there is any credit intact, the loss of income could result in increased interest rates on loans, higher monthly installments and security or deposit requirements while the higher earning spouse enjoys just the opposite.

Cheryl: Is there an obligation on Divorce Practitioners to equalize credit capacity when separating assets?

Georg: Statutes have not spelled out how to divide “credit capacity” although credit capacity is clearly recognized as an “asset.”

Cheryl: What can be done about the inequality?

Georg: A support award is available for the lower earning spouse that is viewed as the “dependent spouse.” The court must consider certain factors which include standard of living as well as earning capacity, marketability, and portability of skills, education, contributions to the others’ education, ability to pay support, availability of unearned income streams, and the needs of the supported spouse. Almost all of the mandatory statutory support factors are reflected and evidenced in credit reports.

Cheryl: How do you calculate the discrepant creditworthiness between the divorcing spouses?

Georg: The mathematical differences between what the same creditor would charge each spouse for the same goods. For example, compare the different costs of borrowing money. It could be a comparison of the different costs of borrowing money to purchase a car on credit. Interest rate, down payment, servicing points, and monthly repayment over seven years is compared. The difference between the value of the two credit profiles is the amount that is equalized.

Cheryl: Wow, it seems to me that equalizing the credit capacity could be often overlooked. What is the first thing a divorcing spouse should do to preserve their credit?

Georg: Obtain copies of your credit reports in the early stages of divorce as soon as possible. The three primary credit reporting agencies are Experian, TransUnion and Equifax Information Service. There is also a Tri-Merged Subscribers consumer credit report. This report is typically the most complete. If going to court, the valuation date for purposes of the division is “as near as practicable to the time of trial.” This is something to be aware of. A careful monitoring of activity on credit reports would also signal potential unauthorized uses of marital credit during divorce. Credit reports are also used to evaluate changes in credit as time moves out.

Cheryl: In my mind, credit equalization should be a top priority when it comes to the division of assets in a divorce.

Georg: In my view, credit is a form of reputation, and may be the most valuable asset a person has. The asset is intangible property and should be treated as other intangible assets accrued during marriage requiring division in divorce.

Cheryl; Thank you Georg, this has been very insightful. Where can you be reached if someone wanted to reach out to a professional Credit Evaluator?

Georg: My pleasure. My website is www.creditdamageexpert.com which provides my qualifications and services. I can also be reached at Georg@creditdamageexpert.com.

Why a Wine Barrel was my home during divorce

Excerpt from the book entitled Meritage Divorce, written by Cheryl Nielsen.

I realized that divorce offered me an opportunity to go back into the barrel and become the wine I wanted to be-a kind of “barrel refinement process.” I became the winemaker.  So I decided to hop in -it was a good place to hang out, safe and warm.  the wood protected my fragile being and held me together.  I got to re-produce myself in here-making the most of the time communing with myself.  I spent some time drinking my own wine-spitting out what I didn’t like along the way, and deciding what to swallow.  It took courage to learn to live by faith, as it can be dark in the barrel-but there is wine, and that is a good thing.

barrelsYou see wine as it rests in a barrel goes through subtle chemical changes, resulting in greater complexity and character.  It also soften the harsh tannins.  The barrel imparts the character of the wood into the wine and delivers distinctive flavors and sophistication.  The time I rested in the barrel had a profound effect upon the wine I became.  Tears of sorrow enhanced the flavor.  My personal growth, reflection, and self-discovery delivered character.  The tannins of my backbone became smooth with perspective, compassion and humility.  My character changed.

No longer a flat one dimensional wine, I became spicer and more complex.  The experience awakened a higher spiritual awareness as a result of having only faith and a barrel to carry me through the darkness of loss and grief.  I got back in touch with the varietal of my core.

When I gave myself over to the barrel refinement process, it was as though everything I was running from-all the demons of the past-were cast into the barrel with me.  I had to decide if I was going to see the light of day, or if I was going to live forever in the dark.  Ultimately, my time in the barrel was a time that reconnected me with the real wine I am.  Not the type that hides under labels.  In hindsight, the barrel turned out to be just the home I needed.

Dating after Divorce Through WINE Colored Glasses

The question of when to start dating after divorce has many answers.  I’d like to offer just one.  When you are comfortable being alone.  Alone does not mean you are lonely.  It means you are WHOLE and that you have re-built your life with a new identity.  One that is no longer defined by a relationship.  You can run solo and feel complete. If you are not healed, and in a needy place, it is easy to make new relationship mistakes.  Picking partners from a place of neediness creates blinders or what I like to call ROSE colored glasses and our goal is to see perfectly out of our WINE colored glasses – the ones that offer the most clarity. Looking outside ourselves for someone to make us feel loved, validated, or worthy is risky business.  If the relationship ends, we can set the healing process backward only now we have complicated it with the mourning of the loss of a relationship.

shoe openerIf you do not depend on a relationship for your happiness, then you will choose and attract partners with a healthy emotional state.  This person will compliment your life, not define it. Casual dating (I did not say casual sex) gives us a chance to better understand our likes, needs, and preferences in a partner AND how to maintain self control.  Think of it like wine tasting.  You can swirl it, smell it, taste it, and spit it out if you don’t like it.  But don’t get too intoxicated or drunk on the experience. You know what corked wine tastes like.  Divorce is nothing more than knowing your great bottle of wine has corked.  You’ll eventually land the right bottle but let it open slowly.  Good wine takes awhile to decant.  Let it linger on your palate before swallowing and make sure it doesn’t have an aftertaste.  This takes time.  Then, when it is right you can take the bottle home. Anything can blow your palate the minute it hits.  It matters if it delivers a consistent experience that is enjoyed over time.

figurative-people-dancing-art-painting-leanne-laine-til-you-sizzle

Be careful what bottle of wine you open. Swirl many, sip few, and never buy the whole case until you know you are ready.  Life is too short to drink bad wine as you already know! Taste is subjective – different grapes for different palates but if you pair two compatible grape varietals together, you will have a better chance for a more drinkable experience.   CHEERS

Living in an Apartment after Divorce Through WINE Colored Glasses

Moving to an apartment didn’t happen right away.  At first, I stayed in the house my EX and I owned while trying to sell it.  It was 2008, and luxury property wasn’t selling in Orange County.  Lenders all but stopped lending at higher price points.  I learned however, that there was a market for wedding venues.  I then set this mediterranean property, I called home, up for large scale events by locking my personal items in the master bedroom closet and opening up entertaining space by removing excessive furniture.

HousewithbrideThe property was situated on four acres with a boutique vineyard backdrop reminiscent of Italy-complete with a terraced patio that could accommodate 150 chairs for a wedding.  This is my story of making wine out of water.  After establishing relationships with wedding planners, I soon starting booking weddings and was able to generate some income to offset the huge mortgage.  I struggled for two more years until I couldn’t turn the water into wine anymore and it washed the property out from under me.  I admit, I was emotionally tied.  I wouldn’t give up until the bitter end. It was a labor of love tending to the 600 Cabernet Sauvignon vines planted in rows on the hillside that I nurtured to full maturity with lush fruit over a three year period.  I really didn’t own it long enough to enjoy the fruit of my labor.  There was no rest while taking on water and trying not to drown.

waggy-dog-logo-colorThere were some priceless memories I took with me of the weddings, a few wine pairing dinners with friends, and the divine Cabernet Sauvignon wine I drowned my sorrows in purchased from Paso Robles for a planned private label release.  I’ll always joyfully remember the dogs running through the rows of the vineyard and fetching their “toy” on the expansive park like front lawn.

I tried to short sale the property when the value went upside down.  I considered filing bankruptcy, but I didn’t.  In hind site, I wish I had.  I paid for the consequence of holding on too long, liquidating all my retirement assets in an attempt to stay above water, until my retirement was gone and Uncle Sam came knocking at my door, and not for a glass of wine.

This is why I am passionate about working with divorcing couples on housing planning.  Emotional mistakes with property, without a solid financial plan to support it, can lead to huge financial losses that can prove devastating for many years to come.

IMG_0700I thought I would “die” at first if I had to live in an apartment.  I bought my first property at twenty-one.  I had not rented since.  I was mortified at that thought.  Fast forward, after living in several apartments, I have learned to look at it through wine colored glasses-in my case, an extension of travel by experiencing different towns and cultures.  I’ve lived in Marina Del Rey on the boardwalk with a view of the ocean and hung out with the locals at scenic bars along the coast.  I’ve lived in Newport Beach with a view of the Back Bay and frequently took my dog in a kayak for a spin around the bay.  I’ve lived Laguna Beach with a view of the canyon and have been interviewed by the local radio station.  On Sundays I take in the Farmer’s market and eat breakfast bistro style downtown.  I’m free.  Sure, I sign a lease, but twice, I have paid the lease breakage and moved when I wanted to try something different.  It’s an adventure.

I have virtually no maintenance.  I never worry about a leaky roof or property taxes. It’s easy to clean up an apartment quickly.  I like being a “number” with a corporate owner with no emotional connection with a private owner.  No one to tell me I have to move because they are selling the property or they want to inspect it regularly or move back into it.  I always paint my walls when allowed and personalize the apartment to my style.  I look for something unique – a view, a large patio, or an interesting alcove for an office.  I always manage to set it up for entertaining a group of people for dinner.  I’ve hosted wine pairing dinners for Thanksgiving and even hosted wine tasting with a small live band.  Currently, I am working on a herb garden in wine crates for my large patio and a wood picnic bench complete with outdoor lanterns and a rock garden.

grapesLiving in an apartment, has allowed me to relax and not be responsible for so many moving parts of taking care of a property and unexpected maintenance expenses.  I need the rest. ,k It has freed me up to focus on my work and writing.  At this time of my life, I prefer it.  I’m happy to have owned several homes and I look forward to the day when that is right for me.  For now, I think I will sit back and enjoy a glass of Cab and take in my view for awhile and contemplate my next options.

Cheers

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