financial issues Archives - Tracy Stewart, CPA

Do’s and Don’ts for Boomers Living in Sin

July 24, 2015 by Tracy Leave a Comment

After a divorce, many Baby Boomers swear they will never marry again. Then they fall in love. In a previous post, Boomers: In your next relationship just shack up, I listed the financial incentives that are fueling the surge in seniors shacking up together. In this post, I will share tips on how to handle your finances when living in sin.

Share Household Expenses? Definitely

Many divorces are sparked by the inability to talk openly about money. In your post-divorce relationship, don’t fall into the same trap that got you into that divorce. Make it a priority to go over the money situation once a month. Share the household expenses equally or proportionately based on your respective incomes. Here’s where that joint account comes in handy to pay the bills. You each deposit your share of money to cover expenses and pay for them out of the joint account.

When I say “household expenses”, I am not talking about improvements to the house; fund those by the person who owns the house. Sharing in the cost of remodeling or major repairs can get complicated when one of you passes away first without clearly covering this situation in the estate planning documents. Again, I can refer you to excellent estate planning attorneys in the Brazos Valley.

Mingle Assets & Debt? Nope

When shacking up together, retain separate checking accounts. One joint account is fine as long as you also have your separate account. Do not apply for a joint credit card. Do not comingle debt.

Do not contribute toward the purchase of a major asset that is titled to your partner. Talking about houses, vehicles, boats, airplanes and investment accounts. Ok, if you just have to contribute, be sure your name is also on the title. If you are leasing an abode, get both your names on that lease. No exceptions. Consult with an estate planning attorney. Ask me for the best ones in the Brazos Valley. Do not get yourself into the pickle of co-owning a house with your partner’s mother after your partner tragically and suddenly drops off the perch.

Get a No-Nup? Yep

Ok, it might not be romantic, but get a no-nup anyway. This is a legal document that addresses property division, financial support and debt planning for the possibility that your relationship ends prior to either of you passing on. You want to be clear what will happen to your assets if and when the relationship ends. It is not a DIY project. You will need a family law attorney, so call me if you want recommendations.

Boomers: In your next relationship just shack up

July 20, 2015 by Tracy Leave a Comment

It used to be called living in sin. It is now socially acceptable and growing by leaps and bounds among boomers. Shacking up is a popular alternative to marriage and divorce, even a nice collaborative divorce. Older people are living together for an average of nine years. Financial reasons top the list of incentives.

Loss of Income. Alimony usually stops when the recipient marries. If you have survivor’s pension benefits, you might lose those if you remarry. If you are receiving a share of your late or former spouse’s Social Security benefits, you could lose those benefits if you remarry before your 60^th birthday. If you remarry after age 60 (age 50 if you are disabled), you can collect benefits on your former spouse’s record.

Potential Financial Burdens. In Texas, both spouses are on the hook for most debts incurred during the marriage, regardless of who incurred the debt. Then there is the cost of nursing homes at $5,000 a month in the Bryan College Station area. As a married couple, such costs can devastate the surviving spouse’s financial security.

Tax Disincentives. If each of you has income, as a married couple you could be thrown into a higher tax bracket. As singles living together, you each get $3,000 of capital losses to offset ordinary income, which results in an offset of $6,000 over the two tax returns. As a married couple filing with a joint tax return, you two would only get $3,000 to offset.

Estate Planning Risks. Protecting their children’s inheritance is a big reason Baby Boomers opt to cohabitate. Assure yourself and your heirs that their inheritance will remain intact. Visit with an estate planning attorney before you move in together. Contact me if you need a recommendation for an excellent estate planning attorney in the Brazos Valley.

In my next blog, I’ll give you tips for what to do and what not to do when shacking up. Do’s and Don’ts for Boomers Living in Sin

Does Divorce Affect My Credit Score?

March 30, 2015 by Tracy Leave a Comment

There’s enormous power in those three little digits.

When you’re going through a divorce, it seems like you’re surrounded by dollar signs and considerations about your financial future. But is it really necessary to add your credit score to that growing list of concerns?

Is A Healthy Credit Score Really THAT Important?

While credit reporting and the scales being used to rate an individual’s credit worthiness have changed a bit over the years, the sentiment has stayed the same.

There’s usually a range of numbers (let’s say 500-900), and your score (based on factors such as history of your credit accounts, whether or not you repaid the debts on time and the ratio of debt to available credit) is determined within this range.

With this score in hand, lenders, services and other entities can then assess whether or not they’ll be able to extend credit, service or better rates to you. And as someone who’s going through a divorce and will have to make some lifestyle changes and adjustments, having a favorable credit score could prove quite helpful.

What are some reasons for needing a healthy credit score?

Establishing a mortgage for a new home
Getting a loan for a new car or student loans
Opening credit accounts for purchases and expenses
Qualifying for better insurance rates
Applying for certain jobs which require a check of your credit history

We’re an economy and a society that runs on credit, so it’s important to know your score and the factors that contribute to it.

Okay, But Does Divorce Affect My Credit Score?

I recently had the chance to chat with Julie Springer, Senior Vice President of TransUnion, on the effects of divorce on an individual’s credit score.

The short answer: Divorce alone won’t affect your credit score, but some of the financial changes associated with the process could certainly make an impact.

Ms. Springer mentions the fact that many couples co-sign for loans and credit accounts, and as these accounts are closed with the divorce, individuals may see changes to their credit report and score.

The individual being removed from an account will see their history with that account end.
The individual now minting the open account could see a rise in their ratio of debt to credit.
Any late payments are now the sole responsibility of the individual with the account.

Springer’s example: A couple has an account with a balance of $1000. During the divorce, person A is removed from the account, which means their history with that account is now complete on their credit report. Person B is left with a $1000 balance to pay off, which could likely affect their debt to credit ratio (a factor that is considered when determining and individual’s credit score.)

Tips For Minimizing Negative Effects Of Divorce On Your Credit Score

Ms. Springer also had a few ideas to help individuals minimize any negative effects changes from a divorce may have on their financial accounts.

Split accounts, debts and savings — If you can’t split the responsibilities of an account, divide the responsibilities of a joint debt. (For example: The person living in the house takes on the mortgage, the spouse who takes the car gets the auto loan, etc etc.)
Make a list of current debts and the payment due dates — Your spouse may have handled paying the bills, so it’s important to know the who, what, when and where to help avoid missing any payments.
Remove each other as authorized users on accounts — If he or she misses any payments, this can negatively impact your credit score.
Create a post-divorce budget — Splitting one household income into two can change your spending habits and lifestyle, so it’s important you create and implement a realistic post-divorce budget to help curb any extra spending which may cause you to go into debt.
Check your credit report — Make sure you stay on top of your credit report, especially a year or so after the divorce. This will allow you to spot any changes that may have happened as a result, including any missed or late payments on accounts in your name.

There are a variety of services and tools to help you view, manage and monitor your credit report, but I definitely recommend you first start by checking your report and score with TransUnion.

Being savvy with your finances is the quickest and easiest way to minimize (and even avoid) the negative effects of divorce in your life. Dodge a drama-filled divorce and spare yourself the heartache of a messy ordeal by getting your free copy of my ebook, “The Pitfalls of Divorce: Avoiding the Five Most Common Mistakes Couples Make During Divorce.”

How divorce after 50 may affect retirement

February 24, 2015 by Tracy Leave a Comment

Fact: 30% of divorced women over the age of 62 who are still single live at or below the poverty line, according to research by Susan Brown, a professor at Bowling Green State University who has chronicled “gray divorce” throughout the years.

If we were to compare that to married couples in the same age demographic, only 4% live at or under the poverty line.

I just did a piece for the Chicago Tribune and Janet Kidd Stewart on divorce and retirement benefits – and why I think collaborative divorce may be the single best decision divorcing couples over 50 can make. Aside from the fact that collaborative keeps your divorce civil, respectful and private, the process also works to address your immediate and long-term financial needs (including those retirement years). [Read more…]

How much will this divorce cost?

May 2, 2014 by Tracy Leave a Comment

I hear questions from people who come to me for divorce financial advice. No matter whether we are talking about College Station or Houston, the answer is always “it depends.”

It depends upon which divorce process you choose. Do it yourself, litigation, mediation or collaborative. Even the do it yourself can be expensive if you are not fully aware of the complexities of your financial situation. Don’t be like most people. Don’t assume your situation is simple.

It depends upon how cooperative you and your spouse are going to be with each other. Will you compromise quickly? Will you fight over the vacation souvenirs? (Yes, I saw that happen.)

It depends upon whether you are counting the future hidden costs of incomplete information. Don’t be focused only on the present. Look ahead at the possible financial gotchas that will bite you if you shortcut your divorce. Hire competent professionals: attorney, divorce CPA and child specialist.

It depends upon whether you hire the cheapest or the most expensive attorney. Don’t do either. Hire an attorney with average hourly rates. Ask other professionals for recommendations. Your friends and colleagues will give you names, but that doesn’t mean their favorite is the right fit for you.

It depends upon how organized you are. The more organized, the more you can save on fees.

3 Steps to Being Financially Smart in Divorce

April 19, 2014 by Tracy Leave a Comment

Being smart about you money before and during a divorce can make the difference between living a lower lifestyle and living your current lifestyle. There are tons of financial details to be aware of during your divorce. But if you nail down the basics, those details will fall into place more easily.

Basic Step #1: Be completely organized. Create logical files for all your financial information. Create a balance sheet – a list of everything you own and everything you owe and include copies of proof, such as mortgage statements, property tax statements and retirement account statements. Assemble the last twelve months of all credit card and bank statements. Being complete will save you time and professional fees down the road.

Basic Step #2: Hire a divorce financial advisor. Having a financial advisor on your team means that you will have an objective expert to see the things that your emotions block. To survive financially, you need to recognize the good news and the bad news. To recognize them, you need an expert to explain them to you. Much of the financial issues in divorce include little known gotchas. Don’t let those bite you.

Basic Step #3: Don’t listen to your friends. They have the best intentions, but they also are not experts in your divorce. If their claim to expertise is their own divorce, you are getting slanted advice. Your divorce is different. They are all different in quiet but crucially detailed ways. Be careful to avoid the wrong advice.

Divorce After 50: Health Insurance Is Tricky

September 2, 2013 by Tracy Leave a Comment

Divorcing people over 50 are part of a growth trend in America. Between 1990 and 2009, the divorce rate for those 50 and older has nearly doubled, according to the National Center for Family and Marriage at Ohio’s Bowling Green State University.

Younger couples negotiate for child custody while midlife couples negotiate for long-term financial security. These older couples are dividing retirement assets, health insurance, real estate and business interests, not to mention debt. Getting replacement health insurance coverage can be daunting. Many clients procrastinate on this research, causing a bit of panic at the last minute. Do not do that to yourself. The moment you realize divorce is coming, start studying your health insurance choices.

Trying to get health insurance in your 60’s can be a challenge. You have had time to develop health issues that come into play when you seek coverage quotes. I send my clients to an insurance consultant here in College Station. A good consultant will explain your options along with the pros and cons of the various policies and coverage details. Insurance is a complex area. You need to be able to rely on an expert who will educate you while giving advice.

One of your health insurance choices may be COBRA. This is a coverage that stems from your spouse’s employer. Your cost will be higher than the cost your coverage was while married. You will not get the employer subsidy that you once had. You can have COBRA coverage for either 18 or 36 months, depending upon the size of your spouse’s employer. The cost is not your only issue.

Most people don’t think ahead to the end of the COBRA coverage. By that time, you may have developed new health issues that will cause your replacement policy to be even more expensive. Consider this before you sign on to COBRA. Learn what your options are before making any decisions.

If you are facing divorce, contact me. I can refer you to a health insurance advisor and recommend an attorney who is a good fit for your unique situation.

Low Cost Divorce

August 5, 2013 by Tracy Leave a Comment

Are you looking for a clean, quick divorce in Bryan/College Station that avoids expensive attorney fees? Your answer is the CPA-driven early intervention mediation. Another name for this is “let’s get it done without wasting money.”

Is this right for you?

You should seriously consider this option if you both answer yes to the following questions.

Are you both on reasonable speaking terms?
Do you both believe you can reach mutual agreements?
Do you both want financial advice about your property division and how it affects your future?
Do you want to arrange your settlement agreement to avoid income tax problems?
Are you ready to move at a quick pace?

Why a CPA mediator?

Attorneys are great with the legal issues, but not so great with the financial issues.

I met a disappointed ex-husband whose Bryan attorney hadn’t told him about the risks of not being able to buy a new home after the divorce. Had he known about this, he would have negotiated differently for the property settlement. He cannot qualify for a mortgage on a new home as long as his name is still on the mortgage tied to the former marital home. His ex-wife is in no hurry to refinance the mortgage.

A New York City divorce attorney found my website and has been calling me to consult on divorce cases. Last year I taught him about the Internal Revenue Code rules on alimony recapture. That kept his client out of hot water with the IRS.

There are many more financial issues that a divorce CPA mediator can identify during mediation. This expertise can help you avoid nasty post-divorce financial surprises.

Who writes the divorce decree?

Just as attorneys shouldn’t pretend to be CPAs, accountants shouldn’t pretend to be attorneys. After I help the two of you have a successful mediation on property and children issues, I recommend two reasonable attorneys who want to write your divorce documents. I pick these Bryan/College Station divorce attorneys carefully for their efficiency and their cooperative style. They will advise you on legal matters, but they won’t try to undo your agreement and burn through your savings account with large legal fees.

If you would like to know more about getting your divorce done without wasting money, ask me about mediating your settlement. Drop me an email at stewart@texasdivorcecpa.com.

Why Collaborative Law Divorces Save You Time, Money and Hassle

July 22, 2013 by Tracy Leave a Comment

The collaborative law divorce process is the preferred process of educated couples seeking divorce. Like you, they want to save time, money and hassle. These couples like the benefit of being able to make decisions with the help of experienced collaborative professionals. These couples like being in control.

Collaborative couples don’t have to wait for lawyer responses or court dates. They can wind up their divorce at their own pace. When they have obligations in their “real” lives, they can schedule team meetings around those events. Their professional team works around the couple’s schedules instead of the court dictating their schedules.

Most collaborative alumni tell me they are now communicating better than when they were married. This is because they selected a Mental Health Professional for their team who taught them how to effectively communicate as co-parents.

Collaborative couples select a single neutral CPA who understands their financial situation. The neutral financial professional analyzes the finances to maximize how the redesigned family will cover the children’s expenses and spousal support. The collaboratively trained CPA helps the couple decide how to stretch their limited funds to benefit the entire family.

If you would like to learn more about collaborative law divorce options in Bryan/College Station, just let me know.

Divorce: Watching Out for Your Financial Future

July 15, 2013 by Tracy Leave a Comment

Bryan/College Station couples in divorce who stay out of court can get ahead financially by choosing the collaborative law divorce process. Unlike all the other divorce processes, collaborative law divorce provides a neutral financial advisor who has particular experience in helping couples move from we to me. You can save divorce costs and have a new financial plan that gets you going in your new life.

Divorce is one of the most stressful transitions you can face. Most individuals just want out, no matter what the cost. Unfortunately, without divorce financial advice, the cost can be very steep indeed. It can include decades of fighting in court and difficultly making ends meet. The usual financial planning structure does not work in divorce.

Your financial considerations hinge on the fact that you are moving from a couple to a couple of individuals. You and your spouse may have always differed in your financial planning opinions, but you had to compromise in some way during your marriage. After the divorce, each of you can make your own choices. This transition in planning is unique to divorce.

In a Bryan/College Station collaborative law divorce, you work with a team of experts trained by the Collaborative Law Institute of Texas. This includes attorneys for both sides, a neutral CPA/financial planner and a neutral divorce coach/child specialist. The neutral CPA develops a plan for splitting your property and is prohibited from taking either of you as a client after the divorce.

In mediation, you usually only have your attorney to advise you, missing the financial expertise of the collaborative law process. If a financial planner is engaged for a mediated divorce, that person can accept either party as a client after the divorce. This is a financial risk to you if your spouse promises to be a paying client after the divorce. Only the collaborative process ensures the protections of a truly neutral financial advisor.

I have worked on about 100 collaborative law divorces. If you would like my advice on which collaborative law attorneys to interview, feel free to contact me at stewart@texasdivorcecpa.com.