Before You Agree to a Divorce Settlement, Consider These Issues

How might my credit be affected by my divorce?

If you have tried a “do it yourself” divorce agreement, you likely found yourself on a mine field of legal and financial issues. Should you step on one of those mines, the financial damage could be serious. Here are issues you need to consider, with the help of one of our experienced divorce attorneys, regarding assets and debts when agreeing to a settlement in your divorce.

First, consider the nature of assets. If an asset is “liquid,” that means it is easy to get its cash value, such as a bank account. Real estate is “illiquid” because it can be difficult to convert its cash value. If, on balance, the assets that each spouse will get are about the same, it may appear to be an equitable decision. But if one side’s assets are largely illiquid, cash may be needed to maintain them (like paying for insurance and taxes) but in short supply. Converting these assets to cash will involve cost and time so what looked like a fair deal actually is not.

Second, consider taxes. Different assets are taxed differently so the value may appear to be good, but the cost in taxes may be bad. The effect of your settlement on various taxes can be very costly if not addressed properly. Capital gains, income tax and alimony are some areas impacted by taxes.

If a big part of the settlement involves retirement assets, there are many tax issues and possible penalties. Under normal circumstances, distributions from a retirement plan before age 59 1/2 are considered “early distributions” and subject to a 10 percent penalty tax and the ordinary income tax. A transfer to an ex-spouse as part of a divorce settlement is an exception. Income taxes still apply, so any assets from a “qualified plan,” like a 401(k), will be subject to a mandatory 20 percent tax withholding. To avoid this, the transfer needs to be made directly to another retirement account, such as an IRA.

Third, consider debt and credit scores. Don’t start off your new life with a bad credit score. Get a copy of your credit report. It should show all joint accounts, accounts you may be unaware of and potential credit problems. Pay off and close all joint accounts prior to the divorce settlement. Open new accounts in your own name. 
Though a separation agreement may divide responsibility for joint debt, it has no effect on the creditor. Each person is liable for the full amount of debt until the balance is paid, whether married or not.

The experienced family law attorneys at Nirenstein Garnice PLLC serve clients in the Scottsdale, Arizona, area. We can help you reach a fair and equitable divorce settlement. Call us today at (480)351-4804 for a free consultation.

Divorce for Same Sex Couples

Is There Same Sex Divorce in Arizona?

In October a federal judge struck down Arizona’s ban on gay marriage and now same sex marriages are legally recognized in the state. U.S. District Judge John Sedwick’s decision barred enforcement of a 1996 state law and a 2008 voter approved state constitutional amendment outlawing gay marriage.

Sedwick’s decision was issued after the 9th Circuit Court of Appeals (which covers Arizona) ruled that gay marriage bans in Nevada and Idaho violated equal protection rights guaranteed in the U.S. constitution of same-sex couples. Last October the U.S. Supreme Court decided not to hear appeals from several states trying unsuccessfully to enforce their bans on same sex marriage.

With same sex marriage becoming legal and recognized in Arizona, same sex married couples have all the rights and obligations to each other, and any children born to the couple, as heterosexual couples, which includes the ability to get a divorce.

Given the decision came down in October and Arizona requires that one party must live in the state for at least 90 days prior to filing for divorce, it may take a while for Arizona’s first same sex divorce case to be filed.

Because this would be new legal territory, many issues need to be worked out. Same sex marriages are recognized in 35 states, either due to court decisions or legislation. A same sex couple married in Arizona, but that moves to one of the 15 states where the marriage is not recognized, may need to move again to a state that does recognize these marriages and establish residency before filing for a divorce.

If you are in the Scottsdale, Arizona, area and are thinking about or planning to get divorced, contact the divorce and family law attorneys at Nirenstein Garnice today by calling (480)351-4804 for a consultation.

Liquidating Assets During A Divorce

What are the dangers associated with the liquidation and trading of assets in a divorce proceeding?

One thing that many people find difficult about divorce is the effect it often has on their finances.  You might come out of a marriage in a totally different financial situation than you were in before.  Fortunately, an experienced divorce attorney can help you reduce the impact that a dissolution of marriage has on your overall financial picture.

Arizona is a community property state.  This means that all of the property acquired by a couple during the marriage is considered to be owned by both spouses.  Only property acquired before or after a marriage or designated as belonging to one spouse is considered separate property. When a marriage ends, the couple and sometimes the court has to decide how the community property will be divided amongst the parties. Sometimes, in order to come to a settlement, assets need to be transferred or liquidated.

If assets need to be liquidated, both parties must think about the implications this liquidation will have.  Liquidation is what is known as a taxable event and therefore proportionate taxes will be assessed.  These transactions can have a major impact on each of the parties’ taxes and future finances.  Also, courts do not always take them into account when deciding whether the settlement is fair.  Therefore, tax consequences should always be considered when making a determination to either liquidate assets or use another option.  

Essentially, the other option is trading assets between spouses to come to a settlement.    Exchanging assets between spouses is not a taxable event and each party can receive what they are entitled to without worrying about the taxes that go along with liquidation.  But, there are other things to consider.  For example, if one spouse agrees to accept the family home as part of the settlement, he or she should determine ahead of time if they can make the monthly payments.  A detailed analysis of the effects of accepting an asset should be done before reaching an agreement. 

The attorneys at Nirenstein Garnice in Scottsdale, Arizona, regularly work with clients to reach a divorce settlement that is beneficial to both of the parties.  Contact the firm today by calling (480)351-4804 for a consultation. 

Most States Failing on Shared Parenting Laws—Except Arizona

How does Arizona’s “shared parenting” differ from other child custody arrangements?

Advocates of “shared parenting” in divorce cases have been trying to change a decades-long tradition of giving child custody to one parent, usually the mother.  Typically, a non-custodial parent gets far less time with the child.  Supporters of shared parenting believe that, unless there has been some form of abuse or neglect, parents should receive equal time with their children.

A survey by the National Parents Organization shows that most states are lagging in adopting child custody laws friendly to shared parenting.  Nearly half of the states rated received a “D,” and some received an “F.”  The states with the highest grades were Arizona and Alaska.

Legislators in some states may continue to view mothers as better qualified to care for a child, or may worry that a 50-50 division of time with a child will result in more conflict between parents.  
 
Arizona, however, has a different view, and has been a leader in the movement toward shared parenting.  In 2012, state legislators adopted a law designed to encourage parents in a marital dissolution to engage in joint parenting.  [http://azcapitoltimes.com/news/2012/12/26/new-arizona-law-encourages-more-joint-parenting/]  Arizona state law forbids courts from giving preference to a parent based on the gender of the parent or the child and requires courts to try to ensure that both parents spend time with their children.

Under the law, physical custody is referred to as “parenting time,” while legal custody is “legal decision-making authority.”  A parent with decision-making authority can make decisions about a child’s health and education, as well as over personal matters such as grooming or getting a piercing.  Parents are also subject to strict notification requirements when they move a great distance away. 

The Arizona law requires judges to consider the child’s best interest when making all decisions, but maximum time with both parents is generally preferred over granting custody to one parent while giving the other occasional visitation.

Disputes over child custody can be contentious in every jurisdiction.  In Arizona, laws on shared parenting may add new layers of complexity.  If you are contemplating a dissolution of marriage in which child custody may be an issue, or if you already have a child custody arrangement that you seek to modify, the experienced matrimonial law attorneys at Nirenstein Garnice can help.  Based in Scottsdale, Arizona, we have years of experience handling all types of divorce and domestic relations issues, including child custody disputes.  Contact us today at (480)351-4804 for a confidential consultation. 

Now is the Winter of Our Discontent

Now is the winter of our discontent was a line penned by Shakespeare and spoken by Richard III to open the play of the same name. Though he was speaking of his good fortune, for many married couples winter is the season of their marital discontent and the time to file for a divorce. The number of divorce filings is normally high from January to March.

Why is this supposedly happy holiday period the launching pad for many divorces?  Spouses may decide to have one last holiday season together or the stress of a bad relationship along with being surrounded by family members during the holidays may be the straw breaking the camel’s back.  If children are involved, delaying the filing to January allows children to have one last Christmas with married parents. January is the busiest month for bankruptcy filings, evidence of the financial problems that frequently break up couples. In addition, an unappreciated spouse suffering through another Valentine’s Day may have decided he or she has had enough.
Filing after New Year’s Day can have some financial benefits.  For example, one spouse may be due an end-of-the-year bonus from work, money the other spouse can add to the overall financial picture.  Also, for tax purposes the couple’s finances would be fixed for the entire preceding 12 months. This makes the division of assets much easier to calculate once the divorce process begins.

February is usually the high point in divorce filings, according to CNN. They report a study of divorce filings in New York, Illinois and California which found that February is the busiest month of the year for divorce filings as numbers are usually up about 18% from the average month at this time each year. 

A divorce may come as a surprise to a spouse, no matter when it’s filed. If that happens to you: 

• Control your emotions and maintain an even temper;
• Don’t blow up in a rage and say or do something you will regret;
• Stay cool, calm and collected; and 
• Start making your own divorce preparations.

If you are not the one in control, or do not have a good understanding, of your family’s finances, start obtaining files and information that can give you a grip on your family’s money matters. 

If you live in the Scottsdale, Arizona, area and have decided that 2014 is the last year you want to be married, the attorneys at Nirenstein Garnice can explain divorce law and the process involved in dissolving your marriage. Call us at (480)351-4804 for a confidential consultation today.