Defining Your Needs: Lifestyle Planning
The divorce process is costly. One income often supports a single household. When divorced, that same income may need to support two households; however, in recent years there has been a growing trend to the two income household. This is creating some new dynamics in divorce. The higher income earner may be the wife rather than the husband who historically was the primary wage earner. Consequently, more men are asking for spousal support as part of the marital settlement. Spousal support (alimony or maintenance as it is sometimes called) is not as common today as in past generations.
Some of the primary expenses to consider in Divorce Lifestyle Planning are spousal support, child support, and insurance costs of all types. See our comprehensive Lifestyle Planner to determine what your ongoing expenses are and what your monthly outlay is.
Spousal Support and Child Support Facts:
A spouse may be eligible for temporary spousal support during the separation and divorce proceedings. Child support for the spouse who takes care of the children is generally available for that same period. Child support may be paid by either spouse or be a divided expense between both spouses.
Spousal Support (Alimony or Maintenance)
- Spousal support is taxable to the person receiving it and tax deductible to the person paying it.
- Spousal Support is granted by a judge’s decree or spousal agreement.
- Judges decree can be based on ability to pay, need, length of marriage, standard of living, age and health of spouse.
- Judges use a lot of discretion in awarding spousal support – conduct and fault can be a consideration even in a “no-fault” divorce.
- Division of assets is the first consideration, then spousal support.
- Duration of support is also at the judge’s discretion.
- Spousal support is generally modifiable.
- Only state law governs spousal support.
- In states that recognize common-law marriages, they are treated like legally married couples.
- Child support is not tax deductible for either spouse.
- A paying parent who files for bankruptcy must still pay child support.
- Child support orders (in separation or divorce legal papers) state when payments are due, the frequency, and the dollar amount of each payment.
- Support for a child usually lasts until he/she turns 18 years old. There are special situations that may differ such as disabilities or by parent agreement.
- Guidelines for determining child support are based on your specific state.
- State guidelines usually consider the number of children needing support; both parents’ income; and the child’s basic-need expenses such as daycare costs, food and clothing, healthcare, school costs etc.
- Child support calculation formulas can differ by state
- Check your state’s online resource section for child support calculators to estimate the amount of support for your specific situation.
- The 1994 Family Support Act mandates that the non-custodial parent’s employer must deduct child support payments from that parent’s earnings and pay a child support enforcement agency or make payments directly to the custodial parent.
Divorce Insurance Options
If you are currently covered for medical and dental insurance, take the opportunity now to schedule checkups for you and your children. Your coverage could change later even if you are able to elect COBRA coverage. The cost is usually much higher because the medical insurance is not subsidized by the previous employer when you have COBRA. Check with your current insurer for details on COBRA eligibility, costs, coverage duration, and details related to divorce. The Consolidated Omnibus Budget Reconciliation Act (COBRA) as it is called has many stipulations. It is good to know these early in the divorce process.
Other important kinds of insurance that need to be reviewed in addition to medical, dental and vision are:
- Life insurance – Universal, Whole Life, Term Life
- Disability insurance
- Long Term Care
Insurance is a complex business. Discuss the elements of each type of insurance with a Certified Divorce Financial Analyst® (CDFA™). The value and best way to maximize insurance should be done before discussing the topic in a divorce settlement negotiation.
For existing policies, monitor them to insure that the premiums are being paid on time during the divorce process. Do not let a policy lapse occur without understanding the possible consequences.