CONQUERING THE FINANCIAL FEAR FACTOR IN THE MIDST OF DIVORCE

Attorney Jennifer M. Krueger and Attorney Barbara A. Hayden
Murphy Desmond S.C., Lawyers

Divorce is not only the dissolution of a marriage. It is also the ending of a financial merger between two spouses. Despite the overwhelming emotional trauma, a person must use sound judgment during their divorce to ensure financial survival.

I am thinking about filing for divorce. My spouse and I have several joint credit cards. I know that both my spouse and I are responsible for payment of these joint accounts. What can I do to make sure that she does not charge large expenditures on these credit cards after I file for divorce?

You should contact your creditors in writing and ask that they close your joint account. Be advised, however, that some creditors may not close the account if there is an outstanding balance. It is also important to remove your spouse from any other account in which he or she is an authorized user. The credit card company will likely require you to reapply for a new individual account, rather than transferring your former joint account to an individual account.

I am currently going through a divorce. My spouse's attorney has suggested dividing my pension plan to equalize the property division in our divorce. How is this division accomplished?

Generally, a pension plan is divided by a Court order called a Qualified Domestic Relations Order ("QDRO"). The Order instructs the pension plan administrator to pay the former spouse a portion of your accrued retirement benefits. Each type of pension plan has its own guidelines and methods for division. Therefore, it is important for you to consult your attorney on the proper method for division.

I started my own business shortly after I got married. My spouse and I have filed for divorce and she is threatening to take away my business. Can she really do this? She never had anything to do with my business before the divorce.

Wisconsin is a marital property state. Therefore, the presumption is that any assets acquired during the marriage should be divided equally between the two spouses during the divorce. You will likely need to obtain an appraisal to determine the value of your business. The parties may agree to hire an independent appraiser, share the cost of the appraisal and abide by the appraiser's valuation. Alternatively, you may each obtain your own separate appraisals and argue about the valuation differences later. In any case, the appraised value will be added to the total marital pot of assets which will have to be divided between the two spouses. Depending on the specific circumstances, you may be able to keep the entire business by offsetting its value with other assets being awarded to your spouse.

What are the tax consequences of child support, maintenance and family support?

Child support is money paid by one parent to the other parent to be used for the support and care of the children. The payor parent may not deduct child support. It is not considered income to the receiving parent. Maintenance is money paid by one former spouse to the other to assist in the support of the recipient spouse. A payor spouse may deduct the maintenance payments for income tax purposes. The recipient spouse must include maintenance payments in his or her gross income. Finally, family support is essentially what the term denotes: support for the family. Think of it as a combination of child support and maintenance. The payor spouse may fully deduct the family support payments and the recipient spouse must include the payment in his or her gross income. It may be beneficial in some instances for the parties to agree to family support in lieu of child support and maintenance given the tax consequences of the payments.

I recently went through a divorce. My divorce decree states that my ex-husband is responsible for paying our two joint credit card debts. My ex-husband failed to make the payments on this debt. Now, the credit card companies are contacting me to collect on these debts. I told them that the divorce judgment ordered my ex-husband to pay these obligations and that they should collect from him. However, they told me that, despite the divorce judgment, they can still collect the debt from me. Is this true?

Yes. You and your ex-spouse entered into a contract with the credit card company. That contract provided that the credit card company could hold both of you liable for unpaid obligations on the account. The Divorce Court does not have the authority to modify the terms of that contract because the credit card company is not a party to the divorce action. Therefore, the credit card company can take collection action against you or your ex-spouse despite the language in the divorce judgment. However, you may inform the Divorce Court that your ex-husband is ignoring the terms of the judgment. The Court may then take further action against your ex-husband for his failure to adhere to the Court's Order.

The most important thing to remember is that you do not have to conquer your financial fears alone. Your attorney, accountant, banker or financial planner will be of great assistance to tailor the right plan to meet your financial needs during and after divorce.

Barbara A. Hayden is an attorney with Murphy Desmond, S.C. Lawyers, Madison, Wisconsin practicing in the family law area.

Jennifer M. Krueger is an attorney with Murphy Desmond S.C., Lawyers, Madison, Wisconsin practicing in the areas of general business law and taxation.