Should I Get a Loan While Getting Divorced?

Erin KopelmanErin Kopelman, Principal

If you’re going through a separation or divorce and cash flow is tight, you’re not alone. Many families going through separation or divorce find it difficult to get their hands on cash and pay expenses, especially with the increased cost of going from having one household to two, and paying lawyers. Many people wonder if they should get a loan.

In general, at the time of divorce, the then-existing marital assets are valued and equitably divided between you and your spouse. In valuing an asset, the fair market value is reduced by any loan on which it is collateral.

For example, the value of a house is reduced by its’ mortgage. The Court determines what is equitable after considering a list of factors, which include, but are not limited to: each spouse’s contributions to the family, the economic circumstances of each party, the circumstances that contributed to the estrangement of the marriage, the duration of the marriage, each party’s age and health, etc. These factors include consideration of each party’s debts. While equitable does not mean equal, absent extraordinary circumstances, the division of marital property often ends up being equal or close to it. Also, in divorce, Maryland Courts cannot allocate debts, so you are stuck with the debts in your name; whereas the D.C. Court can distribute debts accumulated during the marriage. Therefore, when possible, it is better to spend marital property, rather than taking a loan.

For example, say that you are in Maryland and are getting divorced. You and your spouse have $50,000 in marital funds, and you need $20,000 to pay bills. You have two options. In Option A, you take a loan for $20,000. In this situation, at the time of divorce you and your spouse will each equitably divide the remaining marital funds of $50,000, so in divorce you and your spouse will each likely get $25,000 each, but you have a $20,000 loan that you are solely responsible for. In actuality, this leaves you with only $5,000 net and your spouse with $25,000 net. In Option B, you pay the $20,000 from the $50,000 marital funds. This leaves $30,000 remaining in marital funds, so in the divorce you and your spouse will each likely get $15,000 each. You are better off with Option B.

If you find yourself needing money in divorce, I usually suggest, in order of priority:

  1. If possible, always spend marital assets first on your reasonable living expenses and attorney’s fees. This will reduce the marital property being divided, but this is preferable to taking out a loan where you could be solely responsible for paying it back.
  2. If you cannot access marital assets to spend first, then take a withdrawal from a marital asset. Taking a withdraw from a marital asset reduces the value of that asset, so the reduced value is considered when valuing the asset for purposes of equitably dividing it. Again, this is preferable to taking out a loan where you could be solely responsible for paying it back.
  3. If you cannot take a withdrawal from a marital asset, then take a loan from a marital asset. Taking a loan against a marital asset can reduce the value of that asset, so the reduced value may be considered when valuing the asset for purposes of equitably dividing it. However, in Maryland, if the loan is in your sole name, you will be solely responsible for the loan payments in the divorce.
  4. Only if you cannot spend marital assets or take a withdrawal or loan against a marital asset should you turn to the option of incurring non-collateralized debt.

Each case is different, so if you find yourself needing money, you should consult a family law attorney. At Lerch, Early & Brewer, we guide our clients through the day-to-day decisions they have to make in the divorce process so that they make decisions that are in their best interests.

For more information, contact Erin at 301-347-1261 or elkopelman@lerchearly.com.

The Do’s and Don’ts of Telling Your Children Their Parents are Getting Divorced

AvatarDonna E. Van Scoy, Principal

Few couples marry with the thought that someday they will be divorced. Fewer couples have children with the thought that they will be children of divorce.

Despite parties’ intentions, divorces happen. If you have children and decide to divorce, PLEASE make every effort to work together to tell your children you are getting divorce. Your children will remember how they found out their parents were getting divorced. Your children will remember how each parent told them or if a parent did not discuss the divorce with them. Your children will remember how each parent acted during the divorce. PLEASE put your children first when telling them their parents are divorcing.

Whether your children are five, 18, or somewhere in between, you are their parent, their mom or dad. They need you to be the adult during this emotional time in their lives. You and your spouse will also be dealing with your own real and raw emotions. Every effort needs to be made to work together regarding the information your children receive so it is consistent and they do not become involved in the details of the divorce.

DON’TS:

  1. Do not race to be the first parent to tell your children that their dad or mom is leaving the family. There is no need to tell your children that their mom or dad is having an affair. There is no need to tell your children that dad or mom is unhappy and wants to go live their own life.
  2. Do not refuse to allow your children to communicate or see their parent because your spouse hurt you or they are being unreasonable in the divorce. Nothing good can come out of you refusing to allow your children to attend an important family event with their other parent because it is you “time.” Remember your children are part of each of their parent’s families. Your children love both of their parents and both sides of their family.
  3. Do not share details of the family finances with your children. Do not specifically blame the other parent as a reason they cannot have something or do something.  While better not to address, if necessary, come up with joint and consistent statements to the children about financial issues.
  4. Do not use your child(ren), no matter how old they are or how much they offer, as a sounding board to discuss the divorce. It is important during your divorce to have a support person and/or group. That person or group cannot be your child(ren). Look to organized groups, a therapist, friends, and relatives (minus the children).
  5. Do not ever share any written documents or Court documents concerning your divorce with your children. It does not matter how old your children are they are still the children and the document is still sharing information about their Mom and Dad.

DO’S:

  1. Love your children more than you dislike your spouse. You children deserve to hear that each parent loves them and that the love will not change because of the divorce. They need to hear the divorce was not their fault.
  2. If possible, tell your children together with your spouse about the divorce. For suggestions on how to talk to your children consider speaking to their pediatrician, a therapist, reading articles, and/or reading a book. Investigate the best way to communicate with your children depending on their age. Determine if you should tell all your children together or separate. If as parents you cannot tell your children together, agree on a plan of how, when, and what to tell them separately. Don’t ignore their questions and answer them in an age appropriate manner. Share with your spouse details of the discussion.
  3. Allow your children to take their possessions (including clothing, outerwear, uniforms, and shoes) between households. Respect the other parent and children by timely returning and sharing the possessions. If important to the children and possible, allow the family pet to travel with the children. Be extra patient with your children as they learn to move between homes. Both parents need to work together when items are forgotten or misplaced.
  4. Observe your children. It is possible they may need and/or benefit from seeing a therapist. If you are unsure but concerned, contact their pediatrician, teacher, and/or school counselor. Also, speak with your spouse.
  5. Spend quality time with your children. This will be a hard time for you and your children. Spending time together will help you and will help your children. Making new memories allows everyone to move forward.

For more information, contact Donna at 301-610-0110 or devanscoy@lerchearly.com.

Visualizing Your Life: Achieving Your Post-Divorce Goals

Chris RobertsChris Roberts, Principal

I have found that an effective way to face divorce is to visualize your future post-divorce life, then work backwards (so to speak) from that end goal to take the steps necessary to achieve it. This strategy can help you shape the positions you take during the divorce and create a light at the end of the tunnel.

I discuss this concept in detail above. Please don’t hesitate to follow up with me at cwroberts@lerchearly.com and check out my bio for more on my practice and background: https://www.lerchearly.com/people/christopher-w-roberts.

Is the COVID Pandemic Hindering Your Child’s Chances of Future Success?

AvatarErik Arena, Principal

“…[I]t ain’t about how hard you hit. It’s about how hard you can get hit and keep moving forward; how much you can take and keep moving forward. That’s how winning is done!” – Rocky Balboa

Since roughly April 2020, the concern I’ve heard most from clients, friends, and colleagues alike – what is the pandemic doing to my child’s academic and social development? This question is causing unquantifiable angst for many, particularly with no end to the pandemic in sight.

Until our local jurisdictions return to full-time, in-person learning, and even after that happens, what are the traits and skills parents can teach their child or children to ensure he or she is still positioned for success? 

Author Paul Tough provides a refreshing take on this topic in his 2012 book, How Children Succeed. In its introduction, Tough describes the book’s mission:  “… to solve some of the most pervasive mysteries of life:  Who succeeds and who fails? Why do some children thrive while others lose their way? And what can any of us do to steer an individual child – or a whole generation of children – away from failure and toward success.” 

Tough’s approach – study those that have, and have not achieved success by academic, scholastic, or professional avenues, in similar and differing environments, to define the traits common among those who succeed. 

Tough and others, cited in his book, posit that common denominators for success are not necessarily intelligence quotient, mathematical abilities, reading or writing competence, or mastery of social or applied sciences. Rather, they are, more consistently, character or personality traits such as perseverance, grit, curiosity, social intelligence, conscientiousness, optimism, and self-control. 

Viewed in the context of the COVID-pandemic, what might this mean for you and your child? Well, if Tough and his colleagues are correct, parents need not necessarily worry if their child is falling behind a bit in math or science or any particular course or courses. That might actually be the expectation, given the challenges of remote learning for many adolescents. 

Instead, parents can use the challenges of the pandemic to further their children’s perseverance, grit, curiosity, optimism, and self-control. How might one do that? 

  • Encourage them to test daily the limits of their intellectual and physical abilities and curiosities;
  • Incentivize them to exhibit a bit more perseverance and self-control each day;
  • Providing constructive encouragement and feedback to reward effort and perseverance, and foster optimism and grit, regardless of success or failure. 

For more information, contact Erik at eparena@lerchearly.com or 301-657-0725.

Decisions, Decisions: Can your spouse make them for you if you lack capacity?

AvatarHeather Collier, Principal

Too often couples find themselves in a situation where due to age, illness, or accident, one spouse no longer has the ability to make decisions or handle life’s responsibilities – in legal terms, that spouse lacks “capacity” – and there is no plan in place.

What happens then? Can your spouse make decisions for you simply because they are your spouse? If not, are they able to obtain authority to make decisions on your behalf even if you are already incapacitated?

My colleague and fellow guardianship practitioner, Jenica E. Cassidy, associate attorney at Lerch, Early & Brewer, joins us as a guest author on this post to answer these questions:  

Can my spouse make decisions for me if I lose capacity just because they are my spouse?

If you become incapacitated, your spouse does not automatically have authority to make all of your decisions and handle your affairs. This can have far-reaching implications, ranging from accessing your bank account and paying your bills to speaking with doctors and consenting to medical procedures. If you don’t already have a power of attorney and an advance healthcare directive in place, your spouse may have no other option but to seek guardianship over you.

What is guardianship?

Guardianship is a legal procedure where a court appoints guardian for a person who has been determined to lack capacity to make and communicate responsible decisions for themselves and handle their personal affairs.

The guardian can be appointed to handle financial matters or healthcare and personal matters, or both. The guardian essentially steps into the shoes of the incapacitated person and has control over all aspects of the person’s life. Because of this, the court takes guardianship very seriously. A person seeking guardianship over another must file a detailed petition along with medical certifications verifying the incapacity. They must also provide notice to people close to the incapacitated person. The court will appoint an attorney to represent the incapacitated person and will hold a hearing before appointing a guardian. If anyone objects to the guardianship, the contested matter could proceed to a jury trial.

Suffice it to say, the guardianship process can be emotionally taxing, financially burdensome, and may carry on for many months. On top of that, it requires disclosing deeply personal information to a public record where a judge or jury will make the ultimate decision regarding who has control over your affairs.

What can I do now to make sure I have control over who makes decisions for me if I am not able to make them for myself?

It’s best to avoid guardianship if you can. It’s meant to be a matter of last resort after all other options have been exhausted. The best way to do this is to plan ahead. Prepare the appropriate estate planning documents. Name your spouse or a trusted individual to make decisions for you and handle your affairs should you lose the ability to do so on your own.

What type of lawyer do I look for to help me with these issues?

If you are planning ahead, see an estate planning lawyer to help you prepare the appropriate estate planning documents, including powers of attorney and advance medical directives, designating who has authority to make decisions for you in the event of certain circumstances.

If you are trying to pursue a guardianship over a loved one, see a family law lawyer or elder law lawyer who handles guardianship matters.

For more information, contact family law attorney Heather Collier at hscollier@lerchearly.com or elder law attorney Jenica Cassidy at jecassidy@lerchearly.com.

Can You Really Get Divorced From Your Couch?

Erin KopelmanErin Kopelman, Principal

Who would have imagined years ago that in 2020 you would be able get divorced from your living room sofa? It is as if it were predicted in the movie “Back to the Future,” like video phones or hoverboards (sort of).

However, this change allowing people to get divorced from their own homes is not the result of some creative Hollywood writer, but because the COVID-19 pandemic occurred during a time when the technology was ripe to go virtual.

The pandemic has caused hardships to many individuals and business. It has forced people to work and do business differently, including our court systems. While the pandemic has been strenuous on our court systems, causing a re-shuffling and backlog of cases, it has also forced our legal system into the digital age.

Our Court system had to quickly adapt to working remotely. Hearings and trials that were almost exclusively in person were converted in a short period of time to occurring virtually over Zoom and WebEx. While no system is perfect and glitches need to be worked out, it is now possible for a person to decide to divorce, find and retain a lawyer and go through their entire divorce process, even if it consists of a full trial, in their own home.

Many hearings are happening quicker and more efficiently. Pre-pandemic it was customary for Courts to schedule multiple hearings at the same time, so when scheduled to be in Court, a client is paying their lawyer to travel, and while in Court there is often significant time spent waiting for your case to be heard. All of this has significantly been reduced when cases are heard virtually, which can be a big financial savings for clients.

While the ability to take care of everything without going anywhere is logistically easier and may have a financial savings, it is important to keep in mind that it does not necessarily make divorce easier emotionally.

For many, divorcing during the pandemic is more difficult. The lack of a personal connection and human touch with their lawyers may be stressful. Moreover, the inability to be surrounded by an in-person emotional support network of family and friends except through virtual and social distancing interactions may be harder not just on those going through divorce, but also on their children.

At Lerch Early, we are highly cognizant of the emotional and financial stresses of divorce on our clients and keep that in mind as we guide them through their divorces.

Am I Covered? Divorce and Health Insurance

AvatarHeather Collier, Principal

‘Tis the season for many employers open enrollment period for health insurance coverage and other employment-related benefits. Choices abound. But what if you and your spouse are divorcing and you are on their health insurance? The plot thickens.

  • How long after divorce will you be covered? Do you have any options to continue coverage through your spouse’s plan? Who will provide health insurance for your children? And who pays? Is your ability to continue coverage linked to any other decision you make or rights you derive from the divorce?  Here are the basics: * If you are covered on your spouse’s health insurance at the time of separation, your spouse can continue to cover you until the entry of a judgment of absolute divorce.
  • Divorce is a terminating event for health insurance coverage. If you were on your spouses’ coverage, in most cases, you can elect to continue coverage for a specific period through the same health insurance plan. There is typically a 60-day grace period for you to decide to elect continuation coverage (if available), seek coverage on the health insurance Marketplace, or seek coverage through your employer’s plan if you are employed and they offer benefits.
  • There are differences in the continuation coverage benefits offered based on the employer and whether the employer falls under federal or state laws. With exceptions, private sector companies with 20 or more employees fall under federal COBRA, while companies with less than 20 employees fall under state based continuation coverage laws. The Federal government provides continuation coverage through the Federal Employee Health Benefits program (FEHB).
  • COBRA allows continuation coverage for 36 months post-divorce. State law based continuation coverage periods vary.
  • FEHB also allows temporary continuation coverage (TCC) for 36 months post-divorce. However, former spouses of federal employees insured under FEHB during the marriage may also be eligible for extended continuation coverage beyond 36 months, called Spouse Equity Coverage. This is available if the former spouse receives a share of the federal employees FERS or CSRS pension benefit and/or is designated as a survivor beneficiary of the federal employees FERS or CSRS plan based on the division of property in the divorce.
  • If you elect continuation coverage under the applicable laws, you will pay 100% of the premium cost (without subsidy) and a percentage of the premium as an administrative fee. Therefore, it may not be the most cost effective option, particularly if you are eligible for insurance through your own employer.  If you are seeking spousal support and need continuation coverage, you will need to factor the cost into your expenses and ultimately your support request.  If you are eligible for insurance through you own employer, the divorce will qualify you to enroll in your employer’s plan even if it is outside the normal open enrollment period.
  • Even though your former spouse cannot continue carrying you on their health insurance policy post-divorce, they can continue to cover your children. The cost of the premium for the children’s health insurance coverage is factored into the calculation of child support. If your former spouse has other health related benefits like dental or vision insurance, they can also cover your children on those policies. If you or your former spouse have access to other health related benefits, e.g. a Flex Spending Account (FSA) or a Health Savings Account (HSA), confirm before the divorce what policies and rules apply to using those funds so you can determine whether that impacts who provides insurance coverage for the children, who claims them as dependents on tax returns, etc. and negotiate accordingly.

If health insurance coverage is a concern for you post-divorce, it is imperative you obtain information, informally or formally, from your spouse and/or their employer about the availability of continuation coverage, the cost, and the period of time continuation coverage will be available to you because of the divorce.  Do not wait – this information may influence the resolution of other parts of your divorce case such as spousal support and, if you have minor children, child support, and income tax related benefits.

My Top 5 New Year’s Resolutions for Those Going Through Divorce

AvatarErik Arena, Principal

In keeping with the time-honored New Year’s tradition of reflecting on the year past and making resolutions for the coming year, I’ve put together a list of my top-five resolutions for divorcing clients for 2021.

2020 was a year unlike few others. The challenges were several. The landscape was ever-changing. But you persisted.

How can you make 2021 a little bit “jollier” for yourself.

1. Adjust Expectations and Prioritize

2020 didn’t go as planned for many. New challenges surfaced, for which easy solutions were unavailable. The crisis then persisted and persists to this day. Personal goals went unmet, but not for lack of will or desire. You expended the same effort and energy with fewer results. It was a humbling year.

Those realities should guide your-self assessment of 2020. Be forgiving in your assessment of 2020 successes and failures, and don’t view them in isolation (i.e. some of your failures might have been necessary to produce some of your greatest successes). Be realistic about what you want and intend to accomplish in 2021, and leave some latitude to account for the ongoing challenges of everyday living

2. Self-Care is Not Optional

The human body and mind need three things to function at their respective peaks: (1) adequate nutrition/diet; (2) regular exercise; and (3) adequate sleep/rest. Pre-COVID, maintaining 2 of these 3 regularly was considered an accomplishment. That thinking needs to change in 2021.

The COVID pandemic and your ongoing divorce are great sources of stress and uncertainty. They can impact your sleep and eating patterns greatly. If those disturbances persist for long enough, you will find yourself in poor physical and mental health. You cannot be at your best if you’re not up and operating at full capacity. This why self-care should be your number one priority in 2021.

You cannot always regulate your sleep. However, you can regulate your diet and exercise. These investments will yield dividends (i.e. focus, concentration, stamina) with consistency. It is sometimes counter-intuitive to take time away for these things; but they are fuel for the mind and body.

3. Be Intentional with Your Time and Energy

To subsist and thrive in the new reality of 2020, prioritizing and allocating time effectively became premium talents. Mundane tasks like commuting and having business lunches were replaced with parenting tasks and early morning grocery runs. Routines were obliterated.

The pace of information sharing and gathering quickened. We were inundated with stimuli, be they personal, professional, social, or political. It was difficult to decide where to invest your time with seemingly endless choices at your disposal. This explains the phenomenon that was “Tiger King”.

Consciousness is said to be the pause between the stimuli and the response. To be intentional with your investment(s) of time and energy means pausing to assess options before reacting to the many stimuli you will encounter. Ask yourself – what, among these options, can I do next that will advance my goals for myself? If the response does not meet those goals, move on to an endeavor that does.

4. This Too Shall Pass

World War II persisted for seven years. The Civil War dragged on for four years. Even the Ebola virus/pandemic spanned three years. In either 2021 or 2022, the COVID pandemic will be in our rear-views. As will your divorce. Whatever you may be experiencing as far as stress and angst is temporary, even though it may not feel that way at the moment. It is important to remember that and take comfort in knowing that brighter times are ahead.

In order to make those brighter times more vivid in your mind, start planning now for what you want your post-divorce and post-pandemic life to look like. You can use those images to set incremental goals for yourself in 2021, and as reference points when deciding where and how to invest your time and energy (see point 3 above).

5. Build Incrementally Toward Your Goals

Don’t rush to fill the holes you find in yourself during the divorce. Approaching them incrementally, with small, tangible, realistic steps, is the best way to build toward the future you envision for yourself.  

For example, you may envision a future in which you’re re-married to another, more suitable romantic partner. If that’s you, I would recommend against hitting the town with your friends in search of a suitable mate while you’re still enduring the trauma of the divorce. Start by processing the trauma of your separation/divorce and what that means for you as an individual. Figure out what you want to do the same and what you want to do differently in your life moving forward. Then you can start looking for mister or misses right.

The same can be said for many post-divorce goals (i.e. financial security, job security; home ownership). They often seem vast and insurmountable from where you’re standing at the moment. But, if you break them down into several, smaller, attainable steps toward your goal, the path will not seem so daunting.

Casey Florance Admitted to Fellowship in the American Academy of Matrimonial Lawyers

AvatarDonna E. Van Scoy, Principal

Divorce attorney Casey Florance has been admitted to fellowship in the American Academy of Matrimonial Lawyers (AAML).

One of only 35 Fellows throughout Maryland, Casey is now among those generally recognized by lawyers and judges as preeminent family law practitioners with the highest level of knowledge, skill, and integrity.

For more information, see the AAML website: https://aaml.org/page/WhyAAML.

Casey Florance is a family law and divorce attorney who represents clients in all aspects of family law, including separation, divorce, custody, property, support, post-judgment issues, and domestic violence matters in Maryland.