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Fiscal Fitness - Alimony Reform
Did you know that back in September, Governor Christie signed a bill ending lifetime alimony?
While New Jersey’s bill doesn’t let already divorced people go back and change alimony agreements, it allows for reductions when payers lose their jobs or retire.
New Jersey’s overhaul replaces the legal term permanent alimony with open durational alimony, allowing modifications after 90 days of unemployment and says if a recipient moves in with a new partner that could also be a cause to end payments. The law says that alimony may be modified or end when the payer retires unless a judge decides it should continue.
As a devoted advocate for the collaborative model, I work very closely with clients helping them understand the financial implications of their settlement. If you are in the process of a divorce, understanding the recent changes and how it could affect you financially down the road is crucial.
How do I evaluate my settlement so it makes sense for me?
Remember, your attorney went to law school and specialized in family law, not financial planning. Have you prepared a realistic analysis of your current lifestyle and how it will look post-divorce 5, 10 or 20 years down the road? When working with a client, we look at many factors such as future income and expenses, child support and dependency exemptions, taxes, pensions and retirement plans, investments and educational expenses. With so many moving parts, how do you decide what makes sense now and for your future?
Should I keep the house?
One of the biggest problems I see is a spouse being emotionally attached to the marital home (a non-liquid asset) and trading that off in lieu of another marital asset such as an IRA or a pension. Although this trade off might make sense on a yellow legal pad, understanding the long-term impact and how it fits into your overall financial plan isn’t easy when emotions are running high. Too often I hear “I will keep the house and deal with it later.” Later may be too late, depending on your age and income level.
Am I entitled to continue coverage from my former spouses’ group health plan?
Under COBRA, a covered spouse may continue their plan coverage for a limited time when they would otherwise lose coverage due to a particular event, such as divorce (or legal separation). A covered employee’s spouse may elect continuation of coverage under the plan for a maximum of 36 months. The ex-spouse (a qualified beneficiary) must notify the plan administrator of the qualifying event within 60 days after divorce or legal separation. After being notified of a divorce, the plan administrator must give notice, generally within 14 days, to the qualified beneficiary of the right to elect COBRA continuation coverage.
What are the rules on receiving Social Security from my ex-spouse?
Generally speaking, to be entitled to spousal benefits, you need to have been married for 10 years and currently unmarried.
If you have never taken an active role in how the finances were managed during your marriage, why would you make such difficult financial decisions on your own during a divorce? Working with an experienced professional, trained and certified in divorce financial planning, can help the family pursue long-term financial success. Together we can make it happen
This information should not be construed as specific tax, legal or investment advice. Investing involves risk, including possible loss of principal. Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.
If the divorce is being filed under one of the seven fault grounds (including extreme cruelty, adultery, abandonment, substance or alcohol addiction, institutionalization, deviant sexual conduct and incarceration), the 18 month separation period, required for a no-fault divorce, is waived. However, each ground for divorce has its own stipulations.
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