My client Susan first came into my office when she was just starting the divorce process. She had been a stay-at-home mom to her three sons for 15 years and was finishing up a masters degree in math education at TCNJ. Married for 20 years, their household income was $150,000 per year. They had some credit card debt and mortgage on their home in Monmouth County.
After meeting with me and then several divorce attorneys, Susan decided she was going to handle the divorce herself. She felt that since things were amicable, she and her then husband could work out the details for themselves. Using the internet and a few books, they hammered out an agreement, filed the paperwork in court, and did make it through to a final decree for divorce.
Susan stumbled through the first 18 months of the divorce realizing that their agreements were not as air tight as they could have been and the ambiguity left too many decisions up for interpretation. Finally, Susan found her way to my office again when her ex-husband decided to sell a joint investment without her permission, taking a huge loss, and saddling her with an enormous debt (the down payment on that asset was on a home equity loan, a home they still owned together because no one had gotten around to selling it).
After looking over their final divorce papers, the current joint assets, and the debt incurred after the divorce, we negotiated a new plan to divide their assets disentangling their finances and making sure she did not suffer for the debt he incurred with the sale of the joint asset.
The new plan included:
- While Susan was not interested in bankrupting her ex-husband making him soley responsible for paying off the HELOC (not in the best interest of their three children), she was not willing to be saddled with debt from the sale of the asset (which occurred without her permission). So, we negotiated a way to have Susan obtain a larger portion of an assets that had yet to be divided. This included several investment accounts.
- A schedule was put in place to divide all other joint assets. That plan was missing from her original divorce agreement. This included a detailed list of the bank accounts, different financial vehicles, and even a timeshare. Most importantly we negotiated who was getting what from each asset, who was responsible for dividing each asset, and an appropriate schedule of events for each piece of each asset to be handed during division.
- A Qualified Domestic Relations Order (QDRO) was never filed to separate the husband’s IRA. A QDRO is critical yet complex legally binding document used when dividing retirement assets (such as a IRA or 401K). The required language differs based on each financial institution where the savings instrument is held. With this document in place the split is not seen as a gift to either party and therefore it is not taxed. Susan was set to receive $50,000 from one IRA, so this protection was critical to avoid an enormous tax bill.
The parts of the divorce that were working were left in-tact. We agreed to and filed new financial agreements with the court, which were signed by a judge and became legally binding. Susan and her ex-husband did not even have to return to the courtroom. I am happy to report that all parts of the agreements have been completed, all accounts have been divided and my client now has the financial security and independence to move on with her new post-divorce life.