Jennifer R. Lewis Kannegieter

Financial

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Don’t Cause A Headache – Organize your Estate!

Imagine for a moment that you have just died suddenly.  Your grieving loved ones are in complete shock.  When it comes time to “get down to business” they are still having a difficult time accepting the fact you are gone.  They come to your house looking for a will.  They think you might have one, but don’t know for sure.  Will they be able to find one?  Through their tears, they rifle through your important looking papers.  They are trying to figure out what assets you owned, what debts you have, and where everything is located.  How long will it tack them to track everything down?  As they inventory your personal property, they wonder what they are supposed to do with it.  Who would you want to receive your treasured book collection?

Unfortunately, this scene is all to common for many families.  Do your loved ones a favor – let them know whether or not you have a will (you really should) and where it is.  Let them know where your important documents are kept.  Do whatever you can to keep your papers organized.  Consider preparing an Estate Organizer.  Each of my estate planing clients receives one – a workbook where they can provide information on the important people and professionals who should be contacted, the identification and location of assets, debts, and important paperwork, instructions for personal property, and a list of all of those memberships and internet accounts you might want cancelled upon your death.

Taking the time now to organize can save your family a lot of time and tears later.

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Divorce and Retirement Assets

In a divorce, marital property is divided between the spouses.  Marital property includes all things that have been accumulated during the marriage, including real estate, vehicles, savings accounts, and retirement assets.  Retirement assets can often be overlooked.  In order to reach an equitable division of property, it is important to understand what assets are available, what the value of these assets are, and what makes the most sense in dividing these assets.

There are many different types of retirement assets.  Some, such as IRAs and 401(k)s are easy to determine the true value just by looking at a recent statement.  While you may be subject to taxes and penalties, the funds in these accounts can generally be liquidated early.  Other retirement assets, such as pensions, can be difficult to determine the value of, and you may need to hire an expert to value these assets.  With a pension there is no way to receive funds until the retirement of the employee.

Once you have determined the value of the retirement assets you and your spouse can figure out an equitable way to divide these assets.  Many times, divorcing couples immediately jump to “we’ll split them all equally” – meaning Husband will get half of Wife’s IRA, half of Wife’s 401(k), and half of Wife’s PERA and Wife will get half of Husband’s IRA, half of Husband’s 401(k), and half of Husband’s pension.  This can cause a lot of headache, and extra expense, when it comes down to dividing the retirement accounts.  Instead of focusing on splitting everything evenly, when developing a plan to divide retirement think about what will be required for the division and what the receiving spouse intends to do with those funds.  You can still reach an equal division of the assets by offsetting the amounts rather than splitting each asset individually.

Sometimes a spouse wishes to use retirement assets after a divorce towards a down payment of a new house or payment of marital debt.  In these situations receiving an award of the 401(k) or IRA will be much more useful than the pension.

Many retirement accounts will require a separate court order specifically regarding the division of that account – a Qualified Domestic Relations Order (QDRO), governed by federal ERISA law.  One QDRO can cost a minimum of $300 each.  Some accounts (such as IRAs) do not require the separate court order, and other accounts (such as PERAs) allow for special language inserted in the divorce decree for division.  You can save several hundreds of dollars by dividing the retirement assets in a way that minimizes the need for QDROs.

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Minnesota Divorce and Bankruptcy: An Introduction

Today’s post is a guest post by Elizabeth Rosar Chermack. Liz is a Minnesota bankruptcy attorney providing compassionate and practical advice to her clients. Liz is the author of the Minnesota Bankruptcy and Housing Blog.

Bankruptcy and divorce often go hand-in-hand. Sometimes financial problems lead to the breakdown of a marriage. Other times the breakdown of the marriage causes the couple to have to file for bankruptcy. When a couple goes from running one household together to living separately, their expenses increase. Now there are two rent payments, two sets of utilities, two kitchens to keep stocked. The process of divorcing can also lead to increased expenses.

Sometimes one spouse may not have been forthcoming about the debt that was incurred during the marriage. The other spouse may feel betrayed when they realize that their spouse hid massive amounts of credit card debt from them. This debt could be in one spouse’s name, or it could be a joint debt. The process of identifying and separating this debt can be a burden.

The current housing crisis has resulted in some divorcing couples choosing to file for bankruptcy. The couple’s house may be “upside down” or “underwater.” If neither party is able to afford the house on their own, a foreclosure or short sale may be imminent. A foreclosure on the first mortgage or a short sale could leave a personal liability for a second mortgage. The combination of the couple’s other debts (credit cards, medical bills, etc.) and the negative equity or remaining liability could be enough to cause the couple to file for bankruptcy.

If a divorcing couple has a high debt load, it is important to learn about bankruptcy. Both a bankruptcy attorney and a divorce attorney should be consulted in order to fully understand the available options. There are important things to consider when deciding whether or not to file bankruptcy, and if so whether to file jointly before the divorce or individually after the divorce. These considerations will be discussed in upcoming posts on the Minnesota Bankruptcy and Housing Blog.

This is the first post in a series about Minnesota Divorce and Bankruptcy. To learn more about the interaction between bankruptcy and divorce and how bankruptcy can affect child support and spousal maintenance obligations, check out http://blog.chermacklaw.com throughout the next week.

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Divorce in the Recession

We have been hearing the word all over the news: recession. Unemployment is up, foreclosures are up, spending is down. In times like these, money and finances are likely a hot topic in many households and something that husbands and wives are fighting about. However, instead of divorce rates increasing during this time, many reports indicate a downturn. This may not be good news for those who are hoping that the recession will help their family reconnect through more stay-at-home nights. The increased tension in a household coupled with the fact that divorces can bear a large punch to the purse has left some frustrated couples with no way out.
With the housing downturn finally starting to shift, however slightly, there may be hope that one of the largest marital assets, the home, will start to regain its former value. On the other hand, there are reports that there will be more foreclosures to look forward to this year and that it will take several more years for the housing market to fully recover. People are continuing to look for work or struggling to make ends meet with their current jobs while their spouse is out of work. With everything so up in the air, it is easy to see why couples choose not to get a divorced during this time. Even those couples who do decide that they want to get a divorce despite financial difficulties often cannot move on entirely from the situation. Some couples are even continuing to live in the same house, despite starting (and even completing) the divorce process, simply because they cannot afford housing elsewhere.
There are several things to consider when deciding whether or not to wait out the recession before proceeding with a divorce. If you are in this position, be sure to consult with a divorce attorney to determine the best course of action in your situation.

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Better File Now – Court Filing Fees to Increase July 1, 2009

In case you haven’t heard, the court system (like everything else) is broke.   Starting July 1, 2009, Minnesota court filing fees will be increases.  The new family court filing fees for most of the state (Hennepin County tends to run higher by $2) will be:

  • $400 Divorce Filing Fee (previously $330) – In most cases each party will pay the filing fee (This can be avoided IF the parties have reached a complete agreement prior to entering the court system.  But be prepared to pay if you are fighting).  The good news is, once you have paid the case filing fee, you won’t have to pay it again.
  •  $100 Filing Fee for all Motions and Responses (previously $55) – If you need to ask the court for temporary relief during a divorce proceeding, or wish to bring a motion post-divorce to enforce provisions, modify child support, etc, you will be paying a $100 to the Court.  If the other side brings a motion you disagree with, you will be paying $100 to contest it.  And, if you did not pay an initial case filing fee before, be prepared to pay it now.

So, if you have been thinking of modifying child support or filing for divorce, act now and save a few dollars.  Every little bit helps.