Making Financial Decisions When Divorce Occurs

Transcription

1 Making Financial Decisions When Divorce Occurs An Idaho Guide Published jointly by the University of Idaho Cooperative Extension System and the Idaho Women s Commission

2 Making Financial Decisions When Divorce Occurs Elizabeth Brandt, Linda Kirk Fox, and Kathleen Hardcastle an Idaho Guide

3 Making Financial Decisions When Divorce Occurs: An Idaho Guide is the product of the work of numerous individuals throughout Idaho. The authors acknowledge financial assistance from the following for printing and distribution costs: University of Idaho Cooperative Extension System Idaho Women s Commission IMPORTANT What is considered property to be divided at divorce, and the guidelines for child and spousal support, differ from state to state. This publication is based on Idaho law in effect as of July However, the section entitled Child Support on page 11, and Table 3, Basic monthly child support guidelines schedule, on page 19, are subject to revision. Contact the District Court (look under County Government in the telephone directory yellow pages) or request copies of the Child Support Guidelines from Administrative Offices of the Court, 451 W. State Street, Boise, Idaho (208) Reprinted June 1992; revised 11/97 ii

4 Table of Contents Disclaimer... ii Introduction... 1 Do You Need a Lawyer?... 2 Hiring a Lawyer... 2 Mediation... 2 Property and Debts... 3 Community Property Separate Property... 3 Fair Market Value Replacement Value... 3 Division of Property... 3 Division of Debts... 4 If You Own a Home... 4 Market Value or Estimated Sales Price... 5 Proceeds from Sale... 5 Selling at Some Future Date... 5 Income Tax Consequences... 6 The Cost of Staying in the Family Home... 6 Estimated Costs of Rental Housing... 6 Household Appliances and Furnishings... 6 Automobiles and Other Vehicles... 7 Bank Accounts, Investments, Stocks, and Bonds... 7 Life Insurance... 8 Who is the Insured?... 8 Who Owns the Policy?... 8 Who is the Beneficiary?... 8 What is the Face Value?... 8 Is There a Cash Value?... 8 Are There Any Loans Against the Cash Value?... 8 Life Insurance as Property... 8 Life Insurance and Child or Spousal Support... 9 Retirement Accounts and Plans... 9 IRA s and Keogh Plans Other Employee Plans Pension Plans Debts Proposed Property Division Child Support The Financial Needs of the Child Child Support Guidelines Income Determination Under the Guidelines Gross Income Gross Potential Income Computations When Guidelines Apply Other Adjustments Shared Physical Custody Extended Visits Split Physical Custody Future Adjustments Medical and Dental Expenses Post-high School Education Timing and Method of Payments Budgeting and Recordkeeping Spousal Support Social Security If You Are Married If You Divorce iii

5 Table of Contents (cont d) Health Insurance Medicaid Estimated Income/Expense Statement Other Financial Considerations Credit Joint Accounts During Marriage After Divorce Credit Payment Priorities Creditors Options Review Your Credit Report Should You Consider Loan Consolidation? Who to Talk to About Your Financial Situation If You Have No Credit Rating Child Care Assistance Food Stamps Income Tax How Divorce Affects Taxes Before Divorce After Divorce Earned Income Tax Credit How to Receive EIC How to Receive the EIC in Your Paycheck Bankruptcy Wills and Estate Planning A New Financial Life Name Change Prenuptial Agreements Glossary Additional Resources Authors, Acknowledgments Illustrations Tables 1. Estimated annual family expenditures on a child (overall U.S. from birth to age 18) Child support obligations based on both parents gross income where only one parent has custody Basic monthly child support guidelines schedule Figure 1. Affidavit verifying income Worksheets 1. Estimated Proceeds from Sale of House Estimated Cost of Staying in the Family Home Estimated Cost of Renting Summary of Life Insurance Policies Summary of Debts Summary of Proposed Property Division Completed Sample Worksheet Monthly Financial Needs of Children Child Support Obligations Child Support Obligation, Shared Physical Custody Summary of Income of Husband and Wife Projected Income-Expense Statement iv

6 Introduction Making Financial Decisions When Divorce Occurs: An Idaho Guide The financial decisions you make at divorce have long-term economic impacts on you, your spouse, and your children. One decision affects another, such as how your property is valued and divided, how debts are paid, who provides child support, and (in some cases) whether one of you provides support payments to your spouse. The decisions may be made by you and your spouse; by you and your spouse with assistance from a mediator, counselor, or the attorneys of husband and wife; or, in a contested divorce, by the judge. Economic information and an understanding of your financial situation are critical as you make these decisions. It takes time and effort to become familiar with your family financial situation. The purpose of this publication and the worksheets is to help you analyze your financial situation. The goal of the divorce proceedings is to arrive at a settlement that is just based on the facts and circumstances of each case. What is just depends on the situation. In some situations, dividing assets and debts equally would be just; in others, an equal division would not be just. What is just in a short-term marriage will differ from what is just in a long-term marriage. In some divorces, decisions you make can be carried out immediately. For example, if the only property to be divided is the bank account, it can be divided at the time of the settlement. Other divorces may involve promises of things you will do in the future: sell property, pay debts, or make payments to your spouse. These promises need to be in writing. If they are not, enforcing the provisions may be impossible. The written agreement is called a property agreement, and it becomes a part of the divorce decree. Do not sign a property settlement agreement you do not understand or one that you feel contains unfair terms. Consult your own attorney not your spouse s attorney before you sign. The period before divorce is difficult. You are expected to make rational decisions at a time of emotional turmoil and in a setting that does not lend itself to rational discussion. Most couples experience increased pressures due to separation and pending divorce. Do not let emotions result in missed payments, lapsed insurance, or unnecessary additional financial pressures. Develop a temporary income and expense plan to keep up to date with financial obligations and, if possible, avoid incurring additional debt. You and your spouse should keep records of all expenses you ve paid. If you have no money for current living expenses or if you fear your spouse will sell or dispose of assets, get legal help. Many of the legal terms in this bulletin are italicized bold in the text and defined in a glossary on pages For Worksheets, see pages The goal of the divorce proceedings is to arrive at a settlement that is just based on the facts and circumstances of each case. What is just depends on the situation. 1

7 The period before divorce is difficult. You are expected to make rational decisions at a time of emotional turmoil and in a setting that does not lend itself to rational discussion. Do You Need a Lawyer? A simple divorce can be obtained without the assistance of a lawyer. For example, when you and your spouse are on good terms, do not have children, do not own real estate or other substantial items of property, and do not have extensive debts, a doit-yourself divorce may be appropriate. However, if any of the above factors apply to you, the assistance of a lawyer will best protect your interests in the divorce process. This guide will help you whether you are represented by a lawyer or not. If you are not represented, the guide will help you cover all the bases. If you are represented, it will enable you to be an informed consumer of legal services and will help ensure that you provide your attorney with accurate and complete information on all aspects of your divorce. Hiring a lawyer To find a lawyer to hire, you have several options. You may want to ask friends and acquaintances. You may look for lawyers who advertise in the yellow pages of the phone book. You may also call the lawyer referral service of the Idaho State Bar, phone (208) Idaho Legal Aid Services, Inc., handles a limited number of divorce cases for people who have income below the poverty income guidelines. These cases must involve either spousal or child abuse. Call your nearest Idaho Legal Aid office. The Idaho State Bar also has a Volunteer Lawyer Program, phone (208) which assists individuals who cannot afford to pay for legal advice. Mediation Mediation is a nonadversarial procedure where you and your spouse jointly hire a neutral, third-part facilitator (often a specially trained attorney) to help you work out a fair and equitable divorce agreement together. Included in this agreement will be the children s living arrangement, visitation, the home, and other assets and debts. When the mediator completes the draft divorce arrangements, both you and your spouse should review it with your individual attorneys before agreeing to anything. Mediation often is relatively quick and less expensive, but it s not for everyone. The alternative is litigation. In some instances, the court may refer both parties to mediation to resolve custody and visitation disputes. In many counties divorcing parents are automatically referred to mediation. In this case the fee is split between the two parties. Trained mediators charge by the hour for six to eight one- or two-hour sessions. To locate a qualified mediator in Idaho, contact the Idaho Mediation Association, phone (208)

8 Property and Debts If you are considering divorce, you need to determine how to divide community property and who will pay debts incurred during the marriage. Before doing this, you need a list of the property owned, its estimated value, and a list of debts. This list should reflect which property is community property. Property is both real estate and personal property. Real estate is land, buildings, and crops growing on the land. Your home is considered real estate. Personal property is all property that is not real estate automobiles, furniture, appliances, bank accounts, stocks, bonds, life insurance, IRA s, pensions, etc. Community Property Separate Property Community property is any property acquired by you or your spouse during the marriage with the following exceptions. Property is separate if it was acquired by assets you or your spouse owned before you were married. Also property acquired by you or your spouse as a result of a gift to one of you, or through inheritance, is separate property. A gift to both of you, however, is generally community property. Your earnings during marriage and things purchased with those earnings are community property. Furthermore, in Idaho, the rents and profits of the separate property owned by you or your spouse are community property. For example, if you owned stock before marriage, the dividends paid on the stock during marriage would be community property; but the increase in value of that stock would not be community property. Interest is another example of rents and profits of separate property that would be community property. Fair Market Value Replacement Value Estimate the dollar value of your property. Before you start estimating value, it is important to differentiate between fair market value and replacement value. Fair market value is the price at which a willing buyer will buy an item and a willing seller will sell an item. How much could I get if I sold my car? Replacement value is the cost of replacing the property with similar property. If I don t get the car, how much will it cost me to buy one to get back and forth to work? As you and your spouse discuss property values, whichever one of you plans to keep the property may think in terms of fair market value, while the other (who will be replacing the property) may think in terms of replacement value. For example, if you keep the furniture, you might think, This stuff is 10 years old and almost worthless; I couldn t even sell it. That s fair market value. Your spouse might think, I have no furniture, and it will cost a lot to get my apartment furnished. That s replacement value. Both fair market value and replacement cost are considerations. But property has to be valued the same way by you and your spouse; the most common way to value property is fair market value. Division of Property Community property should be divided equally unless there are compelling reasons for making an unequal division of property. Generally, separate property is not divided at divorce and you and your spouse may keep your own separate property. An equal division of property does not mean that each of you must receive one-half of each asset. Instead, an equal division means that the total value of the property distributed to each of you should be equal. Community property should be divided equally unless there are compelling reasons for making an unequal division of property. 3

9 If you own a home that was purchased during your marriage, its value is generally community property to be divided at divorce. The decision to make an unequal division of community property is within the discretion of the court. While an equal division is most common, a court will consider the following factors in making an unequal division of community property: 1. the duration of the marriage; 2. any pre-nuptial agreement between the parties; 3. the age, health, occupation, amount and source of income, vocational skills, employability, and liabilities of each spouse; 4. the needs of each spouse; 5. whether the property settlement is in lieu of or in addition to maintenance (alimony); 6. the present and potential earning capability of each spouse; 7. retirement benefits including Social Security, civil service, military, and railroad retirement benefits. Division of Debts The division of property must also take into account the debts incurred by you or your spouse during your marriage. These debts could include amounts owed on a car, home, credit cards, home equity loan, unpaid bills, and unpaid taxes. These debts must be considered even if you did not personally sign the agreement leading to the debt or did not consent to incurring the debt. The material in the following sections will help you begin to inventory and value property and to inventory debts. This publication does not discuss valuation of closely held corporations, family businesses, and professional corporations. It also does not discuss property rights in (and valuation of) professional licenses and college degrees. If your divorce involves any of these issues, you need technical and legal help beyond the scope of this publication. If You Own a Home If you own a home that was purchased during your marriage, its value is generally community property to be divided at divorce. However, if the money used as a down payment on the home belonged to one of you before marriage, is a rollover from the sale of a house owned by one of you before marriage, or was given to one of you, the house may not be community property. In addition, questions regarding the community character of the house may arise if only one spouse s name appears on the deed to the property or the mortgage. If your house is not community property, but you or your spouse made payments on the mortgage using your income, you may be entitled to reimbursement of the amount paid If your house is community property, this value may be divided in several ways: You may sell your home and split the proceeds with your spouse. One of you may buy your spouse s share of the house. One of you may retain the right to live in the house for a certain period of time (while the children are minors, for example) and at some future date sell the house and divide the proceeds. One of you may retain the home, and your spouse may receive other property and/ or income of comparable value. When you make decisions about the house, carefully consider the economic aspects of these decisions: What is the market value (estimated sales price) of the house? 4

10 How long would it take to sell the house? How much equity do you have in the house? (Equity is the value of your investment what you could sell your house for, less the balance due on the mortgage or purchase contract.) How much cash would be available after the house is sold? Are there income tax considerations? Can either you or your spouse afford to live in the house after divorce? What is the cost of alternate rental housing if you do not continue living in this house? Market Value or Estimated Sales Price Market value is the amount of money a buyer would pay for your house. Market value is not necessarily the same as the price at which a real estate agent would list the house; houses often sell below list price. You might hire a real estate appraiser to determine the market value of the house. Before you hire an appraiser, find out the cost. When you receive the appraisal, read it carefully. Know what the appraisal includes (it usually includes the major household appliances). Your property assessment notice gives a dollar amount that the assessor s office considers market value. If you do not have the property assessment notice, you can get one from your county assessor s office for about 50 cents. Since market values change continuously, the assessor s figure may not be an accurate estimate of value. For example, it may not reflect the current condition of the house or the current condition of the real estate market. Proceeds from Sale When a house is sold, there are expenses paid by the seller. The proceeds from the sale is the selling price less the selling expense. Estimate your proceeds on Worksheet 1. If you are planning to sell your home, talk to more than one real estate broker because commissions and services differ. Check the real estate broker s contract (the listing agreement) carefully before you sign. Many of the terms are negotiable. However, the negotiations must take place before you sign the contract. An agreement for the sale of real estate must be in writing. The earnest money agreement names the parties, describes the property, and lists the terms of payment and the conditions of sale. Read and understand the earnest money agreement before you sign. Selling at Some Future Date Some property settlements provide for the sale of the family home sometime in the future; one of you will continue living in the family home for a certain period of time. At the end of this time, the home is sold and the proceeds divided. Sometimes, the parent with the custody of minor children lives in the home, and the sale takes place when the youngest child is 18. If you are considering postponing sale of the house, decide these points: Before the sale, who pays the principal? interest? insurance? taxes? Before the sale, who pays for major repairs such as a new roof? or a new furnace? Before the sale, who pays for routine upkeep such as lawn care? painting? minor repairs? Are there income tax consequences to consider? When the house is sold, how will the proceeds be paid? Will one person have a lien on the house that will be paid off at sale? Or will the sale proceeds be divided? Often one person wants to remain in the family home after the divorce. Staying in the family home may provide security and eliminate costs and stresses associated with moving. 5

11 If you overestimate the fair market value of household appliances and furnishings, you also overestimate both the value of the property to be divided and the share of the property of the person receiving the appliances and furnishings. Income Tax Consequences When a home is sold and there is gain (the sale price is greater than the purchased price), the gain is income and is taxable. Generally, this gain is taxable in the year the home is sold. Moving to a smaller home, relocating to a less costly area, or deciding to rent is an important decision. Starting with homes sold after May 6, 1997, up to $500,000 of current and deferred profit is tax free for joint filers ($250,000 for single filers). And the exemption can be claimed every two years. Previously, many divorcing people who have sold their homes have felt compelled to take advantage of a rule that let them defer tax on any profit by buying a replacement home of at least equal value within two years or using laws that applied only if you were over the age of 55. Ask a tax expert before you decide whether to sell the house before or after the divorce or whether one or both of you should sell the house. Helpful tax publications are available from the Internal Revenue Office: No. 523, Tax Information on Selling Your Home; No. 504, Tax Information for Divorced or Separated Individuals; No. 551, Basis of Asset; and No. 555, Community Property. The Internal Revenue Service is listed in your phone book under U.S. Government or can be contacted by calling TAX The Cost of Staying in the Family Home Often one person wants to remain in the family home after the divorce. Staying in the family home may provide security and eliminate costs and stresses associated with moving. Worksheet 2 will help you estimate the monthly cost of living in the house. Is this affordable on after-divorce income? If it isn t affordable, staying in the house will not provide security or eliminate stress. In addition to monthly costs, consider the household work. Who has been doing the repairs, maintenance, yard work, and housekeeping? If you have been doing all or some household work before your divorce, will you be able to continue to do it after you divorce? If after divorce you will be employed for longer hours, you will have less time for household work. If your spouse has been doing some household tasks, can you do them or can you hire someone to do them? Estimated Costs of Rental Housing Is rental housing available as an alternative to staying in the family home? If several children live with you, rental housing may be difficult to find. If rental housing is available, use Worksheet 3 to estimate monthly rental costs. In addition to the monthly rent, there are some one-time costs: moving costs, security deposits, pet deposits, telephone and utility deposits, and hookup costs. And you may have to pay the first and last months rent when you sign the lease. As you look at the cost of renting, think of other factors related to changing housing location. Will you be closer to or further from work? Will you be closer to or further from child care or schools? If you will be further from work, child care, or schools, you will spend more money and time driving. Household Appliances and Furnishings Household appliances and furnishings acquired during your marriage are generally community property and should be divided at divorce. You need to determine who gets which appliances and furnishings, and you need to establish the fair market value of this property. If major appliances were included in the appraisal value of the house, do not list them separately. Don t forget to include the value of coins, stamps, guns, and collectibles. The fair market value of property is the price someone would pay for the item. Even though it may be costly to replace existing household appliances and furnishings with new ones, the fair market value is often very low. 6

12 If you overestimate the fair market value of household appliances and furnishings, you also overestimate both the value of the property to be divided and the share of the property of the person receiving the appliances and furnishings. Estimate the fair market value by looking at the price of similar items of the same age at second-hand stores and garage sales, and in newspaper ads. You could also hire an antique dealer or a second-hand dealer to appraise your household goods. Another way to determine a value for household items is to determine depreciated values. Depreciation is a decrease in value over a period of time due to wear, tear, and age. To determine depreciation you need to know the age and original cost of the item and its life expectancy. When thinking about life expectancy ask yourself, How much longer will this last? That, added to how long you ve owned the appliance, is its life expectancy. Local appliance or furniture dealers may also be able to help you determine life expectancy. Automobiles and Other Vehicles Cars, campers, trucks, motorcycles, etc., acquired during marriage are generally community property to be divided at divorce. The same exceptions that applied to determining whether your house was community property also apply to vehicles. You need to determine the value of the vehicle, who gets the vehicle, and who pays any debt owed on the vehicle. Automobiles and most other vehicles depreciate in value over a period of years. The estimated fair market value of a car may be found in a used car guide. Reference books on values of used cars are published by the National Automobile Dealers Association (N.A.D.A.) and by Kelly Blue Book and are available in most libraries. Banks and other lenders often have these books and can give you an estimate of a vehicle s value. A car dealer can also tell you the high and low book values for a particular make, model, and year of car. The high book value is an estimate of a car s retail value what it would sell for to a consumer. The low book value is an estimate of its wholesale value what the dealer would pay for it. These, of course, are estimates. Cars in very good condition or with extra features may be sold for more, and cars in poor condition or with high mileage and few features may be sold for less. If money is owed on the car, you need to decide who will pay this debt. In some instances, it may be possible and desirable to refinance the vehicle so the loan is only in the name of the spouse who is keeping the car. If the debt is not refinanced, one of you (often the person keeping the car) will usually agree to pay the debt owed by both of you. This agreement should be in writing. The property agreement should state which person assumes the obligation and agrees to hold the other party free from liability or hold harmless the other party. This means that one of you agrees to pay the debt. However, the creditor (the person to whom the money is owed) may be able to require payment from either you or your spouse even if the loan was not in both names. If that happens, whichever one of you was to be held free from liability pays the creditor and then may bring legal action against your spouse, who agreed to pay the debt. If you continue to have responsibility for the debt on a car even if you don t have possession of the car, be sure that the car remains properly insured. Bank Accounts, Investments, Stocks, and Bonds If you or your spouse owns bank accounts, stocks, bonds, and mutual funds that were acquired during marriage, these are generally community property to be considered in the property settlement. Even if the stocks and bonds themselves are If the policy was acquired after marriage and premiums were paid with community property, then the policy is community property and owned by both spouses, even though just one of you is named as owner. 7

13 At divorce, you need to decide who is to own the insurance policies. not community property, the interest and dividends are considered community property. Determine current value using annual or quarterly statements. If you do not know what assets you own, look at Schedules B and D of your Federal income tax return for the past 5 years. Schedule B of the Federal income tax return shows if you have had interest and dividend income. If interest income or dividend income exceeded $400, the schedule indicates the financial institution that paid the interest. This gives you some idea of the accounts and other assets of you and your spouse. Schedule D of the Federal income tax return reports gains and losses from the sale of investment assets such as stocks and real estate. If assets have been sold in earlier years, the proceeds may have been reinvested into new assets. If you do not have copies of past Federal income tax returns, they are available from the Internal Revenue Service. To order, use IRS form 4506, Request for Copy of a Tax Return. It takes at least 2 months, and returns are available for the past 5 years (in some instances, for earlier years). Life Insurance Life insurance purchased during marriage may be community property and is considered in divorce agreements if: 1. it has cash value; and/or 2. it is needed to provide protection against the early death of a person obligated to pay child support or spousal support. Use Worksheet 4 to list the following information about current life insurance policies: Who is the Insured? The insured is the person on whom death benefits will be paid. The policy will state the name of the insured. Who Owns the Policy? This is the person who pays the premium, names the beneficiaries, and can cancel the policy. The person to whom the bill is addressed is the owner. The policy states the name of the owner. If the policy was acquired after marriage and premiums were paid with community property, then the policy is community property and owned by both spouses, even though just one of you is named as owner. Who is the Beneficiary? The beneficiary is the person(s) who receives the benefits on the death of the insured; his or her name is stated on the policy. What is the Face Value? The face value is the amount of money that will be paid to the beneficiaries upon the death of the insured. Is There a Cash Value? Cash value is the amount of money the owner of the policy would receive if the policy were cancelled before the death of the insured. Typically, whole life insurance has cash value; term and group life insurance policies do not. Look for a Table of Cash Value in the policy or contact your agent. Not all insurance policies have a cash value. Are There Any Loans Against the Cash Value? Cash value may be used as collateral for loans. Loans reduce the death benefit of the policy. Life Insurance as Property If you own life insurance with cash value, that cash value may be community property. At divorce, you need to decide who is to own the insurance policies. The owner receives property, and the value of the property is the policy s cash value not the face value. The owner has the right to name the beneficiary and to decide whether the policy will continue. 8

14 Life Insurance and Child or Spousal Support The reason for life insurance is to provide income should the insured person die. When you have young children, you may want the insurance policies on one or both of you to continue. One common way this is done is to have a paragraph in the property agreement or divorce decree that states: (Name of husband or wife) shall maintain insurance on (his or her) life in the total sum of $ as long as (he or she) is required to pay child support. The insurance should be payable to as trustee for the children. If such insurance is not in force at death, the children shall have a claim against the estate for $. There are other ways to assure that insurance benefits will be available for the support of your children. If you have young children or a child with special needs and presently have insurance, ask your attorney about ways to ensure continuation of the insurance. When one of you is paying spousal support or a property settlement over a period of years, you may want to continue the insurance policy on the spouse owing the payments. One way of doing this is to include a paragraph in the property settlement or divorce decree similar to the paragraph above. Another way is actually transferring ownership of the policy to whichever one of you is receiving the payments. The new owner, however, should evaluate whether the premiums are affordable. If there are either child support or spousal support obligations, the court can order present life insurance policies to continue, the purchase of additional life insurance coverage, or (if there is no insurance) the purchase of new life insurance policies. Retirement Accounts and Plans Many couples have substantial sums of money in retirement accounts or plans. Money accumulated in these accounts during the marriage, and the future benefits resulting from the contributions during the marriage, may be community property and will be considered in the divorce settlement. A nonemployed spouse may be entitled to a share in the future benefits of these plans. There are many types of retirement accounts and retirement plans, including defined benefit and defined contribution plans, Individual Retirement Accounts (IRA s), tax-sheltered annuities, Keogh plans, deferred compensation, profit-sharing, and employee stock ownership, 401(k) or 403 (b) plans. Each of these is different. You and your spouse need to list all of these accounts in the name of either spouse and gather as much information as possible about the plan or account. Valuing the plans is difficult; in most cases, they should be valued by a qualified person, such as an actuary. If you live in a metropolitan area, you may find the heading actuaries in the yellow pages of your phone book. Or your accountant or attorney may be able to recommend someone with actuarial training. Before hiring the actuary, find out how much the evaluation will cost. In most instances, there is one fee for the evaluation and another fee if the actuary testifies in court. After plans are valued, decisions need to be made about how these values will be allocated to you and your spouse. In some cases, the value of retirement accounts/ plans is assigned to the employed spouse, and assets of equal value are assigned to the other spouse. In other cases, the present value of the future benefits of the retirement accounts/ plans is divided. And in still others, the retirement assets are not divided until the benefits of the accounts/plans are actually received. The alternatives differ with the type of plan and individual situations. Many couples have substantial sums of money in retirement accounts or plans. 9

15 Retirement accounts/plans come in all sizes and shapes. The following sections have information about several common types of retirement accounts/plans. Check with employers or labor unions to see what pension plans exist for the employed spouse. IRA s and Keogh Plans If payments have been made to IRA s or Keogh plans during a certain year, this information will appear on page 1 of your Federal income tax return (Form 1040) for that year. The accounts in which these payments were deposited issue annual statements that indicate present value. If the money is withdrawn from the account, there is income tax due and perhaps penalties to pay. Therefore, the present value of the IRA or Keogh plan is the account value less taxes and penalties due if money is withdrawn. An IRA can be transferred from one spouse s name to the other spouse with no tax consequences. (If, however, you are not yet 59 1/2 years old and you withdraw the money from the new IRA, there will be income tax due and a 10 percent penalty.) A Keogh plan is harder to transfer because of income tax consequences. Before terminating a Keogh plan to divide funds, carefully check the income tax consequences. Other Employee Plans Employee wage receipts usually indicate whether an employee is participating in deferred compensation, tax-sheltered annuities, profit-sharing, or employee stock ownership plans. Gather as much information as possible about these from the personnel office at the place of employment. You need to know what rights, if any, the employee has to withdraw funds from the account at the present time and, if the employee has such rights, what taxes are due on amounts withdrawn. Pension Plans There are many kinds of pension plans, each with a set of rules on allowances. Typical plans include Federal and State civil service retirement; military pensions; and industry, company, and union retirement. Check with employers or labor unions to see what pension plans exist for the employed spouse. Get copies of booklets explaining the plans and benefits. The information you ll need includes the following: Termination Benefits This is the amount, if any, the employee could withdraw if he or she quits or is fired at the present time. Vesting When the pension is vested, the employee has the right to some future benefits from the plan, even if she or he quits or is fired. Maturity When the plan matures, the employee has the right to the benefits. Usually, this is after the employee has worked a specified number of years and reaches a specified age. Amount of Future Benefits This is the amount that will be paid when the plan matures. It may be expressed as a percentage of the highest 3 or 5 years salary. It may be available in a lump sum or as a payment made monthly or annually until death. Look for information about the benefits paid at early or late retirement, and the benefits paid if the employee becomes disabled or dies before retirement. NOTE: This section doesn t cover Social Security benefits. However, Social Security does provide income at retirement age for an employed person and (under some conditions) for a former spouse. This is discussed in Spousal Support. 10

16 Debts In addition to dividing your property, you must determine who will pay which part of the debts incurred during the marriage List all of your and your spouse s debts including home mortgage, car payments, student loans, credit card accounts, unpaid bills, and unpaid taxes. Decide who will be responsible for each debt or percentage of debt. Usually, one of you assumes the obligation and agrees to hold the other party free from liability or hold harmless the other party. This means that one of you agrees to pay. If you do not pay, the creditor may collect from either spouse. Creditors are not bound by any agreement between the spouses. If whichever one of you who assumed the debt fails to pay, your spouse may be able to bring action against you. Summarize your information about debts on Worksheet 5. Proposed Property Division List all the property owned and debts owed. List the current fair market value for property and amount owed on debts. Determine the net value (assets minus debts) each of you would receive under this proposal. Use Worksheet 6 to record the information. If the property settlement or proposed divorce decree includes promises to pay amounts or to sell property or provides for liens against real property in the future, it must be in writing. This is called a property agreement. Do not sign a property agreement until you understand it. If you are uncertain about what it means or if you feel it is unfair, consult your own attorney not your spouse s attorney before you sign it. Child Support Both of you are responsible for the financial support of your minor children. If one of you is unable to work because of family responsibilities or because of a physical condition, it may be impossible for you to provide child support. However, a parent who is employable must support his or her children. The court will determine your obligations by applying the Child Support Guidelines discussed on the following pages. Your support obligation continues as long as your child is a minor or until the child is emancipated. A child becomes emancipated at age 18 or earlier if he or she marries or enters the military service. If a child continues high school after reaching the age of 18, the court may order child support to continue until age 19, or until the child discontinues his or her high school education, whichever is sooner. A court may also order support continue for a child with special needs. A court will not order child support past age 19 unless the parents agree in their divorce settlement that support will continue while a child is receiving post-high school training or attending college. Parents may choose to continue support obligations for emancipated students; however, if both parents do not agree, support is not automatic for children past age 18, but must be bargained for in a negotiated settlement. The two major questions in determining child support payments are: What are the financial needs of the child or children? How much of this cost should be paid by each parent? No charts or tables tell exactly how much it costs to raise a child. 11

17 ... the new spouse s income and resources would ordinarily not be considered in computing child support. The Financial Needs of the Child No charts or tables tell exactly how much it costs to raise a child. As a parent, you should be aware of the financial commitment necessary for raising children. Some estimated costs are available. Table 1 on the next page gives you a general idea of how much it costs to raise a child based on the annual expenditures on a child by a two-parent family. For the most recent estimates, send a self-addressed, stamped envelope to: Extension Family Economics Specialist, Niccolls Building, University of Idaho, Moscow, ID Use Worksheet 7 to help calculate the cost of raising your children. Child Support Guidelines Idaho has adopted Child Support Guidelines that must be used in setting child support unless one of you convinces the court that the guidelines would be unjust or inappropriate. The guidelines are intended to promote uniform and adequate child support awards; the Idaho Supreme Court will periodically review the guidelines to keep them current. The information that follows is correct as of January 1992, but the guidelines may be adjusted in later years and different amounts may be required. The guidelines are based upon the following basic principles: 1. Both parents share legal responsibility for supporting their child. The amounts in the guidelines are the same whether the parents are separated, divorced, remarried, or never married. The support responsibility should be divided in proportion to each parent s economic resources. 2. Child support is given priority over the needs of parents or creditors in allocating family resources. 3. The sex of the custodial parent, the parent who will have the physical custody of the child most of the time, should be disregarded. 4. If both parents are below the poverty level, support will be determined on an individual basis, but rarely will be set at zero. In the rare circumstance that the court doesn t apply the guidelines, the following will be considered: 1. the financial resources of the child; 2. the financial resources, needs, and obligations of both custodial and noncustodial parents; 3. the standard of living the child enjoyed during the marriage; 4. the physical and emotional condition and needs of the child and his or her educational needs; 5. the availability of medical coverage for the child at reasonable cost; and 6. the actual tax benefit recognized by the party claiming the federal child dependency exemption. Should either you or your spouse plan to marry someone else immediately after your divorce, the new spouse s income and resources would ordinarily not be considered in computing child support. Income Determination Under the Guidelines To determine child support under the guidelines, you must know the incomes of you and your spouse. Income is defined as gross income of the parents; or, if one of you is voluntarily unemployed or underemployed, your gross potential income. Gross Income This includes income from any source: salaries, wages, commissions, bonuses, dividends, severance pay, pensions, interest, trust income, 12

18 Table 1. Estimated annual expenditures* on a child by husband-wife families, overall United States, Child care Age of Transpor- Health and Miscelchild Total Housing Food tation Clothing care education laneous Income: Less than $33,700 (Average=$21,000) 0-2 $5,490 $2,100 $780 $700 $370 $370 $630 $ ,610 2, ,740 2,010 1, ,770 1,810 1, ,560 2,020 1, ,460 1,630 1,520 1, Total $106,890 $34,950 $21,120 $15,900 $9,060 $7,560 $7,470 $10,830 Income: $33,700 to $56,700 (Average=$44,800) 0-2 $7,610 $2,840 $930 $1,050 $440 $490 $1,030 $ ,810 2,820 1,080 1, , ,870 2,750 1,370 1, ,860 2,550 1,620 1, ,580 2,760 1,630 1, ,710 2,370 1,810 1, Total $145,320 $48,270 $25,320 $22,110 $10,590 $9,870 $12,990 $16,170 Income: More than $56,700 (Average=$84,800) 0-2 $11,320 $4,520 $1,240 $1,470 $580 $560 $1,550 $1, ,540 4,490 1,400 1, ,690 1, ,500 4,420 1,690 1, ,160 1, ,430 4,230 1,960 1, , ,270 4,440 2,060 1,730 1, , ,550 4,050 2,170 2,100 1, ,090 1,420 Total $211,83 $78,450 $31,560 $29,730 $13,710 $11,310 $20,760 $26,310 *Estimates are based on Consumer Expenditure Survey data updated to 1995 dollars using the Consumer Price Index. The figures represent estimated expenses on the younger child in a two-child family. Estimates are about the same for the older child, so to calculate expenses for two children, figures should be summed for the appropriate age categories. To estimate expenses for an only child, multiply the total expense for the appropriate age category by To estimate expenses for each child in a family with three or more children, multiply the total expense for each appropriate age category by For expenses on all children in a family, these totals should be summed. Miscellaneous expenses include personal care items, entertainment, and reading materials. Source: Family Economics and Nutrition Review, Vol. 9, No. 3, annuities, Social Security and veteran s benefits, welfare payments, judgments, student loans, worker s compensation, unemployment benefits, and disability payments. The court may consider when and for what duration the receipt of funds from gifts, prizes, net proceeds from property sales, severance pay, and judgments will be considered as available for child support. Benefits received from public assistance programs for the parent shall be included except in cases of extraordinary hardship. For income from self-employment, rent, or ownership of a business, gross income is defined as gross receipts minus ordinary and necessary business expenses. Deductions, such as depreciation or investment tax credits, are excluded. The amount claimed by a self-employed parent as income for tax purposes may differ from the amount of income used for computing child support. Whichever of you can obtain your child s health insurance at the least cost should provide it. 13

19 Your child support is computed by multiplying your child support obligation by the percentage of time your child spends with its other parent. In-kind payments, such as the value of a company car, free housing, room and board, will also be counted as gross income. See Worksheet 8. Gross Potential Income If one of you is voluntarily unemployed or underemployed, child support is based on gross potential income. For example, if you quit a job, or decide to work only part-time, the amount of child support may be set as if you were still working full time. Potential income is based on your work history and qualifications, and also on employment opportunities. You are not considered underemployed while staying at home to care for a child not in school. The guidelines allow an adjustment from gross income for pre-existing courtordered child support currently being made for children from another relationship or for maintenance of a former spouse. Also, an adjustment to gross income is made for the cost of health insurance coverage for those children. See Worksheet 9. Whichever of you can obtain your child s health insurance at the least cost should provide it. Only the child s health insurance premium is deducted, not the amount of the premium for the entire family. The Guidelines provide that any of the child s health care expenses not covered by insurance should be shared equally by both of you over and above your child support obligation. The basic child support amount does not include the cost of work-related childcare expenses. These expenses are ordinarily shared equally by both parents and are included in the child support order. The amount to be added is the net childcare cost (actual childcare costs minus childcare tax credits) up to an equal sharing of the expenses. Computations The basic child support obligation (without considering health care insurance or childcare costs) is based on the gross income of both parents, according to the rates in Table 2 on the next page. Where both of you have gross income (either actual or potential), the amount of child support computed above is prorated between both of you in proportion to your gross incomes. Example: Let s say you have two children but they do not live with you (that is, you do not have custodial care); rather, they live with your spouse. If you earn $25,000 a year and your spouse earns $10,000, child support would be based upon your combined gross income of $35,000. By looking at Table 2, you can see that the first $10,000 of your gross income would accrue child support at the two-child 25 percent rate ($208 per month), the second $20,000 would accrue child support at the two-child 23 percent rate ($383 per month), and the final $5,000 at the two-child 20 percent rate ($83 per month), for a total child support obligation of $674 per month. You and your spouse would divide that amount in proportion to your own gross income. That means you d wind up paying $479 ($25,000/$35,000 or 71 percent) to your spouse as your share of child support. Another way to calculate child support is to use Table 3, a schedule of monthly child support amounts. Go down the first column until you find your combined gross monthly income. Read across to see the child support amount for the correct number of children you have. Multiply that amount by the percentage of your total combined gross monthly income earned by whichever one of you does not have custody of your children to determine how much that parent must pay in child support. When Guidelines Apply As you can see from the computation chart and from Table 3 on page 19, the Child Support Guidelines only apply when your combined annual income is between $6,000 and $150,000. Child support must be computed on a case-by-case basis if your combined income is below $6,000 or above $150,

20 Table 2. Computations for Basic Child Support. The basic child support obligation shall be based upon the Guideline Income of both parents, according to the rates set out in the schedule below: (the amounts are rounded off to the nearest dollar). Number of children and parent's income Per month Per year 1 child: 17% of the 1st $10,000 of combined Guideline income 142 1,700 15% of the next $20,000 of combined Guideline income 250 3,00 13% of the next $20,000 of combined Guideline income 217 2,600 10% of the next $20,000 of combined Guideline income 167 2,000 7% of the next $20,000 of combined Guideline income 117 1,400 4% of the next $20,000 of combined Guideline income % of the next $20,000 of combined Guideline income % of the next $20,000 of combined Guideline income ,060 12,700 2 children: 25% of the 1st $10,000 of combined Guideline income ,700 23% of the next $20,000 of combined Guideline income 383 4,600 20% of the next $20,000 of combined Guideline income 333 4,000 15% of the next $20,000 of combined Guideline income 250 3,000 10% of the next $20,000 of combined Guideline income 167 2,000 7% of the next $20,000 of combined Guideline income 117 1,400 6% of the next $20,000 of combined Guideline income 100 1,200 6% of the next $20,000 of combined Guideline income 100 1,200 1,658 19,900 3 children: 29% of the 1st $10,000 of combined Guideline income 242 2,900 27% of the next $20,000 of combined Guideline income 450 5,400 24% of the next $20,000 of combined Guideline income 400 4,800 20% of the next $20,000 of combined Guideline income 333 4,000 13% of the next $20,000 of combined Guideline income 217 2,600 10% of the next $20,000 of combined Guideline income 167 2,000 9% of the next $20,000 of combined Guideline income 150 1,800 9% of the next $20,000 of combined Guideline income 150 1,800 2,109 25,300 4 children: 31% of the 1st $10,000 of combined Guideline income 258 3,100 29% of the next $20,000 of combined Guideline income 483 5,800 26% of the next $20,000 of combined Guideline income 433 5,200 21% of the next $20,000 of combined Guideline income 350 4,200 16% of the next $20,000 of combined Guideline income 267 3,200 13% of the next $20,000 of combined Guideline income 217 2,600 12% of the next $20,000 of combined Guideline income 200 2,400 12% of the next $20,000 of combined Guideline income 200 2,400 2,408 28,900 5 children: 34% of the 1st $10,000 of combined Guideline income 283 3,400 31% of the next $20,000 of combined Guideline income 517 6,200 28% of the next $20,000 of combined Guideline income 467 5,600 24% of the next $20,000 of combined Guideline income 400 4,800 19% of the next $20,000 of combined Guideline income 317 3,800 16% of the next $20,000 of combined Guideline income 267 3,200 15% of the next $20,000 of combined Guideline income 250 3,000 15% of the next $20,000 of combined Guideline income 250 3,000 2,751 33,000 Other Adjustments Shared Physical Custody If you are the noncustodial parent and have your child more than 35 percent of the year (not counting periods of less than three consecutive overnights), then an adjustment is made in child support. Your child support is computed by multiplying your child support obligation by the percentage of time your child spends with its other parent. The child support obligations are then offset, with the parent owing more child support paying the difference between the two amounts. See Worksheet 9. 15

21 The amount of child support set by the Court will not ordinarily change with an increase in the cost of living unless you include a provision for future adjustment. Extended Visits If you are the noncustodial parent and have your child for an extended visit of 30 days or more, then child support is usually reduced by 50 percent during the time of the visit. For example, if your child spends 2 months of his or her summer school vacation with you, then you would pay only one-half (50%) of the usual child support payment to your spouse, the custodial parent, for those 2 months. Split Physical Custody Split custody refers to the situation where each of you has custody of at least one of your children. The Child Support Guidelines dictate how much you owe each other for child support. Whichever of you owes more pays the difference to the other. To figure child support for a split custody arrangement, the support obligations shown in Table 2 must be pro-rated among all children in the household. For example, if there are three children due support, two of whom live with you and one lives with the other parent, support is calculated using the schedule for three children, with one-third of the amount being used to determine the support obligation for one child and two-thirds of the amount for two children. See Worksheet 10. Future Adjustments The amount of child support set by the court will not ordinarily change with an increase in the cost of living unless you include a provision for future adjustment. This might be done with a provision that child support will be reviewed periodically when there are changes in your incomes. Or child support could change based on a change in the Consumer Price Index, or could change by a certain percent each year. You might agree to change support when your child reaches a certain age. Without a provision for future adjustment, a change in the support amount will not be granted unless you can show that there has been a permanent, substantial, and material change in the circumstances of either one of you or your child. It is best to plan ahead and consider future needs of the children when making your initial child support determinations. Since the guidelines became effective in July 1989, the court will require that the party seeking child support file an Affidavit Verifying Income with the court. A sample of the Affidavit is attached as Fig. 1. In addition to using the worksheets to determine the amount of parental support, you also need to consider the following issues related to the children: medical and dental expenses, post-high school education, the timing and method of payments, budgeting and recordkeeping of future changes in support, taxes, life insurance, and estate planning. Medical and Dental Expenses Medical and dental insurance for children is important. Review carefully any medical and dental benefits available for children through your employment or your spouse s. Obtain from your employers the cost of health insurance for the children, information about when and how the children may be covered, and when and how claims must be made. The determination of child support takes into account routine, uninsured medical and dental expenses. There may at some time be nonroutine, uninsured medical and dental expenses. Examples of expenses that might be nonroutine and uninsured include orthodontia, counseling, long-term physical treatments, or special care for a disabled child. Discuss how these expenses will be divided between you and your spouse. Post-high School Education Education beyond high school is important and expensive. The determination of the child support obligations does not include any saving for the expenses of post-high school training and education. Give some consideration to financial support of your child s post-high school education. What portion of the child s education do each of you anticipate paying? 16

22 How will the cost be divided between you? What part, if any, is the child expected to pay? Will the child be eligible for financial aid? If your children are very young, post-high school education is years away. But the earlier you start to save and accumulate funds, the easier it is. If you have teenagers, discuss these issues with them. You and your child need to understand what education expenses you will provide and under what conditions. Timing and Method of Payments After support has been determined, you must decide how payments are to be made. Most of the time, if you are responsible for paying child support, you will write a check to the other parent. You will then have to forward that check to your local prosecuting attorney s office. They will record that you paid and send the check on. If your child is in college you may agree to pay support directly to the other parent or directly to the child. As you consider the date of payments, think about when whichever one of you pays support usually receives your income. Is it convenient to have payments due about the same time as income is received? If income is irregular, you must set aside money for support payments in those months when there is reduced or no income. Budgeting and Recordkeeping Budgeting and recordkeeping is important for both parents. If your children live with you most of the time, you need to estimate the cost of routine expenses and nonroutine expenses. Nonroutine expenses are those that occur only once or twice a year, such as the expense for clothing, medical examinations, and supplies at the start of the school year. If your child lives with you, you must set up a system to set aside money for these nonroutine expenses. If you are making child support payments, you need to keep records of all payments made. Always make payments by check; the cancelled check is proof of payment. Likewise, if you are the parent receiving support, you need records of all payments received. Both of you should keep records of money you spend on your children. These records will be helpful for future planning. Always make payments by check; the cancelled check is proof of payment. 17

23 Fig. 1. Affidavit verifying income. DISTRICT COURT, STATE OF IDAHO IN AND FOR THE COUNTY OF , Plaintiff. ) CASE NO.: vs. ) ) AFFIDAVIT VERIFYING INCOME , Defendant. ) I hereby state under oath that the following information is true: A. GROSS INCOME FATHER MOTHER 1. Wages, salary, commissions, bonuses, etc. 2. Rent, royalties, trade, or business income, etc. (Net of ordinary & necessary expenses) 3. Interest, dividends, pensions, annuities, etc. 4. Social Security, worker's compensation, unemployment benefits, disability, veterans' benefits, etc. 5. Public assistance, welfare for self or children 6. Alimony 7. Grants, distributions from trusts, etc. 8. Other 9. SUBTOTAL B. ADJUSTMENTS TO GROSS INCOME (I.C.S.G. Sections 6 and 7) 1. Straight line depreciation on assets 2. One-half of self-employment Social Security taxes 3. Child support & alimony from another relationship 4. Support for child of another relationship living in the home 5. ADJUSTMENTS SUBTOTAL C. GROSS INCOME, AS ADJUSTED (line B5 subtracted from line A9) D. IN-KIND BENEFITS (I.C.S.G. Section 6(b)) (Housing, food, transportation, recreation) E. POTENTIAL INCOME (I.C.S.G. Section 6(c)) Potential earned income, Potential unearned income F. GUIDELINES INCOME (C+D+E) G. MONTHLY ICSG INCOME (F+12 months) Spouse s Social Security Number Signature of Party Submitting Notary Social Security Number of Party Submitting Affidavit Subscribed and sworn to before me on, Year. Note: This is an example of a document used in an Idaho court. Actual copies can be obtained from your local Clerk of the Court s office. (I.C.S.G. refers to Idaho Child Support Guidelines) 18

24 Table 3. Basic monthly child support guidelines schedule Combined gross Number of children Annual monthly income Income , , , , ,800 1, ,000 1, ,200 1, ,400 1, ,600 1, ,800 1, ,000 1, ,200 1, ,400 1, ,600 1, ,800 2, ,000 2, ,200 2, ,400 2, ,600 2, ,800 2, ,000 2, ,200 2, ,400 2, ,600 2, ,800 3, ,000 3, ,200 3, ,400 3, ,024 39,600 3, ,052 40,800 3, ,002 1,080 42,000 3, ,028 1,108 43,200 3, ,054 1,136 44,400 3, ,004 1,080 1,164 45,600 3, ,028 1,106 1,192 46,800 4, ,052 1,132 1,220 48,000 4, ,076 1,158 1,248 49,200 4, ,098 1,182 1,275 50,400 4, ,118 1,203 1,299 51,600 4, ,138 1,224 1,323 52,800 4, ,158 1,245 1,347 54,000 4, ,178 1,266 1,371 55,200 4, ,005 1,198 1,287 1,395 56,400 4, ,020 1,218 1,308 1,419 57,600 4, ,035 1,238 1,329 1,443 58,800 5, ,050 1,258 1,350 1,467 60,000 5, ,065 1,278 1,371 1,491 61,200 5, ,080 1,298 1,392 1,515 62,400 5, ,095 1,318 1,413 1,539 63,600 5, ,110 1,338 1,434 1,563 64,800 5, ,125 1,358 1,455 1,587 66,000 5, ,140 1,378 1,476 1,611 67,200 5, ,155 1,398 1,497 1,635 68,400 5, ,170 1,418 1,518 1,659 69,600 5, ,182 1,434 1,536 1,679 70,800 6, ,192 1,447 1,552 1,698 72,000 6, ,202 1,460 1,568 1,717 73,200 6, ,212 1,473 1,584 1,736 74,400 6, ,222 1,486 1,600 1,755 75,600 6, ,232 1,499 1,616 1,774 76,800 6, ,242 1,512 1,632 1,793 78,000 6, ,252 1,525 1,648 1,812 79,200 6, ,262 1,538 1,664 1,831 80,400 6, ,272 1,551 1,680 1,850 81,600 6, ,282 1,564 1,696 1,869 82,800 Table 3. (cont.) Combined gross Number of children Annual monthly income Income 7, ,292 1,577 1,712 1,888 84,000 7, ,302 1,590 1,728 1,907 85,200 7, ,312 1,603 1,744 1,926 86,400 7, ,322 1,616 1,760 1,945 87,600 7, ,332 1,629 1,776 1,964 88,800 7, ,342 1,642 1,792 1,983 90,000 7, ,349 1,652 1,805 1,999 91,200 7, ,356 1,662 1,818 2,015 92,400 7, ,363 1,672 1,831 2,031 93,600 7, ,370 1,682 1,844 2,047 94,800 8, ,377 1,692 1,857 2,063 96,000 8, ,384 1,702 1,870 2,079 97,200 8, ,391 1,712 1,883 2,095 98,400 8, ,398 1,722 1,896 2,111 99,600 8, ,405 1,732 1,909 2, ,800 8, ,412 1,742 1,922 2, ,000 8, ,419 1,752 1,935 2, ,200 8, ,426 1,762 1,948 2, ,400 8, ,433 1,772 1,961 2, ,600 8, ,440 1,782 1,974 2, ,800 9, ,447 1,792 1,987 2, ,000 9, ,454 1,802 2,000 2, ,200 9, ,460 1,811 2,012 2, ,400 9, ,466 1,820 2,024 2, ,600 9, ,472 1,829 2,036 2, ,800 9, ,478 1,838 2,048 2, ,000 9, ,484 1,847 2,060 2, ,200 9, ,490 1,856 2,072 2, ,400 9, ,496 1,865 2,084 2, ,600 9, ,502 1,874 2,096 2, ,800 10, ,508 1,883 2,108 2, ,000 10, ,514 1,892 2,120 2, ,200 10, ,520 1,901 2,132 2, ,400 10, ,526 1,910 2,144 2, ,600 10, ,532 1,919 2,156 2, ,800 10, ,538 1,928 2,168 2, ,000 10,600 1,001 1,544 1,937 2,180 2, ,200 10,700 1,004 1,550 1,946 2,192 2, ,400 10,800 1,007 1,556 1,955 2,204 2, ,600 10,900 1,010 1,562 1,964 2,216 2, ,800 11,000 1,013 1,568 1,973 2,228 2, ,000 11,100 1,016 1,574 1,982 2,240 2, ,200 11,200 1,019 1,580 1,991 2,252 2, ,400 11,300 1,022 1,586 2,000 2,264 2, ,600 11,400 1,025 1,592 2,009 2,276 2, ,800 11,500 1,028 1,598 2,018 2,288 2, ,000 11,600 1,031 1,604 2,027 2,300 2, ,200 11,700 1,034 1,610 2,036 2,312 2, ,400 11,800 1,037 1,616 2,045 2,324 2, ,600 11,900 1,040 1,622 2,054 2,336 2, ,800 12,000 1,043 1,628 2,063 2,348 2, ,000 12,100 1,046 1,634 2,072 2,360 2, ,200 12,200 1,049 1,640 2,081 2,372 2, ,400 12,300 1,052 1,646 2,090 2,384 2, ,600 12,400 1,055 1,652 2,099 2,396 2, ,800 12,500 1,058 1,658 2,108 2,408 2, ,000 19

25 If you divorce, you may still be entitled to Social Security benefits under your spouse s work record. Spousal Support This support is payments made after divorce by one spouse to the other spouse. It is sometimes referred to as alimony or maintenance. There is no automatic right to spousal support, and support is not favored by Idaho Courts, since it is presumed that under a community property system each spouse receives one-half of the marital property. When it is awarded, it is usually for a temporary period to give the spouse time to become employable or when one of the spouses has no means of adequate support. In determining the amount of spousal support the court must consider the following factors: 1. the financial resources of the spouse seeking maintenance; 2. the spouse s ability to meet his or her own needs independently; 3. the time necessary to acquire sufficient education and training to enable the spouse seeking maintenance to obtain employment; 4. the duration of the marriage; 5. the age and the physical and emotional condition of the spouse seeking maintenance; 6. the ability of the spouse from whom maintenance is sought to meet his or her needs while meeting those of the spouse seeking maintenance; and 7. the tax consequences to each spouse. In deciding whether one of you should pay your spouse support, consider each of your past, present, and future earning capacities. Did one of you decrease earning capacity during the marriage by staying home to care for children? Did one of you decrease earning capacity during the marriage by quitting a job to move when your spouse was transferred? Did one of you increase earning capacity by acquiring additional education? Look at present earnings. If both of you are employed and have similar incomes, there is most likely no need for spousal support. If one of you is not employed, could you become employed? Will your health and family responsibilities allow employment? If so, estimate your probable salary by checking the local newspaper, or talking with an employment counselor at the State Employment Office. If you are unemployed or underemployed, could you increase earnings by attending school or participating in a training program? If so, how much would this cost, and how long would it take? Your spouse could help support you while this employment rehabilitation is taking place. In addition to each of your present earnings, consider what these earnings will be in 5 or 10 years are they likely to increase or decrease? Estimate also the income from pensions, Social Security, and investments that will be available for each of you after retirement age. Use Worksheet 11 to summarize this information. Social Security If You Are Married If either you or your spouse has worked under Social Security coverage, you have retirement benefits either as worker or as spouse of the worker. If both of you worked all of your adult lives and had high earnings, both will receive benefits as workers. If one of you (usually the wife) never worked, stopped working for several years, or had low earnings, you will receive benefits as the spouse of the worker. 20

26 If You Divorce If you divorce, you may still be entitled to Social Security benefits under your spouse s work record, or vice versa. As of January 1, 1985, a divorced person who is at least 62 years of age is eligible for benefits based on a former spouse s earnings, even if the former spouse is not retired. If the divorced person has been divorced at least 2 years, was married at least 10 years, and is 62 years of age, benefits will be paid under the former spouse s earnings record. If a divorced person has his or her own pension based on work in public employment not covered by Social Security, the Social Security benefit payable on account of the former spouse s Social Security may be reduced by the amount of the public pension. If you are approaching retirement age, you need to consider what Social Security and retirement benefits will be available for each of you after the divorce. Health Insurance If one of you is presently insured under the other s health insurance policy, you need to determine how health insurance coverage can continue after divorce. If you both are employed, do you have health insurance coverage available through your own employment, and if so, when could you transfer to your own policy? Some health insurance policies have specified periods for changes and enrollment. If one of you is not covered by health insurance, it is sometimes possible to continue coverage under your spouse s employer s policy. Check with the employer to see whether coverage is available and how much it will cost. Which spouse will pay the premium? Under the federal law known as COBRA (Consolidated Omnibus Budget Reconciliation Act), divorced spouses may be entitled to continue group health insurance for at least 18 months. Although the cost of this coverage cannot exceed 102 percent of the premium the company pays, it is usually considerably less expensive than buying individual coverage. Added protection under COBRA can remain available for up to 36 months for divorced spouses and for children who lose their status as a dependent. These provisions apply as long as persons are not eligible for coverage under another group plan. This law also applies only if the company employs 20 or more workers. Also be aware that if you wish to be covered under the COBRA law there is a time limit of 60 days after the divorce is granted to notify the insured s employer of your interest in continuing health insurance coverage. If one of you is presently unemployed, would you be able to obtain your own coverage? Group insurance and individual insurance policies are two options. Many individuals are eligible for group insurance through places of work, unions, or fraternal organization. Whenever group insurance is available, it generally costs from 15 to 40 percent less than the same insurance through an individual plan. There may be other advantages to group insurance such as no requirement of a physical examination to qualify for coverage, no exclusion for a preexisting condition, and no canceling of a policy unless the policyholder leaves the group. Medicaid Medicaid provides medical benefits for children in families where the income is 133 percent below poverty guidelines. Benefits can include vital health care including hospital care, visits to the doctor, preventive care, medicine, dental care, immunizations, and eyeglasses. If, in the event of divorce your income drops significantly, don t forgo health care for your children. A single parent with two Under federal law divorced spouses may be entitled to continue group health insurance for at least 18 months. 21

27 Completing the projected income/ expense statement will help you visualize your own future financial situation. children under age six can have income at twice the minimum wage and the children are eligible for Medicaid. If the children are over age six, they may still be eligible for Medicaid depending on total family income. Children can get Medicaid even if their family has a car, a house, and a savings account. And a family with some health insurance can still get Medicaid. To obtain Medicaid coverage for children, an application must be filed providing information such as the family s income and social security numbers for the parent(s) and children. A family can apply at their local Department of Health and Welfare, and, in some counties, they can apply at a regional hospital, a health department, or a rural health clinic. Estimated Income/Expense Statement A projected income/expense statement shows estimated income and expenses in the future. Use Worksheet 12 to estimate income and expenses for each of you after divorce. As you fill this out, list all sources of income in the income section. If you receive cash that you will invest as part of the property settlement, list anticipated earnings from the investment. If you will have custody of children and receive child support payments, list them as income. If you will be making child support payments, list them as expenses. Usually it is difficult to support two households after divorce at the same level as the one household before divorce. Completing the projected income/expense statement will help you visualize your own future financial situation. If you complete the statement for both of you, it will help you understand and evaluate the fairness of your proposed settlement. Other Financial Considerations Credit Your ability to borrow money is based on your creditworthiness. Your credit history stored at the credit bureau tells a credit grantor about your past ability to handle money. This credit history and your income are the two biggest factors that determine creditworthiness. Joint Accounts During Marriage Look at your bill. If it comes addressed to you and your spouse, you probably have a joint account. To be sure, check with the financial institution. Since June 1, 1977, all joint credit accounts are reported in the credit files of both you and your spouse. Joint accounts that were opened before June 1, 1977, may still be reported only in the husband s file. To get these joint accounts reported in both names, write to the creditor (the store or company granting the credit or credit card) and ask that this information be reported in both names. Before you do, decide whether the credit account was always paid on time. If it was, transfer the record. If it was overdue on several occasions in the last 7 years, you will be transferring poor credit history. After Divorce A creditor cannot close your account or change its terms unless you re unable or unwilling to pay. However, the creditor can require you to submit a new credit application if your original credit account was based on your former spouse s income. To get credit after divorce, you must be creditworthy that is, you must have a good credit history (including the years before divorce) and the necessary income. 22

28 You don t have to include maintenance or child support payments as income unless you want to have them considered as part of your income. If you do include these payments as income the credit grantor must count them as part of your income. The credit grantor may, however, verify the regularity with which those payments are made. In the event of a divorce, be sure to pay close attention to the status of your credit accounts. It is important to make regular payments so your credit record won t suffer. As long as there is any outstanding balance on a joint account, such as credit cards and consumer loans, both you and your spouse are liable for it. A divorce decree does not relieve you from paying your bills. Credit Payment Priorities You need to look at your situation and make decisions about how much and when you can pay. Not all of your debts equally impact your family. The list below contains a list of priorities to establish in dealing with debts. Your priorities may differ. Establish your own list and verify that you have contacted all of your creditors. Checklist: Creditors to pay first First priority: Mortgage or rent Tax liabilities Second mortgages Auto loans Utility companies Child support payments Second priority: Finance companies (secured loans) Third priority: Credit cards, Retailers Doctors and Dentists Hospitals Finance companies (unsecured loans) If the bills are still not paid, they will probably be turned over to an independent collect agency. While the agency will try to get you to pay, the law protects you from certain actions. Debt collectors are prohibited from harassing, oppressing, abusing you, threatening to take your property without the right to do so, or from using false statements (such as implying that they are attorneys or work for a credit bureau or Social Security). The Fair Debt Collection Practices Act applies to any personal, family or household debt and covers debt collectors who regularly collect debts for others, but not the creditors themselves or their lawyers. The law further prohibits debt collectors form contacting you at inconvenient times (defined as before 8:00 a.m. or after 9:00 p.m.) or places. The collector may not contact you at work if your employer disapproves and you notify the debt collector in writing that you do not want to be contacted at work. They also must not tell anyone else that you are behind in your debts and they cannot use obscene or abusive language. As long as there is any outstanding balance on a joint account, such as credit cards and consumer loans, both you and your spouse are liable for it. 23

29 If you need to work out an emergency repayment plan with your creditors, do so. If a bill collector violates any of your rights under Fair Debt Collection Practices Act, complain to the Federal Trade Commission, Washington, DC 20580, (202) or call the Idaho Attorney General s Office Consumer Protection Unit Creditors Options Creditors can take several kinds of legal action against you. These actions are often written into the sales contract you signed. If you fail to make payments, you will receive letters from a creditor s attorney or a collection company warning you of the intended action. Here s a list of possible actions a creditor might take. Acceleration The entire debt is payable at once if you miss a payment. The court can force you to pay by seizing your property and selling it. Repossession the creditor can seize the item you bought or the property you used as collateral. If the sale of the property brings less than the amount you owe, usually you still must pay the difference. Wage garnishment a court order that requires your employer to withhold part of your wages and pay your creditor. Foreclosure if you do not make your mortgage payments for at least 3 months, your lender takes possession of your home and sells it to pay off the loan. You are responsible for the legal fees and difference between the selling price and the amount owed. All of these actions are very serious and could jeopardize your ability to get credit in the future. If you need to work out an emergency repayment plan with your creditors, do so. Missed payments will show that you were delinquent. This could result in a poor credit record that will stick with you and you spouse for seven years. Fixing your credit record is not possible. Don t fall prey to scams that claim to be able to do so. You can, however, write a 100 word statement explaining your hardship and have that statement permanently entered into your credit report. Call your bank and ask for the name of the credit agency which they report to. Send that letter to all three of the major credit reporting agencies Experian, Eqifax, and Trans- Union. By federal law, someone from the credit reporting agency must help you write the letter if you need help. Review your credit report Request a copy of your credit report from one of the three credit bureaus listed below. Usually credit reports cost $8. You can get a free copy only if you were denied credit, employment, or insurance. However, you also are entitled to one free report every twelve months upon request if you certify that: (1) you are unemployed and plan to seek employment within 60 days, (2) you are on welfare, or (3) your report is inaccurate due to fraud. Experian (Formerly TRW) PO Box 2104 Allen, TX

30 Equifax PO Box Atlanta, GA Fax: Trans Union Corp. PO Box 390 Springfield, PA Include the following information in your written request for your credit report: Your first, middle initial, & last name Spouse s name Current home address and zip Home address for the last 5 years Social Security number Date of birth Verification of your current address, such as a photocopy of a driver s license or a utility bill Sign your request Should You Consider Loan Consolidation? If you have a number of outstanding loans, a consolidation loan may be considered. You take out one loan, pay off all bills at once, and then have one debt to pay off to just one creditor (usually extending over a longer period of time). Again, each payment will be smaller, but you will commit yourself for a longer period of time, usually at a higher total cost. Shop around, as you would for any type of credit, to find the lowest interest. Some of your smaller debts may carry no interest and may be unsecured (meaning the creditor s don t hold any collateral). Some bill consolidation loans may require you to put up your household goods, auto, and sometimes your house as security. Be advised that non payment of this type loan could result in loss of the collateral! Who to Talk to About Your Financial Situation Consumer Credit Counseling Service (CCCS) If you d like to have a confidential chat with an expert on personal debt, find the Consumer Credit Counseling Service in your area. Call ( CCCS). That number will connect you to the National Foundation for Consumer Credit. They will give you the address and phone number for the CCCS in your area. They provide counseling to families on debt problems. If you want, they ll help you work out a family budget, they ll call your credit card companies and other lenders, and they ll help negotiate to get your payments reduced. If You Have No Credit Rating The best way to establish a credit rating is to establish a good employment record and have a checking and a savings account. Then open a small charge account with a local retail store, get a credit card with a low credit limit, or get a secured loan from a financial institution. Make payments on these promptly as they become due, and you will establish your own good credit history. If you d like to have a confidential chat with an expert on personal debt, find the Consumer Credit Counseling Service in your area. 25

31 Once a joint return is filed, either spouse is liable to pay up to 100 percent of the tax owed. Child care assistance Working parents, and especially single parents, know that the cost of child care is big part of the family budget. However, your family can get assistance with the cost of child care. The dollar amount of assistance depends upon the family income. For example, in 1997, a family of three with income below $1,623 a month ($19,467 a year) may qualify for child care assistance. Ask about the program at your local Community Action Agency, child care Resource and Referral, or the Department of Health & Welfare. Food stamps If your income is reduced, you may be eligible for food stamps. Low income families can qualify for food stamps while working full time. For example, a family of three with income at one and one-half times the minimum wage may qualify for assistance. If you want to find out if you are eligible for food stamps, apply through the Department of Health & Welfare. Eligibility is determined by your family's financial resources and family income. When you apply for the Food Stamp program, take this information along: Rent receipts House payment book Utility bills Proof if income for all working members of household, including all benefits such as Social Security, public assistance and unemployment benefits Bank books or any papers showing what you have in savings Proof of medical bills (doctor, hospital, etc.). Proof of income. * Note: These are general guidelines. Particular details may be subject to changes based on new state and/or federal regulations. Income Tax Divorce has income tax consequences. Some information is provided here. You may also want to obtain Internal Revenue Service publication No. 504 Tax Information for Divorced and Separated Individuals. To order IRS publications, look under U.S. Government in your phone book or call TAX How Divorce Affects Taxes Idaho s community property law makes both spouses liable for most debts incurred while married. Once a joint return is filed, either spouse is liable to pay up to 100 percent of the tax, interest and penalty, if any, determined to be owning, even if additional amounts become due after divorce. Marriage and divorce may affect your tax liability. If you marry someone who already has a tax debt, at least one-half of what you earn or acquire after marriage can be taken to satisfy that spouse's debt. This can occur because your wages and other property acquired during marriage become co-owned by your spouse. In addition, if you are married to someone who is not paying income taxes on what he or she earns, when the taxes become due, the taxes may be collected from either or both of you. In the event of a divorce, although the divorce decree may state that your exspouse is fully responsible for tax debts, the divorce decree will not stop a taxing 26

32 agency from collecting from you if you have income or assets which can satisfy the liability. Example: Your divorce decree states your ex-spouse is responsible for the tax debts incurred during marriage. You file a tax return, alone or with a new spouse, and expect a return. Your entire refund may be applied to the joint liability incurred during your prior marriage. Your rights under the state law may allow you to sue your ex-spouse for any money the taxing agency collects from you. Collection will continue from one spouse or the other, or both, until the joint tax liability is fully paid. Before Divorce Your marital status on December 31 determines your taxfiling status for that year. For example, if your divorce was not final on December 31, 1997, you may file a joint return for 1997 even though your divorce is final when you file the 1997 return in April If you are divorcing, filing a joint return, and expecting a refund, determine how to divide the refund. The refund is property that belongs to both of you. If you are divorcing, filing a joint return, and owe additional taxes, determine who will pay the tax. The tax is a debt you both owe. If your divorce is not final as of December 31, you may also file as a head of household if you meet all the conditions outlined in the Form 1040 instruction book. After Divorce If you were divorced by December 31, you cannot file a joint return for that year. You file either as a single person or as a head of household. The income tax booklet that comes with the Form 1040 explains who may file as a head of household. When you are divorced, you must file separate returns. You should determine in the property settlement which of you claims the child as a dependent. Usually it s whichever one of you has major physical custody, regardless of the amount of support the other parent provides. If you are the custodial parent you can waive the right to claim the child as a dependent in a given year, allowing the other parent to claim the child as a dependent. If you do, your former spouse must attach to his or her tax return a signed statement from you waiving the dependency exemption. The new tax break is a $400 tax credit per child for Credits, which you can write off directly against tax, are worth much more than deductions (a $400 credit wipes out $400 in tax, but a $400 deduction trims $400 from income subject to tax; in the 28 percent tax bracket, for example, it saves just $112 in tax). The credit, which goes up to $500 for 1999, comes on top of the already existing deduction for a dependent currently $2,650. If you expect to claim several credits, you can lower your withholding to enjoy the benefits of the break in each paycheck. The new credit applies to children and grandchildren age 16 and younger, unlike dependency exemptions, which can apply at any age. But to claim the credit, the child must qualify as a dependent. Divorcing parents need to consider this tax break when determining who gets to claim a child s exemption as related to this new tax credit. Either of you can deduct medical expenses you paid for your child, regardless of who claimed the child as a dependent. For tax purposes, child support is not income for the parent receiving it and is not deductible for the parent paying it. Maintenance or spousal support payments you receive from your spouse are not always considered taxable income and are not always deductible for your spouse. They are taxable for you and deductible for your spouse only if they are within the IRS definition of alimony. According to the IRS, such payments are alimony if: payments are made in cash or check (not property) and there is no responsibility to make payments after one of you dies, and Your marital status on December 31 determines your tax-filing status for that year. 27

33 Due to a potential decrease in income after divorce, the parent who retains physical custody of the children may be eligible for the earned income tax credit. payments are not scheduled to decrease when a child marries, leaves school, etc., and payments exceeding $15,000 per year continue for at least 3 years, unless one of you dies. If you are receiving maintenance that the IRS considers income for tax purposes, you may be required to make quarterly estimated tax payments throughout the year. Obtain IRS publication No. 505, Tax Withholding and Estimated Tax. Earned Income Tax Credit (EIC) Due to a potential decrease in income after divorce, the parent who retains physical custody of the children may be eligible for the earned income credit on his/ her Federal income tax return. The EIC is a "refundable" credit. This means that you can benefit from the credit even if you owe no federal income tax. If you are eligible and owe no income tax, you will receive a check from the Internal Revenue Service in the amount of your credit. If you owe income tax, the EIC reduces the amount of taxes owed. If your credit is greater than the amount of taxes you owe, your tax bill will be reduced to zero and the IRS will send you a check for the remainder of your EIC. How to receive the EIC If you are eligible, file a federal income tax return. Workers with qualifying children may use either Form 1040A or Second, you must also file a tax form called "Schedule EIC" with your tax return. You can choose to fill out just the first side of "Schedule EIC." If you do, the IRS will calculate your EIC for you. Workers not raising children may use the 1040EZ form, sometimes known as the short form, to claim their EIC. If you were eligible in the recent past but did not file for EIC, you may also file for retroactive EIC payments from the last three years if you have not already filed income tax returns for those years. In general, if the you did not owe federal income taxes, no penalty will be assessed for filing late. A household's EIC payments do not count as income in determining its eligibility or benefit levels for Temporary Assistance for Families in Idaho (TAFI), Medicaid, food stamps, SSI, or public or subsidized housing. How to receive the EIC in your paycheck If you earned less than $25,078 in 1996 you can receive a portion of the EIC throughout the year in their paychecks. To apply, an eligible worker must fill out Form W-5, called the "Earned Income Credit Advance Payment Certificate," and give the bottom portion to his or her employer. The W-5 form is available from employers or local IRS offices, or can be ordered by calling the IRS toll-free at Eligible workers can file a W-5 any time during the year, but they must file a new W-5 at the beginning of each year to continue receiving the EIC in their paychecks. Workers not raising children are not eligible for EIC advance payments. See Internal Revenue Service (IRS) Publication 596 for the requirements. You can obtain free help from IRS operators during regular weekday business hours by calling You can also listen to a recorded message on the EIC 24 hours a day by calling the IRS "teletax" service. To hear recorded "teletax" messages on the EIC, dial Request topic 402 for the English message; for the Spanish message, press * on a touch-tone phone, pause, then press 2, then finally press 754. The IRS phone number for hearing impaired persons who have access to 28

34 TDD equipment is Bankruptcy Even though your property settlement agreement specifies who has the obligation to pay certain debts, that agreement may not keep creditors from seeking payment from you on debts your spouse assumed. The creditor will have the right to seek payment from you on these types of debts under these situations: 1. you were personally liable on the debt that is, you signed the loan papers or contract; 2. the creditor has a security interest in property distributed to you under the property settlement agreement; and, 3. your spouse received insufficient property through the property settlement agreement to cover the debt. The likelihood of a creditor seeking payment from you increases when your former spouse has become insolvent or has gone bankrupt. Wills and Estate Planning Estate planning is deciding who will receive your property at your death. You may already have done such planning preparing a will and naming beneficiaries on insurance policies, pension funds, IRAs, certificates of deposit, or government bonds. When you are divorcing review these documents for necessary changes. If you have minor children and want your property to be used for your children when you die, you need to determine the best way to do this and to provide for someone to manage the property for the children. Two alternatives are: 1. Write a will naming a guardian to manage the children s property, or 2. Establish an estate plan that would pass your property into a trust for the benefit of the children. The trust would be managed by a trustee you name according to a trust agreement you prepare. A New Financial Life After divorce, you and your spouse will create a new life, including a new financial life. Because you divided resources at divorce, each of you individually will have less than you had as a married couple. It is important to develop an understanding of your financial situation and a realistic financial plan including a budget and recordkeeping system. If you have children and/or have financial transactions that continue after divorce child support or spousal support payments, property that will be sold and proceeds that will be divided in the future a relationship continues after divorce. This is not the intimate relationship of marriage, but a business relationship. Be businesslike with your new business partner. When there are issues you must discuss, communicate directly. Do not send messages through children, relatives, or mutual friends. If you need to talk with each other, set a meeting time that is convenient for both of you. Limit the discussion time and topics. If the child s future dental treatment and expenses are the topic, talk only about that. Share information. The parent who has talked with the dentist cannot assume the other parent knows what the dentist recommended and why. Record-keeping takes on new importance after divorce. If you are paying or receiving child support, keep a record of all payments you made or received. Keep records of what each of you spends on the children. These records are useful as you budget and plan and if you consider child support changes. They help both of you Do not send messages through children, relatives, or mutual friends. 29

35 When entering into a prenuptual agreement you and your new spouse must act fairly toward each other for the agreement to be enforceable. You and your new spouse must disclose the full extent and value of all assets. Your agreement should also be signed and acknowledged. better understand the child s financial needs. Name change If you choose to change your name when you divorce, for example, resuming the use of your maiden name, you should notify the Social Security Administration (SSA) You do not, however, need to notify the Internal Revenue Service (IRS) of a name change. The IRS verifies the name used on a tax return with the records of the SSA. If you file a tax return with a name other than the name on record with the SSA, a delay will occur in processing your return and mailing your tax refund. Prenuptial Agreements If part of your new financial life involves plans for remarriage, you may want to consider a prenuptial agreement to ensure that the assets you now own as your separate property and any income produced by those assets remain your separate property. A prenuptial agreement can also help to ensure that your property will pass to your children when it is part of a well-planned estate. You can also specify how the property acquired during your new marriage will be treated that is, whether you and your new spouse will share future property or whether you will own your property separately. When entering into such an agreement you and your new spouse must act fairly toward each other for the agreement to be enforceable. You and your new spouse must disclose the full extent and value of all assets. Your agreement should also be signed and acknowledged. If real property is involved, your agreement or a memorandum of your agreement should be filed in the real estate records of each county in which you own property. 30

36 Worksheet 1: Estimated Proceeds from Sale of House. Estimated Sales Price $ (a) Selling Expenses Amount required to pay off loan(s) in full Fix-up costs connected with sale (paint, minor repairs, etc.) Realtor s commission (often 6% of Sales Price) Seller s portion of closing costs (often 1% of Sales Price) Other sales costs Total Selling Expenses (b) Estimated proceeds from sale (a minus b) 31

37 Worksheet 2: Estimated Cost of Staying in the Family Home. Monthly mortgage payment $ Monthly insurance payment* Monthly property tax payment* Electricity, gas, heating oil Water and sewer charges Garbage pickup Maintenance and repair Yardwork Homeowner fee, association fee Other TOTAL monthly cost $ *These may be included in the mortgage payment. If not, divide the yearly expense by 12 to arrive at the monthly cost. Worksheet 3: Estimated Cost of Renting. Monthly costs Rent $ Electricity, gas, heating oil Water and sewer charges Garbage pickup Yardwork, if it is the renter s responsibility Other TOTAL monthly costs $ One-time costs Moving $ Deposits (security, cleaning, pet, key) Utility hookups and deposits Other TOTAL one-time costs $ 32

38 33

39 Worksheet 5: Summary of Debts (Include all debts, credit card amounts, back taxes, student loans, etc.). Balance Minimum Date at which Creditor s owed monthly total debt will Comments (Was the loan secured? If so, name today payment be paid by what? Who signed the loan agreement?) 34

40 Worksheet 6: Summary of Proposed Property Division.* COMMUNITY PROPERTY ASSETS: Fair market Allocated to Allocated to Describe item value the wife the husband 1. $ $ $ TOTAL $ $ $ DEBTS INCURRED DURING MARRIAGE: Amount Allocated to Allocated to Describe debt owed the wife the husband 1. $ $ $ TOTAL $ $ $ Total ASSETS $ minus Total DEBTS $ equals TOTAL NET WORTH $ *Remember each spouse usually is entitled to onehalf of the net worth. If the division of the property reached on this worksheet is not what the couple desires, the couple may either reconsider who gets what property or adjust the allocation by having one spouse make a payment to the other. If cash is not available, the payment may be paid in installments over time. Look to Table 1 on page 13 for an example of this type of a division. 35

41 Completed Sample Worksheet 6: Summary of Proposed Property Division.* COMMUNITY PROPERTY ASSETS: Fair market Allocated to Allocated to Describe item value the wife the husband 1. $ $ $ TOTAL $ $ $ DEBTS INCURRED DURING MARRIAGE: Amount Allocated to Allocated to Describe debt owed the wife the husband 1. $ $ $ TOTAL $ $ $ Total ASSETS $ minus Total DEBTS $ equals TOTAL NET WORTH $ *Remember each spouse usually is entitled to onehalf of the net worth. If the division of the property reached on this worksheet is not what the couple desires, the couple may either reconsider who gets what property or adjust the allocation by having one spouse make a payment to the other. If cash is not available, the payment may be paid in installments over time. Look to Table 1 on page 13 for an example of this type of a division. 36

42 Worksheet 7: Monthly Financial Needs of Children.* Cost for Cost for Item** family children*** Comments Food at home Food away from home Clothing (purchase, repair, upkeep) Household operation (utilities, furnishings, repairs, equipment) Medical care (medical, dental, and eye care; doctors; hospital; drugs) Medical/dental insurance**** Education (tuition, fees, special lessons, summer camp) Transportation Personal (haircuts, allowances, recreation) Child care (babysitter, preschool, day care) Other TOTALS * If expenses do not occur routinely each month, divide the yearly cost by 12 to get an average cost per month. ** If you have items that are not in this list, add them. *** If children will live in 2 households, include costs for both households. **** If insurance is included as an expense, the parent paying the premium receives credit for the amount of the premium. Note: This is an example of a document used in an Idaho court. Actual copies can be obtained from your local Clerk of the Court s office. 37

43 Worksheet 8: Child Support Obligation IN THE DISTRICT COURT OF THE JUDICIAL DISTRICT OF THE STATE OF IDAHO, IN AND FOR THE COUNTY OF, Plaintiff. ) CASE NO.: ) vs. ) ) STANDARD CUSTODY CHILD, Defendant ) SUPPORT WORKSHEET Children Date of Birth Children Date of Birth Plaintiff Defendant Combined 1. MONTHLY I.C.G.S. INCOME (from Affidavit) $ $ $ 2. PERCENTAGE SHARE OF INCOME % % (Each parent s income on line 1 divided by Combined Income) 3. BASIC CHILD SUPPORT OBLIGATION $ (Multiply line 2 times line 3 for each parent) 4. EACH PARENTS CHILD SUPPORT $ $ OBLIGATION (Multiply line 2 times line 3 for each parent) 5. RECOMMENDED CHILD $ SUPPORT ORDER (Bring down the amount from line 4 for the non-custodial parent) OTHER COSTS TO BE CONSIDERED BY THE COURT: a. Work-Related Child Care Cost + b. Health insurance premiums and uninsured health care expenses + c. Tax benefit for dependency exemptions + Comments, calculations, or rebuttals. PREPARED BY: DATE: Note: This is an example of a document used in an Idaho court. Actual copies can be obtained from your local Clerk of the Court s office. 38

44 Worksheet 9: Child Support Obligation Shared Physical Custody IN THE DISTRICT COURT OF THE JUDICIAL DISTRICT OF THE STATE OF IDAHO, IN AND FOR THE COUNTY OF, Plaintiff. ) CASE NO.: vs. ) STANDARD CUSTODY CHILD, Defendant ) SUPPORT WORKSHEET Children Date of Birth Children Date of Birth Plaintiff Defendant Combined 1. MONTHLY I.C.G.S. INCOME (from Affidavit) $ $ $ 2. PERCENTAGE SHARE OF INCOME % % (Each parent s income on line 1 divided by Combined Income) 3. BASIC CHILD SUPPORT OBLIGATION $ a.apply line 1 Combined to Child Support Schedule b.(multiply line 3a by 14 (Sections 10d and 10f) $ 4. EACH PARENTS CHILD SUPPORT $ $ OBLIGATION (Multiply line 2 times line 3 for each parent) 5. OBLIGATION ALLOCATION $ $ (Line 4 divided by the number of children) CHILD 1 CHILD 2 CHILD 3 Plaintiff Defendant Plaintiff Defendant Plaintiff Defendant 6. PARENTS PERCENTAGE % % % % % % OBLIGATION (Number of overnights with other parent divided by 365) If greater than 65% enter 100%, if less than 35% enter 0%. 7. PARENTS OBLIGATION $ $ $ $ $ $ (Line 5a line 6 for each child) 8. TOTAL CHILD SUPPORT $ $ PER PARENT (Total of amounts for each parent) 9. RECOMMENDED CHILD $ $ SUPPORT ORDER (Subtract lesser amount from greater amount on line 8 and place result under greater amount) OTHER COSTS TO BE CONSIDERED BY THE COURT: a. Work-Related Child Care Cost + b. Health insurance premiums and uninsured health care expenses+ Comments, calculations, or rebuttals. PREPARED BY: DATE: For example, if child 1 lives with defendant 80% of the time, 80% goes under plaintiff for child 1. 39

45 Worksheet 10: Summary of income of husband and wife Income Husband Wife Earning ability at time of marriage $ $ Present earning ability and annual income from $ $ property and investments Earning ability and income in 5 or 10 years $ $ Income from pensions, Social Security, and $ $ investments after retirement age Comments: 40

46 Worksheet 11: Projected Income-Expense Statement. For the period from, year to, year Income Husband Wife Husband Wife Salaries (before deductions) $ $ Liabilities Commissions, tips, bonuses Bank loans Investment income Interest (taxable) Charge accounts Charge cards Interest (nontaxable) Other Dividends Savings Profit from rental property Savings account Profit from sale of assets Investments Other investment income Pension contributions Alimony/child support Payments to others Cash gifts Child care Other income Family allowances Total income $ $ Charitable gifts Gift Child support/alimony Business/professional Expenses Taxes Federal income $ $ Social Security State income Property Other Housing Rent or mortgage Utilities Property and other insurance Furniture and other durables Household maintenance Other real estate payments Transportation Car payment Gas, repairs, tires Insurance, licenses Food Clothing, clothing care Recreation, hobbies Personal care Health care Services and medication Health insurance Education, publications Life and disability insurance TOTAL EXPENSES $ $ Summary Total income $ $ Less total expenses Difference $ $ Notes 41

47 Glossary actuary a person skilled in calculating the value of life interests, annuities, and insurance. alimony see maintenance in this glossary. assets money, property, and money-related rights owned by a person; property of all kinds real and personal, tangible and intangible. community property property acquired by either spouse during the marriage including rents and profits of separate property, with the exception that any property acquired by one spouse by gift, will, or inheritance is that spouse s separate property. custody may refer to legal or physical custody of children. Legal custody and physical custody are different. Legal custody refers to the decision-making authority with respect to the child. The parent with legal custody has the right to make major life decisions for the child decisions about religion, education, discipline, and medical care. Sole legal custody is when one parent has this decision-making authority. Joint legal custody is when both parents share the decision-making authority. Idaho courts favor joint legal custody unless strong evidence shows that a parent should be deprived of such custody. Strong evidence might include evidence of drug or alcohol addiction or child abuse. Physical custody refers to the parent with whom the child lives. One parent may have physical custody and the other parent visitation rights. That is, the child lives primarily with one parent and spends certain, usually specified times (such as vacations and specified holidays), with the other parent. Or physical custody may be shared: the child lives at both parents homes. Split custody indicates there is more than one joint child and at least one child lives with each parent. dissolution commonly referred to as divorce, the legal act of terminating a marriage. divorce decree restores the spouses to the status of unmarried persons. The decree may include provisions regarding property division, spousal and child support, and child custody. earnest money agreement a deposit paid by a buyer to commit a seller to a deal and to show the buyer s good faith; an assurance that the buyer is in earnest and good faith. estate plan arrangement for the disposition of one s property after death. fair market value price at which a buyer, who is a stranger to the seller, will buy property at. gross income income from any source including, but not limited to, salaries, wages, commissions, bonuses, dividends, severance pay, pensions, interest, trust income, annuities, Social Security and veteran s benefits, welfare payments, judgments, gifts, student loans, and in-kind payments (such as the value of a company car or free housing, room and board). gross potential income amount of income set by a court for a person who is voluntarily unemployed or underemployed. For example, a person who voluntarily quit his or her job to go back to school would fall in this category. 42

48 group life insurance a form of insurance whereby individual lives of a group of persons, usually employees, are covered by a single or blanket policy; such insurance is renewable on a year-to-year basis and does not accumulate a cash value (that is, no cash surrender value is built up). lien an interest in real or personal property given to a creditor to secure an obligation. This interest gives the creditor the right to take the property through court action to satisfy the debt. maintenance payments made under a court order or court-approved agreement of the parties by one spouse to the other spouse to provide support; also called alimony or spousal support. market value the amount of money a buyer who is a stranger to you would pay. mortgage or deed of trust a lien on real property voluntarily given by the debtor to the creditor. noncustodial parent the parent without physical custody of the child or children but who usually has visitation rights. property settlement agreement (also called property agreement) a written contract between divorcing spouses that lists and divides the property and financial obligations. It may also include plans for custody, child support, and spousal support. real property land and things attached to the land, such as building, fences, and plant material growing on the land. replacement value the cost of replacing the property with similar property. security interest a lien on personal property voluntarily given by the debtor to the creditor. separate property property acquired by assets you or your spouse owned before you were married, or property acquired by you or your spouse as a result of a gift to one of you or through inheritance. term life insurance a form of insurance that promises payment only within the specified term covered by the policy, though such policies are commonly renewed each term. Term policies have no cash surrender value. valuation the act of determining the estimated monetary worth of something. whole life insurance (sometimes called straight life insurance) insurance for which premiums are collected as long as the insured person lives. Whole life policies build up cash value. 43

49 Additional resources What to do When Your Income Drops CIS 1049, University of Idaho Cooperative Extension System publication. Contact your local county Extension office or University of Idaho Ag Publications, Moscow, ID , phone (208) , Coming to Grips with Your Finances (five-part series on sound money management), University of Idaho Cooperative Extension System publication. Contact your local county Extension office or University of Idaho Ag Publications, Moscow, ID , phone (208) , Women and Laws in Idaho is a 64-page resource handbook published by the Idaho Women s Commission. Contact the Women s Commission at P.O. Box 83720, Boise, ID , phone (208) or toll-free For help in locating an attorney, call the Idaho State Bar lawyer referral service, phone (208) To find the Consumer Credit Counseling Service in your area call ( CCCS). You can obtain free help from Internal Revenue Service (IRS) operators during regular weekday business hours by calling Federal tax publications can be obtained by calling or downloading from the internet at 44

50 About the authors Elizabeth Brandt is professor of law, University of Idaho College of Law, Moscow. Linda Kirk Fox is professor and an Extension family economics specialist, UI School of Family and Consumer Sciences, Moscow. Kathleen Hardcastle is a former member of the Idaho Women s Commission and an attorney in private practice, Moscow. Acknowledgments The authors gratefully ackowledge Alice Mills Morrow, CFP, J.D., Extension family economics specialist at Oregon State University, for permission to adapt the publication Making Financial Decisions When Divorce Occurs: An Oregon Guide. Appreciation is also extended to the following individuals who served as reviewers and/or contributors to this publication: Carol Anderson, research assistant, University of Idaho. Vicki Cade, research assistant, University of Idaho. Ann Cosho, attorney at law, Boise, Idaho. Susan Graham, attorney at law, Boise, Idaho. Virginia Junk, associate professor, University of Idaho. Hon. William C. Hamlett, magistrate, Moscow, Idaho. Edith Miller Klein, attorney at law, Boise, Idaho. Jack Miller, Dean, College of Law, University of Idaho. Phyllis Ann Miller, member of Commission on Women s Programs, Pocatello, Idaho. Marilyn Cross Bischoff, University of Idaho Extension educator, Ada County. Sheldon Vincenti, College of Law, University of Idaho. 45

51 Issued in furtherance of cooperative extension work in agriculture and home economics, Acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of Agriculture, LeRoy D. Luft, Director of Cooperative Extension System, University of Idaho, Moscow, Idaho The University of Idaho provides equal opportunity in education and employment on the basis of race, color, religion, national origin, age, gender, disability, or status as a Vietnam-era veteran, as required by state and federal laws. 3M,1-92, 4.5M 6-92, (reprint), 3M revised Bul 733-Produced by Ag Communications $3.00