In a divorce settlement, it is common for both parties to focus on immediate financial concerns. Yet it is the long-term financial consequences of divorce that frequently are more devastating. Here are some of the most common concerns and how to avoid them.
Taking the house. The spouse who will have custody of the children typically wants to keep the family home. While this may be desirable emotionally, it can be financially problematic.
A home is an illiquid asset that costs money to pay for and maintain. The parent with the children may not have the income resources to take care of both the home and the children, particularly if they give up other financial resources in return for the house. Consequently, it may be better financially to sell the home, purchase a more suitable residence, and split the balance.
Assuming equal is equal. The family home is a good example of the “dividing things down the middle.” Frequently, one person takes the house and the other keeps the pension and retirement account. Say both are valued at $400,000. The home is a cost-burden, while the retirement account is a liquid asset that can continue to grow tax deferred, probably at a faster growth rate than the home.
Not examining earning potential. Often one spouse has minimized a career in order to raise children. The settlement needs to take this into account, perhaps by providing extra money to the homemaking spouse to pay for additional career training or education.
Not thinking about taxes. Say it is proposed that one spouse keeps a $150,000 individual retirement accounts and the other keeps a $150,000 taxable investment account. Sounds fair. But it is not. The owners of the IRA will have to pay taxes on the money when it’s withdrawn at higher ordinary income rates while the other pays at capital gains tax rates on the investment gains as the assets are sold.
Not following through with your attorney on the QDRO. A spouse who will be receiving part of his or her spouse’s qualified retirement accounts will need a court order called a “qualified domestic relations order.” To avoid mistakes here make certain the attorney is aware of all retirement accounts and examine each plan for their rules regarding QDROs. Have the QDRO pre-approved by the plan before the settlement is final and start early in the approval process. Consider any available survivor benefits in the process.
Not insuring a divorced spouse. If you will be relying on your ex-spouse for any financial benefits take out a life insurance policy on your spouse to ensure the money will be there when the time comes. You should own the policy, so you know the premiums are paid. And buy the policy before the settlement becomes final so you know the spouse is insurable.
Finally, include your accountant and financial planner in the discussions as well as your attorney. That way long range ramifications can be thoroughly thought through and discussed before the divorce is final.
Money has changed – that’s the issue - New Statesman
Peter Selby responds to Nelson Jones's article Money and Morality.
When the St Paul’s Institute, working with JustShare, Penguin Books and the LSE, brought nearly 2000 people into St Paul’s for a public debate on the theme of Michael Sandel’s book, What Money Can’t Buy: the Moral Limits to Markets (see Nelson Jones, NS 25 May) it was because we knew the theme touched a nerve, not because we have an answer to peddle. The Institute has been engaged for some years, as an agency of the Cathedral, in seeking to get into debate with the financial institutions which are its ‘parish’; as such we could hardly think Sandel’s book unimportant, and we were delighted so many others thought the same.
That’s not the same as signing up to his thesis about the moral corrosion brought about by the intrusion of the market into all sorts of spheres to which it is not appropriate. Certainly we are signed up to the desire to get people thinking hard about which are the things that should be for sale and which should not be and, as Rowan Williams says in his review of What Money Can’t Buy, to do so on the basis of rational reflection rather than relying in feelings of revulsion when we see certain things getting a price.
Nelson Jones in his NS piece wonders whether things have deteriorated from some golden age when money didn’t play the part it now does, and points to many areas where things were much more monetised in the past than they are now. Tellingly, if slightly optimistically, he says we no longer sell people, and however bad the euro crisis gets we still won’t be doing that. There are examples he cites in the ancient world that are at least as unpleasant to think about as some of the examples Sandel gives of the intrusion of market thinking.
In my comments in the debate I voiced my own reservations about Sandel’s thinking, so much of which seems to me to address symptoms without digging deeper into causes. When he gives the example of prisoners being able to buy a cell upgrade, and when Nelson Jones points out that that has historical precedent, the deeper issue is not being faced by either of them: the selling off of incarceration as a business is common policy in the USA as it is increasingly in Britain. In the process of creating that market a financial interest is being created in locking people up. That can’t be unconnected with the fact that we in Britain lock up more people than other European countries and that a quarter of the rising number of prisoners in the world – and a third of all incarcerated women in the world, whose number has increased by a sixth in five years – are in the USA.
The figures that became a matter of public scandal during the Jubilee 2000 campaign for the relief of unrepayable third world debt showed all too clearly that the escalating power fo financial debt was depriving children worldwide of education, healthcare and life itself. The situation is infinitely worse than either Sandel or Jones portrays: the issue is not the buying and selling of things that should, or should not, be free, or whether people value things they pay for more than things they receive for nothing; in the end it is not about getting people to think more clearly than they do about whether markets should have moral limits though all these questions are important. What really matters is that in everything from the depletion of the planet’s resources to the requirement on Greek citizens to sell their democratic birthright to have their debts rescheduled money is deciding matters of life and death, and doing so more and more.
That’s why as a Christian and a theologian I am convinced money has acquired all the characteristics of an idol, aggrandising its power and claiming more and more of people’s lives. And that’s why, because of faith’s commitment to raise fundamental questions about anything that has the potential to be an idol, the St Paul’s Institute will go on engaging that debate at an ever more fundamental level. When it recently commissioned a report on the attitudes of those working in the financial sector (see Value and Values) we learned that most did not think the City should listen more to the Church’s guidance. But we now know, since the Sandel debate came to St Paul’s, that many people do want to know whether pressing economic questions have something to say about the meaning of life and whether those who profess faith are prepared to get involved in relating that faith to those questions.
Because, make no mistake, money did not acquire this power by accident. The last four decades, roughly since the massive oil price rises of the early 1970s, have seen vast increases in the amount of money in circulation, and technological advance has multiplied its speed of circulation. In the absence of means of regulating that the dominant policy has been one of deregulation, allowing the power of money to grow with its quantity. The results are not just the life and death issues I have described, but a situation in which all of us, rich or poor, are compelled to worry more and more about money and think more and more about it.
The issues of monetary reform, dismissed even by the independent commission on banking and widely ignored, are ones we need to press: just as ‘home ownership’ is a euphemism for housing debt, so ‘fractional reserve’ is now a synonym for debt multiplication: is one of the questions we need to ask about the post-2008 crisis whether the system on which we have relied for money creation for nearly a century fraught with inherent instability? I ask the question not because the Institute has a recipe or a policy to commend, but because it is our passion as a community of faith to ensure that these questions are honestly faced. The Sandel debate, and the Jones response are just a start.
Peter Selby is one of the interim directors of the St Paul’s Institute, and author of Grace and Mortgage: the Language of Faith and the Debt of the World. He was until retirement Bishop of Worcester, and Bishop to HM Prisons.
EU finance ministers haggle over bank rules - Yahoo Finance
BRUSSELS (AP) -- European Union finance ministers are to meet in in Brussels Tuesday to hammer out an agreement over how high banks should build their defenses against future financial shocks, with the U.K. running the risk of being isolated over who should set the height.
The EU's 27 members agree on the need to increase capital reserves of banks, following an international agreement called Basel III, which was negotiated by the world's largest economies to avoid another financial meltdown such as the one brought on by the collapse of U.S. investment bank Lehman Brothers in 2008.
But the U.K. wants national regulators to be able to set requirements significantly higher than those of the EU — a position opposed by almost all other EU members, who fear investors might then prefer UK banks and flee from those in other countries.
On his way into the meeting Tuesday morning, George Osborne, the British chancellor of the exchequer, was non-committal about the possibility of reaching an agreement.
"This is a time of considerable uncertainty in the eurozone economies," he said, referring to the 17 countries — the U.K. not among them — that use the euro currency. "And that uncertainty is undermining the entire European recovery. And I think we're reaching a point where we've got to make a decision to see the eurozone stand behind their currency. A very important part of that, of course, is strengthening the entire European banking system. And that is what we intend to do today."
Once enacted, Basel III would require lenders to increase their highest-quality capital — such as equity and cash reserves — gradually from 2 percent of the risky assets they hold to 7 percent by 2019. An additional 2.5 percent would have to be built up during good times. All members of the G-20 have agreed to implement Basel III; if the European Union succeeds, it would become the first entity to institute the new requirements.
The U.K. is arguing that, because national taxpayers have to bail out banks when they fail, national authorities should be able to set more stringent requirements to guard against such failures. A compromise proposal offered by the Danes, who hold the rotating presidency of the European Union, would allow national authorities some leeway to increase requirements beyond those called for in the Basel III agreement. That proposal has broad support — except, so far, from the U.K.
The finance ministers can approve the compromise proposal without British support, through what is known as qualified majority voting, in which member countries have different numbers of votes according to their populations. However, there is a tradition in the EU that changes that would affect an industry in a particular country — such as the banking sector in the U.K. — are not forced into effect over the objections of that country, and consensus is sought.
"I think there should be a unanimous decision on such an important issue," Swedish Finance Minister Anders Borg said on his way into the meeting.
Finance board: Voters should decide energy-saving contract - Eagle-Tribune
NORTH ANDOVER — The battle of the boards over energy saving continues.
While the Finance Committee did not take a formal vote on the issue Tuesday night, the advisory board is moving toward recommending that contracts of more than three years be approved by Town Meeting. The committee is particularly concerned about a proposed $4.3 million contract with Ameresco, a Framingham energy services firm,
Ameresco has said it will reduce the town's energy consumption and costs by making a host of improvements to buildings, including boiler replacements and more efficient lighting. The town would pay back the $4.3 million over 15 years and that bothers Finance Committee members.
The selectmen and School Committee, as well as Town Manager Andrew Maylor and Assistant Town Manager Raymond Santilli, support a pact with Ameresco.
Article 3 on the warrant for the June 12 Town Meeting authorizes the town manager and superintendent of schools to award contracts for more than three years if four selectmen or four School Committee members approve.
Finance Committee member Peter Besen proposed amending the article to require that such contracts be approved by Town Meeting.
"We don't want it to happen administratively," his colleague, Benjamin Osgood, said about the possibility of a contract with Ameresco being approved without voters' approval.
Thomas Dugan, presiding in the absence of Chairman Alan LeBovidge, said board members need to agree on the language of an amendment before moving forward with it.
"We don't have to make a decision tonight," Dugan said. The board invited Ameresco to send a representative to its meeting last night, but the company declined to do so, according to Dugan.
Dugan, Osgood, Matthew Remis and other Finance Committee members have said the board has not been given sufficient information about Ameresco to make an informed decision.
Madison finance committee looking for answers - Everything Alabama Blog
MADISON, Alabama - The Madison City Finance Committee met Wednesday night to review the city's proposed semi-annual amended budget, but left with more questions than answers.
They hope to get some answers at a second budget review meeting scheduled next Thursday at 5:30 p.m. at the Madison Municipal Complex, 100 Hughes Road.
Finance Director Lillie Causey said the amended budget increase goes from $30.2 million to $31.9 million, which concerns the members of the finance committee - Larry Vannoy, chair, Tim Cowles and Jerry Jennings.
Several large-ticket items, including four new police cruisers at a cost of $39,000 each, and radios costing $$489,000 for the police department plus a request of an additional $37,000 for overtime pay for the fire department compared to last year left the finance members scratching their heads. Also, capital outlay requests from Public Works went from $336,717, to $1,495,275 this year.
"Midyear is the time to fix things, not go out and buy things," said Vannoy. "We've got to think hard about expenses and see if we can delay some of these things. We've got to come up with money to pay for the I-565 interchange. This is just a little out of the normal."
Vannoy asked Causey to check into the matter and invite the department heads to attend next week's meeting to explain their budget increases.
Causey reminded the members that Fire Chief Ralph Cobb did manage to secure a grant to pay for the department's radios, saving the city $140,000, not to mention another $1.2 million grant that covered nearly half of the cost of the new fire station. Also, she said Public Works sold a number of units of surplus equipment, which brought in nearly $468,000 in revenues compared to $117,000 this time last year.
The city clerk's office also asked for an additional $35,000 for new fireproof shelves to store official documents.
"We are out of space," said City Clerk Melanie Williard. "Every department has boxes stacked up and there are no more room for shelves. The proposed shelves will give us twice as much room. We have no more room for permanent files, which have to be in a fireproof box."
Although the committee members are keeping a close watch on the city's finances, Vannoy said the picture is looking brighter with an uptick in sales tax revenue and he is glad they are finally "over the hump."
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