The tumultuous process of a divorce can be painful and emotionally draining. With all the emotions and thoughts going through your mind, the last thing you’d want to worry about is dividing the marital or family home. But given that a home is probably the most expensive asset you’ll own, discussions on property division will naturally center on what happens with the house and mortgage.

The “cleanest” option?

Refinancing.

Here are four reasons why.

It Protects Your Credit Score

Even if your soon-to-be-ex buys you out of the family home, you are still liable for the mortgage, which will come back to hurt your score should you miss a monthly mortgage payment. In the eyes of lenders, spouses—divorced or not—are liable for a joint mortgage, unless you sell the house, pay off the mortgage in full, or refinance to remove your name.

Remember, removing your name from the title does not remove your name from the mortgage, which means your credit score takes a hit when your spouse misses payments. Even if you trust your spouse and are parting on amicable terms, trusting him/her to continue making payments after you divorce is too big a gamble to take.

It’s Fair

If you decide to keep the family home, your spouse will probably want a fair share of the equity. You have a number of options when buying out your spouse. For starters, you can offset the equity with other assets like a larger share of your retirement funds or savings.

You can also forego spousal support in exchange for the family home. Be sure to consult a Certified Divorce Financial Analyst to crunch the numbers and see if this is an equitable and financially sound option. You also have the option of a cash-out refinance, which lets you tap your equity to take a new mortgage, which you can then use to buy out your spouse.

Refinancing Provides Access to Low-Cost Capital

Leveraging your equity also offers other benefits aside from buying out your spouse. It’s common for many divorcing couples to be cash poor but house rich. With interest rates now at all-time lows, taking a new mortgage gives you access to low-cost capital, which you can use to pay off bills and credit card debt, create an emergency fund, invest in assets with a higher return than your mortgage interest, or make home improvements among many others.

It Lowers Your Mortgage Payments

With interest rates at historic lows since the 2088 recession, refinancing is a good way to bring down your payments. This is especially useful after a divorce when cash flow is tight because of the higher cost of supporting two households. Talk to a mortgage professional to determine whether it’s possible to lower your payments.
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Going through a divorce can take an emotional and psychological toll on just about anyone. But what many divorcing couples often underestimate is just how expensive a divorce can be. Even worse is how the financial impact of a divorce is felt throughout an excruciatingly drawn-out process.

It’s for this reason that it is absolutely necessary to have a support system around you who can help you move forward both emotionally and financially. The people you surround yourself with will be your most important asset when taking the challenges of a divorce head on. Listed below is a list of personalities you will need to have as successful an outcome as possible.

Family And Friends

For divorces involving children and property division, it’s important to have family and friends who can provide the necessary emotional support as you go through this tumultuous period of your life. Having friends and family who can empathize with your situation and just listen to you goes a long way towards putting you on the path to healing.

It’s also a good idea to regularly see a therapist during this time to ensure you have someone who can help you make sense of your stress and emotions.

A Divorce Attorney

An experienced matrimonial lawyer—ideally one you’ve known for years—will prove invaluable during a divorce, ensuring that you’re getting the best possible representation, especially when the separation involves dividing assets and/or child custody.

If you don’t know any attorneys specializing in family law, start by asking your friends and family. You should also seek referrals from other sources, whether it’s resources like Justia or family law attorney associations. It’s a good idea to narrow your choices down to three attorneys, interviewing each one before making any commitments.

Remember that a divorce process may end up taking years, so you want to work with an attorney that you can actually get along with. You also want to hire an attorney who offers a practical fee structure, at least to your current situation.

Financial Advisor

Besides an experienced divorce attorney, you should also consider working with a financial advisor specializing in divorces and other matrimonial matters. As you go through the divorce proceedings, you will need someone who can help you plan your current and future financial decisions.

A financial advisor’s expertise will also prove invaluable when evaluating settlement proposals and even witness testimony. And after the divorce, you will need an advisor to help you deal with the financial fallout of the separation, particularly if you have been out of the workforce for years and have depended on your spouse’s income.
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Now more than ever, today’s romantics are meeting online. Online dating blew up as soon as the internet hit the mainstream—the first online dating site, Match.com, went live as early as 1995. Now, more 40 million Americans are regularly on dating apps. But how is this figure shaping trends in dating, marriage, and divorce, if at all?

Do online dating apps encourage serial dating? Do they make it easier to cheat in a relationship? And, perhaps the biggest itch in people’s curiosity: How does online dating affect marriages and, therefore, divorce?

The research is in, and it says nothing you would expect—mostly.

A paper titled, “The Strength of Absent Ties: Social Integration via Online Dating” looks into the links between falling divorce rates alongside the rise of online dating.

That’s right, divorce rates are actually falling. They have been since the 1990s, which, as you would recall, was the time that saw the advent of online dating. According to a 2016 report by Time, separations in the United States went from 17.6 divorces for every 1,000 married women in 2014, to 16.9 in 2015. It’s a small drop, but this statistical trend is showing no sign of stopping as, just last year, the divorce rate dropped further to nearly its lowest point in 40 years.

At this point, it’s easy to disregard the link between online dating and falling divorce rates as a baseless correlation. But the paper’s findings actually support the findings of other studies, which show that married couples who met online are slightly more satisfied with their marriages than those that first met offline.

There could be a number of reasons for this, one being that dating apps are connecting us with people we otherwise likely would have never encountered, maybe even considered.

The rise of online dating and social media has effectively opened up a new world of dating possibilities, overcoming barriers such as time and distance in ways never before. Online dating has widened the selection of potential mates unlike ever before. Today, relationships are no longer limited to friends, friends of friends, and so on. “The one” may have never been among our circles, and dating apps are bridging that gap.

Dating apps even have hypothetical benefits. The researchers behind the study have been making simulations of society, adding and removing certain factors and seeing what would happen to relationships as a result. The results? Online dating allowed for more interracial connections, increasing the chances of “complete racial integration,” and ultimately resulting in a more harmonious society.

Although these findings are far from conclusive, they do line up nicely with existing hypotheses of online dating being the main driver of change in the dynamics of relationships.
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State legislators in Illinois have passed a new law that sanctions a new, team-based approach to divorces, encouraging a more amicable way to dissolve marriages.

Although divorces, by their nature, tend to be acrimonious, the Illinois Collaborative Process Act aims to create standards that divorce attorneys, as well as financial advisors and mental health professionals, can adopt and present as viable options to divorcing clients.

Chief among those options is a “collaborative divorce,” which has been described by its proponents as a clean, simple, and less-expensive way to end a divorce without ever having to go through a messy and emotionally-draining trial.

Collaborative Divorce Explained

Words like “clean” and “simple” are rarely associated with divorces, but that’s exactly the appeal behind a collaborative divorce.

In a collaborative divorce, the two spouses work with divorce attorneys with the intention of coming to the most amicable resolution to the case. The process also involves the participation of different collaborative professionals, such as neutral financial advisors, mental health professionals, and child specialists, all of whom are committed to supporting the couple and the family address their issues and arrange agreements for both parties to move on and start their lives anew as ex-spouses.

Collaborative Divorces vs. Litigation

Perhaps the biggest advantage of a collaborative divorce over litigation is that litigation usually devolves into blaming, incessant arguing, and trying to make the other side “pay.” In contrast, the collaborative process is about focusing on solutions by finding common ground between both parties.

In litigation, the goal is often to “win” the case by making your soon-to-be ex-spouse look as the bad guy. With a collaborative process, the goal is not to play the blame game and point fingers—it’s finding a solution that works for everyone involved.

When it comes to costs, while a collaborative divorce is usually less costly than a trial, it will still be expensive.

Will a Collaborative Divorce Work for You?

Of course, the question is: Does a collaborative divorce even work?

Short answer? It depends on the couple seeking it. For example, if you and your ex are the type of people who value your relationship and want to remain civil and maybe even continue on as friends after the divorce, then yes, a collaborative divorce might work for you.

But these scenarios are far and few between, especially when so many divorces involve infidelity and pain. But if you and your ex are willing to put aside your differences for the greater good of your family, a collaborative divorce can be a viable option.
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After making the decision of ending your marriage with your soon-to-be ex-spouse, you have to brace yourself for even tougher decisions during the course of your divorce.

For starters, you need to decide as early as now what you intend to do with the family home, which is perhaps your family’s single biggest asset. Will you keep it or put it on the market?

The answers to these questions will depend on factors such as who owns the house, whether you have children or not, you and your spouse’s personalities, and the nature of your divorce (i.e. amicable or not).

While you weigh these factors, here are a few suggestions on what you can do with the family home.

Option 1: Sell The Home, But Only In The Near Future

This is an ideal option if you and your spouse can agree to dispose of the family home until the kids are older or have moved out of the house. Many divorcing couples pre-agree to split the equity of the home upon selling it, having one spouse stay in the home in the meantime to avoid disrupting the kids’ lives.

This arrangement can come with serious setbacks, however. Many parents, particularly women, negotiate for the home instead of cash, and so they find themselves with a home to live in but no cash to support their lifestyle after the alimony and child support run out.

It’s also a good idea to hold off from making any decisions about your home during and even after the divorce. Once you’ve gotten used to life after marriage, you may be in a better position to make decisions about the fate of your home.

Option 2: Sell Right Away

There are often also situations when it’s financially smarter to just sell the house right away and split the profits with your partner. This is a good move when you consider the closing costs of selling a home, from commissions for your listing agent and home inspection fees to repairs and improvements before selling.

If you’re cash poor, it may be better to just sell the house right away, split the profits, and divide the costs of selling.

Option 3: Consider Nesting

Nesting is a setup that may work for you, especially if you and your soon-to-be ex are on good terms.

Nesting involves keeping the family home and having the kids stay put while the parents take turns living there. The parents can agree to rent and split the costs of a nearby apartment or home, taking turns living there too.

It’s a progressive and downright crazy idea, but one that somehow works for some families. The time will eventually come when it’s more sustainable for one person to buy the other person out of equity or sell the home and split the cash, however, so don’t expect for any nesting setup to last.
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Aside from causing tremendous emotional turmoil and stress, a divorce can be particularly dangerous to either spouse’s finances. Both men and women face an equal amount of financial risks during and after a divorce, making it necessary to plan accordingly.

Below are 4 financial risk areas spouses should be aware of when going through a divorce and even after the divorce proceedings have ended.

A Budget, Or Lack Of It

Let’s face it, it’s rare for divorce proceedings to not be expensive. Whether you’re in the process of a divorce or have been separated for months, you need to gather as much of your financial information as you can to determine your assets and liabilities.

Next, you need to create a budget, identifying debts to be paid, costs that need to be absorbed (e.g. mortgage or car payments), and assets that can/should be divided.

You also need to plan for the future of your children. How will you take care of college? Will you and your ex split the expenses of raising your kids.

Alimony (Spousal Support)

After a divorce, it’s common for one spouse to pay alimony to the other, not including child support. But while child support is non-tax-deductible, ex-spouses who pay alimony can deduct that amount on their tax return, which means the person receiving alimony must also report it as income for tax purposes.

For some people, alimony and child support can be the only form of income they receive, which rules out the possibility of saving for retirement.

But it doesn’t have to be this way, not when individuals who receive alimony can contribute as much $5,500 per year or the amount of alimony received—whichever is less. And for people over the age of 50, the contribution limit increases to $6,500 per year.

For more information about these contributions, consider talking to a tax advisor to discuss your eligibility.

Social Security Benefits

If claiming Social Security benefits is confusing for married couples, it’s even more complicated after a divorce.

For starters, you can only claim spouse benefits on your ex if you were married for at least 10 years. And if you decide to remarry, you’re effectively waiving the ability to claim benefits on your ex. This may turn out to be disadvantageous if there’s a significant gap between you and your new partner’s earnings, and your ex’s earnings.

Investments, Or Lack Therof

A divorce can throw a wrench in your current financial holdings and how much money you may need in the future. This means your investments have to change accordingly to insulate yourself from these new risks. It’s a good idea to talk to a financial advisor to reassess your risk tolerance and your portfolio’s current lineup of equities based on your current and future income needs.
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The idea of a divorce often brings to mind constant bickering, toxic custody battles, ill will, and the fear that either spouse’s lawyers will intentionally prolong the process as a way of hurting the other party.

And true enough, there are many divorce lawyers out there who make these fears a reality. However, there are also lawyers committed to making the divorce process as painless as possible, using a practice referred to as “Collaborative Divorce.”

Collaborative Divorces, Explained

As the name suggests, a collaborative divorce is when both spouses work with their attorneys to arrive at a positive resolution that both sides can agree to. It’s an amicable way to end the marriage, ensuring that both sides sign off on all agreements without ever having to go to court.

Collaborative divorce lawyers can only work with couples who are actually ready to sit down and talk in a collaborative setting. Should the divorce proceedings become contentious, or the couple refuses to compromise and work together productively, lawyers who handle traditional divorces must take over.

If anything, the option to have a collaborative divorce should serve as a wake-up call for separating spouses, who need to ask themselves how they can make the divorce proceedings smoother and more productive.

How Does a Collaborative Divorce Work?

Before entering a collaborative divorce, couples must first sign a contract stating their commitment to practice good faith and fairness in their negotiations and communications. Couples must also promise to be honest and transparent about all required documents, finances, and paperwork.

Once done, the couple and their respective lawyers meet in a neutral environment without the need of a third-party mediator. Both sides agree to work constructively and with an open mind, ensuring that everyone walks away from the proceedings in as positive a manner as possible.

For a collaborative divorce to work, each member of the couple must set aside their differences and focus on what’s best for everyone, including themselves, their children, and their respective families. The last thing you want is to begin the collaborative divorce process only for things to fall apart because you stubbornly refuse to make concessions in exchange for your own requests.

The Benefits of a Collaborative Divorce

A collaborative divorce allows each side a chance to step back and listen and explain themselves without feeling they’re being judged or shut down. It allows everyone to put aside their differences and hurt feelings, and explain in clear, objective terms what they feel they deserve and why. Collaborative attorneys can then step in and provide solutions for each person to meet their needs in an equitable way.

This setup goes a long way towards speeding up the divorce proceedings and keeping the costs of a divorce down. However, it’s also true that collaborative divorces are not for everyone. Some separations will always be bitter and painful, making it impossible for both spouses to even talk to one another, much less work together.
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When two people are filing for divorce, the last thing on their mind is taxes. Divorces are already highly stressful events, and the tax confusion doesn’t make it any easier. Some of the tax issues that will arise include deciding what status to file under, paying taxes on alimony, deciding which parent gets to file any children as dependents, and so on. Understanding these issues are the best way to ensure you and your soon to be ex-spouse reach a fair agreement.

Understand Filing Status

Your filing status depends on your marital status on the last day of the tax year. So, if you are still married and living together on December 31st at midnight, you must file either as “married filing jointly” or “married filing separately.” If you are considered legally separated, or you have not lived together for at least 6 months of the year, you must file as “single” or “head of household.” This also applies if you were married for part of the year, but divorced before December 31st. Typically, the custodial parent of a couple’s children is who files as “head of household.”

“Head of household” and “married filing jointly” filers will typically pay lower taxes than those filing as “single” and “married filing separately.” So, if you’re presently going through a divorce, you should try to file as “married filing jointly” so that you both can save some money while you still can.

Understanding The Tax Implications Of Child Support And Alimony

Child support cannot be deducted by the person paying it, and the spouse receiving it is not required to pay taxes on it.

Alimony, on the other hand, is tax deductible by the spouse paying it. The spouse receiving alimony must treat it as taxable income as well.

If a couple decides to combine alimony and child support into what’s called “family support,” the monthly payment is tax deductible for the spouse paying it, while the spouse receiving it must pay taxes on it.

Understanding Which Parent Can Claim Children As A Tax Exemption

Unless the divorce decree states otherwise, the child tax exemption goes to the custodial parent. If parents have joint custody, the parent who has the child the highest number of days in the tax year is eligible to claim the exemption.

If you are the custodial parent of a child under the age of 13, and you incur work-related child care costs, it can be claimed as a tax credit. This is only applicable to the custodial parent, however.
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The messiest part of a divorce is often splitting assets and debt. When a couple can amicably decide how to split their assets and debt, they submit a marital settlement agreement to the court, which outlines the provisions made. When a couple can’t work together to split their assets and debt, however, the court will step in and make the decisions for them.

It’s important to remember that courts have the discretion to distribute community property in any way believed to be fair, and often times, fair doesn’t necessarily mean equal. When determining if the presumption of equal division should be adjusted, the court will consider factors such as age, education levels, income, and health. Other considerations include:

If one spouse is the primary caregiver for the couple’s children
If one spouse is determined to be at fault for the divorce

Understanding The Difference Between Communal And Separate Property

For divorcing couples looking to divide their assets without court intervention, it’s important to understand what assets actually are. Texas is a communal property state, meaning all income earned and property acquired by either spouse throughout the marriage is community property and belongs to each spouse equally. The court presumes that all property held by either spouse throughout the marriage is community property. Assets that are to not be treated in such a manner are what’s known as separate property.

Separate property can include anything that belonged to one spouse prior to a marriage that was kept separate throughout the marriage. Common examples include an inheritance, and money received by one spouse as part of a settlement or lawsuit due to injury can be considered separate property. The only time this would not be considered separate property would be if the money was intended to compensate for earnings lost due to an injury.

Dividing Assets

The first step in dividing assets fairly is to make a list of all community property, along with the value of each asset. This list will likely include houses, cars, bank accounts, investments and retirement plans.

When dividing assets, both spouses should consider the fairest way for assets to be split. Sometimes, it may not be best to split everything 50/50. For example, if a couple’s assets were two bank accounts, one with $100,000 dollars and one with $80,000, and a car worth $20,000, options may include:

Splitting both bank accounts, selling the car and splitting the money from the sale
One spouse keeping the bank account with $100,000, and the other spouse keeping the other bank account with $80,000 and the car worth $20,000. This is still equally split, but simpler.

Dividing Debt

When couples file for divorce, they may find they have acquired a considerable amount of debt, including car loans, mortgages, credit cards. These debts factor into a couple’s net worth, which means both spouses are responsible for them.

In Texas, certain debt is considered community property. If a debt is incurred during the marriage, and the creditor agreed to look solely at one spouse’s separate property for satisfaction of the debt, the debt may be viewed as separate property. Debt incurred prior to the marriage is generally considered separate property.

When a divorcing couple is trying to figure out how to split their debts, the first step is to write down each debt, along with its dollar amount. The court will ultimately decide who is responsible for each bill when dividing assets and debt, but having a proposed plan in place is helpful and a good starting point.

Division of debt should always be fair. So, if one spouse receives more property, that spouse should also take on more of the debt. The net worth of all of the debt and assets in a marriage is what should be considered, and should be split evenly, but can vary of course, depending on the particular circumstances.
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There’s no denying that a divorce is a highly disruptive event in a person’s life. It represents the end of a way of living you have become familiar with, taking a heavy toll on your emotional and mental health.mIt can also pose significant damage to your finances, so much so that even moneyed divorcees can lose a significant portion of their current and future wealth.

More importantly, even if you have substantial savings tucked away in your accounts, these assets may be frozen throughout your divorce proceedings, leaving you with no way to pay for your divorce. 

Financial Damage Intentionally Brought Upon by Spouses

But that’s not all. Some spouses who wield the financial power during the marriage intentionally cut off their ex’s access to credit cards, joint accounts, and other conjugal assets, hiring the most cunning of attorneys to put financial pressure on their former partners.

Some wealthy husbands and wives have been known to drag the divorce proceedings to a crawl, a tactic that intentionally drains their spouse of all funding. This forces the weaker party to surrender and agree to an unfair settlement that could have been avoided with enough resources.

Sure, you can borrow money from your friends and family, but not everyone has that option. Fortunately, situations like these are where divorce finance can do a lot of good.

What is Divorce Finance?

Divorce financing helps to even the playing field, giving spouses with little to no financial options the funding to pay for their attorney and other litigation fees. Financing also helps them maintain their quality of life.

Financiers can be reimbursed through a “contingency fee agreement,” which means they “win” if the client reaches a favorable decision or settlement. This contrasts with dealings with divorce lawyers, who can’t represent clients based on the outcome.

With independent financing, cash-strapped spouses can go after the settlements they think they deserve but would never have access to without the right resources.

Divorce financing is a relatively new product, with firms like New Chapter Capital and BBL Churchill among the few to offer loans and financing options specifically for individuals going through a divorce. These firms offer loans or advances to help clients pay for attorney fees and personal expenses, with repayment only required until reaching a settlement.

But how do these firms turn a profit? In theory, any divorce can lead to a favorable settlement if the litigant has enough resources at his disposal. Financiers know this, which is why they see your divorce as an investment opportunity. By investing in your divorce, the financier is making a calculated risk to get a solid return on their money.

Although no amount of money can completely ease the emotional and mental stress of a divorce, these kinds of products and services offer a solution to the financial burden of a separation, allowing litigants to devote their time to more pressing matters, like child custody and property division.
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