Amazon Fairness and Divorce, Oh My!

Jeff and MacKenzie Bezos

For anyone who can’t let go of that “Money=Happiness” thing, just read and be kind of glad that you don’t have so much money that God borrows from you.

The divorce fairness issue that Jeff and MacKenzie Bezos don’t have to worry about

https://www.cnn.com/2019/01/11/opinions/divorce-unfair-bezos-opinion-cohen/index.html

Amazon Fairness and Divorce, Oh My!

For anyone who can’t let go of that “Money=Happiness” thing, just read and be kind of glad that you don’t have so much money that God borrows from you.

The divorce fairness issue that Jeff and MacKenzie Bezos don’t have to worry about

https://www.cnn.com/2019/01/11/opinions/divorce-unfair-bezos-opinion-cohen/index.html

Post Divorce Portfolio Balancing Act

All investors review their investments annually, and in light of the market’s recent volatility, it would be wise to review your investments soon as the new tax laws may affect your strategies. “Rebalancing” may be in order if your portfolio’s asset allocation no longer meets your current long-term objectives.As always, you should consult with your tax preparer and financial advisor to ensure that whatever changes have occurred in your life are reflected in your fiduciary’s overall plan.

It’s easy to see why PeaceTalks relies on the teamwork dynamic of involving tax and investment specialists in all our mediations. From the start couples build individual strategies as the assets are divided until a settlement agreement is reached and they sign off to their mutual satisfaction. We refer people, when necessary, from our group of trusted associates and we work seamlessly with whomever a client trusts.

The following has been excerpted from and article in The Press-Enterprise by Terry Parker. Look over these ideas and see if something might aid you in your preparation and planning. If you have a question please contact the office anytime.

Tax-Loss Harvesting
Are you holding an investment that has lost value since it was purchased in your taxable portfolio? Intentionally selling this investment at a lost to reduce your tax liability is called tax-loss harvesting. The capital loss realized from this transaction can be used to offset capital gains, reducing your tax liability.

Give the Gift of Cash
Do you want to give a gift of cash? In 2018, you can give a gift of cash up to $15,000 to as many different people as you want without incurring the gift tax. The $15,000 is a per-person limit, not a total limit. Gifts up to this amount—called an annual exclusion—are not reportable on your tax return. A husband and wife can each make a $15,000 gift, giving as much as $30,000 to as many people as they choose each year.

Qualified Charitable Distributions
At the end of 2015, lawmakers approved a permanent measure allowing individuals who are 70½ years old or older to make qualified charitable distributions (also known as QCDs) directly from their individual retirement accounts (IRAs) to their favorite qualified charities.

Teri Parker is a vice president for CAPTRUST Financial Advisors.

Click here for link to full article

Taking Stock In Your Divorce

In light of the changes in the tax laws and the recent roller coaster volatility in the stock market it might be prudent to talk with your financial advisor about whatever investment assets are attached to your settlement agreement. You can also get feedback and updates related to other nest eggs that are not part of any divorce settlement, which is nevera bad idea.

The division of investment assets can be gnarly and painful so people are getting creative in settling these issues through trading, and exchanging their respective interestsin a mutually agreeable fashion. So identifying and getting a valuation, along with guidance, about your asset options will only aid you in making any changes before the December 31St deadline.

I’ve included some tips from veterans in this field that echo ideas that we’ve heard in our discussions at PeaceTalks with our financial associates.

Splitting Retirement Accounts

To understand the value of a retirement account, you need to know how withdrawals will be taxed. In general, there are 2 main types of retirement accounts: traditional and Roth.

In a traditional account, contributions are made before taxes—or you get a tax deduction for the amount contributed if it has already been taxed. Contributions to a Roth account are made after taxes are paid but the benefit is that withdrawals of earnings and contributions in retirement are not taxed.1

Bottom line: $100,000 currently in a Roth is worth more than $100,000 currently in a traditional retirement account simply because of the different tax treatments in each type of account.

Taxable Investment Accounts

When it comes to taxable investments, it’s not about the value you see on your statement, but what you get to keep after taxes.

In general, when dividing investments in a divorce, couples may have options: One option would be to sell investments and divvy up the proceeds. This can have tax consequences. Alternatively, you can generally split the investment holdings. For instance, if 100 shares of stock are part of the marital property to be divided in half, one party gets 50 shares and the other party gets the remaining 50 shares. The IRS allows divorcing spouses to each keep the same cost basis and holding period for an investment they already own. Cost basis is the price at which the investment was originally purchased. Holding period is important because profits from the sale of investments owned for a year or less are taxed at your ordinary income tax rate, while investments held for more than a year are taxed at lower long-term capital gains rates.

Assuming your investment has appreciated, you will end up with less than the sale price—because you have to pay taxes on any gains over the cost basis. Exactly how much will depend on your tax rate, holding period, and cost basis, which can vary for a single investment if you bought shares over time. So, if you’re dividing investments equally, it’s important that the cost basis is divided equally as well—your financial institution or Fidelity representative should be able to help with that.

Of course, other important things to think about with regard to investments are the future prospects for growth or income, your own tolerance for investment risk, your financial needs, and your timeframe for investing.

Tax Consequences of Investment Asset Allocation

In addition, periods of market volatility stand to impact capital gains and losses generated from investment assets. The former can create a tax liability (e.g. where a holding is sold for more than its purchase price), whereas generally speaking the latter results in an asset (e.g. where a stock’s sales price is less than its purchase price, thus creating an offset against present or future capital gains).

In high net worth divorce cases often involving millions of dollars of investment assets subject to substantial market gains and losses, it is important in periods of market volatility to recognize that certain holdings may carry positive or negative tax consequences to the litigants. In these circumstances, it is good practice to consult with financial advisors and accountants at even this micro level of asset allocation to ensure that assets and liabilities are being apportioned and allocated as the litigants contemplated, and to avoid an unintended result of one spouse being allocated a vastly disproportionate share of capital gains or losses.

Quotes From Divorce Veterans

There was an article in the Sunday LA Times by Ben Steverman of Bloomberg News with some very clear advice from some divorce professionals that have been doing this for a long time.

His article was written before the fires started devastating the lives of thousands of our fellow Californians. PeaceTalks and every other mediation group I know of will help with emergency paperwork in concert with any attorneys to get something in place by December 31St. Everyone will do their bit. Good luck.

When a rich couple splits, divorce attorney Lowell Sucherman gets blunt:

“Look, I’ve been doing this for 50 years,” he says early in the negotiations. “I know how this case is going to come out within a few dollars.” Find a fair way to settle quickly, he says, and you can save enough in legal fees to send your kid to college. Or you can fight tooth and nail, he adds, “and I’ll send my grandchildren to college.” His warnings work only some of the time.

 Michael Stutman, a partner at Stutman, Stutman & Lichtenstein in Manhattan, said he’s seeing more feuding couples open to negotiation as the alimony deduction deadline looms.

“When you’ve got people pretty close to an agreement, the specter of losing that benefit is pushing people together.”

Stutman is handling a divorce for a real estate mogul, and it’s taking a long time for two skilled forensic accountants to untangle the family’s holdings. The couple is “beside themselves” with how long it’s taking, he said.

Peter Walzer of Walzer Melcher, a law firm in Los Angeles. said:

“Still, there may be a workaround. If a settlement agreement, which often includes alimony terms, is reached by the end of this year, many divorce lawyers said, that would probably be sufficient to still get the alimony tax break. But that isn’t airtight, and there could be issues if the agreement is altered in the future.”

Chris Chen of Insight Financial Strategists, a firm specializing in post-divorce financial planning said:

“The difference between getting a divorce finalized this year and waiting until later is significant, especially among people with high incomes.

A chief executive living in New York City who is divorcing a stay-at-home mom would pay about $35,000 in child support for their two young kids. If he makes $1 million a year and agrees to pay her $360,000 in alimony, the 2019 rule change could cost them about $23,000 annually in higher taxes, according to an analysis by Chris Chen of Insight Financial Strategists, a firm specializing in post-divorce financial planning.”

The alimony change puts even more year-end pressure on divorce lawyers, judges and clerks. It’s not clear whether courthouses will be able to handle the extra crush of paperwork.

“They’re going to have a hard time processing all these judgments” said Peter Walzer.

Just to be safe, lawyers are getting paperwork in as soon as possible.

Link to full article here

Divorce Last Minute Loophole

For anyone that is still facing the December 31 deadline for filing here’s some possible relief from some of that anxiety.

A lot of people have come to Peace Talks worried, in part, about the alimony change in the new tax laws and what they have to do by December 31 to maximize their benefits going into 2019. There may be a way to avoid spoiling your holidays by having to deal with a mountain of paperwork. It’s not for everybody but it may work for you and Peace Talks can help you determine if it’s the right option for you.

These are some highlights from an article by John Fiske a veteran with 30 years of mediation experience. You’ll need to consult someone to verify that this strategy could work for you and at Peace Talks this is part of what we do every day.

“We can only imagine the conversations we will be having in December with clients who call us looking for a divorce and learn they have less than a month to write a separation agreement if they want to preserve the ability of the payer of alimony to exclude the payments from his or her taxable income.  

What if we could write a simple “placeholder” Separation Agreement to be executed before the end of this December, wherein one or both spouses agree to pay a defined amount a month to the other as alimony subject to an agreement of modification which defines all the terms of their divorce, including the alimony agreement, in a Separation Agreement to be filed in court in 2019 for approval?”

“Section 11051 of the TCAJA reads as follows: The amendments made by this section shall apply to any divorce or separation instrument executed on or before such date and modified after such date if the modification expressly provides that the amendments made by this section apply to such modification.”

“Since Section 11051 states that any divorce or separation instrument executed before December 31, 2018 is not affected by TCAJA and such an Agreement may be modified after that date, all that is needed is the signed Separation Agreement.”

“So the clear language of TCAJA does not require court approval or a divorce filing in court before December 31, 2018 if you have a written separation agreement that preserves the alimony exclusion. This step appears to satisfy the federal statute and gives people time to work out a sensible Separation Agreement without ruining their holidays.

Based on this analysis I will be suggesting to my mediating clients that if they want to have taxable and excludable alimony in their Agreement they consider writing a simple divorce or separation”

“You should sleep better knowing that you need not take away any remaining holiday spirit and activities in order to rush to sign more than a Separation Agreement before the end of 2018.”

Read the entire article here

Divorce and IRA’s – Watch Your Assets

Understanding different types of retirement assets, and the costs and taxes associated with each, when liquidated, can help you make informed decisions. Always consult with your financial and tax advisors during the decision making process especially before a liquidation.

To help ensure that you reach an agreement that is equitable to both of you, it’s important to know what you have now and understand how your agreement could impact your income, and lifestyle years after the divorce. You can’t direct the investment process for social security but you should be overseeing and getting advice about your IRA’s.

To understand their value, you need to know how withdrawals will be taxed from both traditional and Roth accounts. In a traditional account, contributions are made before taxes, so you get a tax deduction for the amount contributed if it has already been taxed. Contributions to a Roth account are made after taxes are paid but withdrawals of earnings and contributions in retirement are not taxed. We, of course, might see more changes to the tax code.

As an example, right now, $100,000 currently in a Roth account is worth more than $100,000 currently in a traditional retirement account simply because of the different tax treatments in each type of account.

This can be really complicated, especially when you have to deal with corporate 401K accounts. If this is something that needs attention in the life of your family and you need a suggestion please call the office and we’ll be happy to talk with you about some professionals we trust.

Divorce Lawyer Secrets

Peace Talks, by definition, gives people the opportunity to talk about everything that is relevant to reaching an amicable agreement. This applies, as well, to all the legal advisors that come to our mediation table. We get to listen to the perspective of the lawyer in many different types of divorce situations representing a wide range of individual styles. Many of these lawyers have shared personal “secrets” about advice they offer, and techniques they employ, that help ensure the best results for a client. If anything you see provokes a question about your situation please contact the office to find a time to talk that is mutually convenient.

“Don’t think assets in your name can’t be claimed by your spouse in a divorce. “Almost all assets are divisible, including airline miles.”

“It’s going to cost more money”. More often than not, the costs will often be higher than your lawyer’s original estimate.

Contested divorces cost anywhere from $15,000 to $30,000, which is the primary reason for the suggestion of mediation.

“Solo practitioners may not be able to give you the level of attention you need from your lawyer and costs may compel you to live very frugally, necessitating some dramatic cuts in expenditures”

While it is dispiriting, to “downsize” it’s better totemporarily cut corners in your lifestyle than miss opportunities in getting a faster, favorable outcome.

“Lawyer fees may be negotiable.” This doesn’t mean an attorney will always be willing to lower their fees, but for mediation cases there is usually a different fee schedule.

“If your divorce is uncontested, then you may be able to perform several parts of it on your own.” This means that you and your spouse agree on child custody, spousal support, child support, visitation, and division of property. This would be the ideal circumstance for mediation.

“You may still decide to retain an attorney, but their role will be limited to the navigation of court procedures.” The mediation team handles the paperwork to save time and money.

“An initial retainer fee does not equate to the actual cost of handling a divorce matter”. It is only an advance on work undertaken by the attorney and does not represent the thirty thousand dollar threshold reached by most divorce cases.

“That you should meet with multiple attorneys”

One secret your divorce lawyer doesn’t want you to know is that it is extremely beneficial to have multiple consultations. As with all partnerships it has to be a good fit and you have to sit down with someone to decide that for yourself. We have introduced many clients to people they eventually selected for representation.

Common Questions About Divorce

Here are a few of the questions that come up most often when people are their evaluating their options in relation to the divorce process. If you have some questions about your own situation please contact the office anytime.

How can I avoid going to court?
If you use a mediation service the court will be provided with what is known as a stipulated judgment, and you never have to appear before a judge. At Peace Talks we use a service to hand deliver all court paperwork to the court.

Does Divorce Mean We Have to Sell the House(s) or Can We Still Own Property Together?
In mediation the parties are free to decide between themselves how they wish to dispose of marital assets. Parties who were once married can continue to own property together as single people. Just the same way that people who were never married can own property together as “partners”. In mediation we will discuss how to continue to co-own.

How Much Dpousal Support Do I Get?
Spousal support is not based on a formula. Spousal support is the result of the careful weighing of the factors set forth in family code §4320. What happens in mediation is that the parties negotiate together so that in light of the applicable resources, income/expenses and needs, a workable, mutually agreeable, solution is arrived at. At Peace Talks we use divorce financial planning software to help you optimize your financial situation.

Can We Provide for Shared Custody of Our Pets?
Yes, although courts of law are traditionally reluctant to get involved in “custody battles” involving animals, parties in mediation are free to make any agreements they choose and that agreement will become the order of the court.
(Note that CA Gov. Jerry Brown just signed Assembly Bill 2274 that affects this process in the court system.)

 

Family Disputes: Money Matters

Of all the issues that come up with co-parenting “families of divorce” none are as insidious or downright ugly as “matters of money”. Having attained status as a C.F.P. over the years, I witnessed some of the acrimony the author describes and she is, unfortunately, not exaggerating.

The end of the year will often be an important “plumb line” for decisions about finances and investment assets, in particular. So with the changes to Alimony Payments along with some other adjustments in the Tax Code there might be a few unpleasant surprises that warrant discussion and, as the author points out, a lawyer’s office may not facilitate thebest overall result. If you, or anyone you know, comes into a situation like this and help might be needed please contact me with your questions.

Here is the link to an article by Carolyn Rosenblatt in which she advises F.A.’s to consider a mediator if and when they come up against a real struggle.

What Can Advisors Do When Family Disputes Threaten Client Wealth?

Mediation can be an effective way to reach agreements.

Carolyn Rosenblatt | Aug 20, 2018 | Wealth Management

Sometimes it’s fighting between parents and the next generation. Sometimes it’s sibling conflictsthat have existed for many years. Unresolved family disputes can destroy successful intergenerational wealth transfer with or without a family business at stake. When you’re managing the money, it can feel like torture seeing your clients behave so destructively. Expensive lawsuits or standoffs that damage businesses the family is arguing aboutcan threaten the very work you’ve done over time. You’ve tried to preserve wealth and keep families on track. They can ruin your best efforts.

Mediation is one underutilized way to resolve conflicts. You may be able to help your clients by suggesting mediation and finding a good mediator.

It starts with the help of a trained and qualified mediator who understands conflict resolution principles as a professional. The purpose isn’t to change any individual’s personal traits; rather, it’s to see if the family can come to some rules of engagement on the path to reaching agreements on specific issues. Focus isn’t on who’s right or wrong. It’s on the tasks at hand. Reaching an agreement about division of authority can be a major step forward.

Based on my own experience over many years of being an advocate at mediation in lawsuits, I saw that most of the time, matters get settled by the mediation process.

Perhaps the greatest benefit of a family mediation is that the underlying emotions that typically drive the conflict can come to the surface in a neutral setting. The mediator guides the discussion and helps each party identify and clarify what they want, guiding them to their own solutions.  Generally, this isn’t something they can do on their own. They’re too caught up in resentment, anger, fear or other feelings.

Read the full article here

Notes On Divorce and Tax Changes

This article by Dr. Halem seemed very timely as we hit the Labor Day weekend and all too soon will be staring Halloween and Thanksgiving in the face. I really liked what she said about keeping you informed after your mediation is finished.

Here are a few highlights and a link to the entire article along with reminder that help is available if you get stuck with a question.

The Tax Reform Law Impacts Families

By Dr. Lynne C. Halem from Mediate.com

Dr. Lynne C. Halem is the director at the Centre for Mediation & Dispute Resolution in Wellesley, MA

Helping you stay informed, even after mediation has ended, is a central part of CMDR’S long-term mission.

Child Tax Credit:
For children under 17, single parents earning up to $200,000 can receive a credit of $2,000 per child. This is a major improvement. Prior law limited parental earnings to $75,000 and provided a credit of only $1,000 per child.

529 Education Plans:
The new law allows parents to draw up to $10,000/year from 529 Plan(s) for pre-college private schooling or, say, tutoring. There is still no limitation on the amount of money to be drawn from 529 Plans for qualified college expenses.

Other Education Provisions:
You can still deduct student loan interest of up to $2,500/year. The Lifetime Learning deduction is also still in effect.”

Click here for full article

Interest Rising In Credit Rates

by Stephanie Maloney

Interest Rising In Credit Rates - Divorce Mediation - Los AngelesOnce in a while, something related to my previous incarnation in the investment world catches my attention, especially when it relates to the credit markets.

A piece in The Washington Post by David Lynch shed some light on important recent developments in the economy, particularly affecting consumers, as we moved into the second quarter.

Here are a few things David points to that are relevant to most of us, especially those people that are young and maybe first-time users of a credit card. Including, of course, our kids.

“For most of the past decade, as the U.S. economy marched through the second-longest expansion in its history, Americans enjoyed a rare trifecta: soaring stock values, cheap loans and consumer prices that rarely rose”.

” Consumer prices by a key measure are rising at their fastest point in seven years, mortgages and business loans are becoming more expensive, and after peaking in late January, the Dow Jones industrial average is now roughly flat on the year.

“The result is that Americans have to spend more money on staples, pay more to borrow money to buy big-ticket items such as cars and homes, and are seeing less growth in their investments. These factors will probably pinch Americans particularly during spring and summer when home-buying and driving peak.”

But today’s rising borrowing costs will hit an economy loaded with debt, meaning that people and businesses will have to spend even more on interest payments. Corporations outside the finance industry at the end of last year owed creditors more than $49 trillion.

Rising consumer prices have not been a significant problem for years. That may be about to change as the Commerce Department reported that prices, excluding food and energy products, rose at a 2.5 percent annual clip in the first three months of 2018.

It’s not difficult to “do the math” and figure out that a lot of us are going to have to make adjustments and make the time to talk about any major expenditures or purchases while conditions are still somewhat favorable.

Spring Cleaning

by Stephanie Maloney

Spring Cleaning Your FinancesAs we finally are getting some much-needed rain I keep thinking about things, besides the social and political black holes, that are ripe for clean up.

With a clearer picture of your finances under the new tax laws it’s probably not a bad idea to get an overview from your advisors about all your options.

I used to talk with my brokerage clients at the end of the first quarter, especially after a turbulent year, so they could position themselves for any changes their tax advisor might suggest.

We already know the landscape has changed but we’re just learning about the effects on our individual situations.

You might very well need to talk about some adjustments with your ex-spouse about your co-parenting parenting plan in light of what is not working so well and any increased levels of stress on the kids. Worries about money have a habit of affecting all family members.

As I have noted please let me know if you think I might be able to be of help even if only for a referral to someone with a very specific area of expertise.

Also let me know if you or a friend might be interested in our Tuesday Support Group.