Decreased Costs for Post-Divorce Mortgage Refinances

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After a divorce, it is quite common for one of the spouses to remain in the marital residence, creating the need to “buy out” the other spouse’s interest in the home. This is often accomplished through a refinance transaction—in order to remove the departing spouse from the home as well as to generate cash to pay off the departing spouse.

In times past, this refinance was treated by lenders as a “cash out” refinance, and thus subject to a higher interest rate and stricter limits on the loan amount.  The reason for this is people who take cash from their homes have a statistically increased risk of foreclosure. Many of those folks are spending the cash on home improvements or even a variety of toys, but the facts show that they often get overextended beyond their means. To compensate for that increased risk, lenders historically charge a higher interest rate for getting cash out, regardless of the reason behind it.

More recently, however, the government agency Fannie Mae—which is in charge of setting the rules for residential lenders—has taken a closer look at the nuances behind cash-out financing.  Fannie Mae concluded that certain situations (such as divorce buy-outs) do not actually constitute an increased risk of foreclosure. Hence, divorce buy-outs are no longer considered a “cash out” loan and they are no longer subject to the corresponding interest rate adjustment.

This is good news for recently divorced folks looking to save money! 

Also, the loan amount for a divorce-based refinance can now go up to 95% of the value of the home (for a conventional loan).  Historically, a divorce “cash out” refinance could not exceed 80% of the property’s current value. With decreasing home values over the past few years, such a restriction meant that many divorced folks simply could not refinance—putting the financial and home separation process into an awkward limbo.

Keep in mind an important exception, however.  If the cash from the refinance is being used to pay off credit cards, then the loan is still viewed under the old guidelines.  The new guidelines apply only when the cash is for paying off another spouse per the divorce decree.  With lower costs and more flexible criteria, these new financing rules are a welcome change to those already in the midst of a difficult process.
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Jeff Koch is a mortgage lender with over 10 years of experience.  He works for 1st Advantage Mortgage—a subsidiary of Draper and Kramer.  Prior to that, Jeff spent several years as a full-time Realtor in Chicago.  He enjoys helping people secure the best and most affordable financing options for their unique situation.  Seeing each individual as valuable, Jeff’s goal is to provide “Absolute Integrity and Unparalleled Service”.  Learn more about Jeff from his website: www.singingmortgageguy.com.

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Nothing in life is certain but death and….

TAXES

January 31, 2014 marks the opening of the IRS filing season. The IRS has delayed the opening of tax season  due to “critical system testing” following the October government shutdown. But it is not too soon to prepare your taxes (or start thinking about it) if you have received your tax documents. W-2′s are due to employees by January 31st, as well.Taxes due

There are important and substantial tax considerations resulting from entering a divorce judgment, legal separation, and/or custody judgment. We are not tax specialists or experts in the area of taxation and we always recommend seeking out the advice of a Certified Public Accountant.  But here is a list of things to think about.

What is your filing status?

Married – your marital status on the last day of the year determines your marital status for the entire year. If you were divorced on December 31, 2013, you cannot file as “married” for your 2013 taxes. Sometimes couples parting ways delay the final divorce date in order to get one last year of tax benefits from filing married.

  1. Married Filing Jointly – if the divorce is still pending, you are still legally married and you must file either married filing jointly or married filing separately.  There is the potential that filing jointly will have more benefits but you will be responsible for your spouse’s information on the form.
  2. Married Filing Separately – if you don’t trust your spouse, you may want to file separately but it can limit potential tax benefits.

Single – if you are unmarried, legally separated or your divorce is finalized, you can file as single.

Head of Household – if you are unmarried and paid more than half the cost of maintaining a home for you and a qualifying person.

Dependent Exemptions and Child Custody

The parent with primary custody is assumed by the IRS as the parent that will claim the dependent exemption for the tax returns. However, this is not a requirement. Parents can agree to divide up the exemptions (ex. if there are 2 children, each parent claims one child). And sometimes the court will order that the parents alternate years if the non-custodial parent contributes substantially to the support of the child(ren).

Medical expenses can be deducted if you paid for them, regardless of whether you can claim the child(ren) as a dependent.

Maintenance and Child Support Payments

  1. Child support payments are not deductible to the parent paying them (payor);
  2. Maintenance (formerly known as alimony) is an above the line deduction for the payor;
  3. Maintenance is considered taxable earned income to the person receiving it (payee).
  4. Unallocated support does not differentiate between child support and maintenance and is taxed like maintenance. This can be helpful for the high income payor and the low income payee. Unallocated support can be tricky and if you make a mistake in how you receive/end unallocated support, you could end up losing money.

Exchanging Tax Documents with your Ex Each Year

Sometimes the divorce or custody judgment will require the parties to periodically turnover tax documents. This allows the custodial parent (usually also the payee) to determine whether the income of the non-custodial parent (usually the payor) has gone up and whether to ask the court to modify child support.

Transfer of Property

Transferring stocks, IRA and 401(k) funds are actions that are not taxable in a divorce transfer. Cashing them out, on the other hand, is a different story.

Under the IRS code, transfers of real property between spouses incident to divorce are tax free transactions. However, real property transfers can create taxable situations in some cities, like Chicago .  Since 2005, the has imposed a tax upon the privilege of transferring title to, or beneficial interest in, real property located in the corporate limits of the City of Chicago and this applied to divorcing couples.

 

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1 Resolution for 2014: More Uncontested Parentage/Child Custody Cases

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We get a ton of new client calls that begin with some variation of the following…
“Yeah, my girlfriend and I broke-up a couple months ago, she’s refusing to let me see my son, and now she’s left the Chicago area and is living in Houston, Texas with her parents.” Happens all the time, there’s a relationship break-up and then one of the parents takes off with the kid. It’s devastating for the parent who has lost his son or daughter and it’s devastating for the son or daughter who lost his/her mother or father. Yet it’s PREVENTABLE by simply filing your parentage (unmarried parents), child custody case BEFORE someone takes off. It’s one of my main professional resolutions for 2014 because it’s easy; it’s good for parents; it’s great for kids; and, it’s great for our world.

Here’s Why We Need More Uncontested Parentage/Child Custody Cases

  • Lock-In Illinois as the Child’s Home State. Until there’s a court case filed it’s unclear whether or not a parent in an unmarried, parental relationship has the right to take the child/children to another state without the approval of the Court or the other parent. Once there’s a child custody case filed if a parent wants to relocate outside of Illinois that parent has a very difficult case to prove to get a judge to allow the move. And if a parent would just leave with the kids once there is a case on file that parent would immediately face criminal kidnapping charges.
  • Not Easy, But Simple. This isn’t an easy subject…the issue of legal rights with regards to a child. But I’m not suggesting raising the temperature and getting all catty and contentious. But it’s a mature and important subject that must be addressed BEFORE the break-up while tempers are in check and a child’s best interests are the priority. And we’re not talking about anything over-the-top, but custody/visitation/home state/financial provisions should be clearly set-out and legally enforceable.
  • Help Your Kid. Earlier this year I wrote a post entitled, A Tale of Two Fathers. Think about how these kids felt having been stolen by their mother, taken half-way across the country away from their father and friends and their entire life. We got a couple of those kids back because the father hired us as his lawyers but the other father couldn’t afford an attorney and his daughter last I heard was still in Alabama…sad.

As a boutique, family law firm we’re involved with many, many uncontested divorces. It’s probably the most popular sort of representation that we’re involved with. People understand that if they no longer want to be married they need to file for divorce and in many situations it’s not contentious but a pretty simple case that can get concluded in a couple of months.

In 2014 I want to educate people so that we file more uncontested parentage and child custody cases. If you have children outside of marriage you must file this case for the reasons I laid-out above. No big fight, just a mature and rational decision you must make to protect your kids and you too!

 

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Reconsidering Divorce

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Here’s an exclusive, guest post from Anita Chlipala, Licensed Marriage & Family Therapist, from Relationship Reality 312. Anita is wonderful relationship coach & a great friend of our Firm

 

You contact a divorce attorney. You begin the process when a moment of doubt hits you. Is this the answer? Did we really try everything?

If you’re not sure whether to follow through with a divorce, you’re not alone. Studies show that between 25-30% of people start the process but still hope for reconciliation with their spouse.

As a Licensed Marriage & Family Therapist (LMFT), I work exclusively with romantic relationships, especially marriages. Couples come to me with an assortment of desires and goals, but one of the most common is to help them determine whether they can save their marriage. Equipped with some pertinent information and learning skills to help with their interactions, couples actually can save their marriage – and have a happy one, too.

 

4 things to consider before you finalize your divorce


1. You still have fondness for your spouse.
Can you recall any good times? Do you look back on how you met or your first date with a smile? Can you list positive traits of your spouse that you still see to this day? When you’re spending time together, do you sometimes still get along and have fun? If you can muster up any positive times, there’s a good chance that you can still make your marriage work.

Friendship is the foundation of a solid marriage and helps fuel the positive feelings that are essential to keeping a marriage alive. By the time couples come to me for help, many have neglected their friendship over the years and have felt misunderstood and disconnected from each other. Working on the friendship has to be intentional – carving out time for one another, doing the things you used to do when you first got together, and overall just making your marriage a priority in your lives.

2. You think you don’t communicate well. How is this supposed to help your marriage if you don’t communicate well? Because communication problems are a reality for most couples. Having effective communication is one of the top goals of my clients. It doesn’t mean you’re not compatible or you shouldn’t be married, it just means that you may need some skills to help with understanding each other better and handling conflict more efficiently.

3. You think you have too many differences. The reality is that marital problems are inevitable. In fact, research shows that no matter who you are with, you will not see eye-to-eye on nearly two-thirds of issues. Do you disagree about the frequency of sex? If money should be saved or spent? Do you have different preferences in how to spend your free time? This is just a small sample of the many issues all couples have to negotiate. I teach my clients how to understand their spouse’s perspective and to honor and respect what is most important to their spouse, as well as to them. You will still get what you want, but marriage means flexibility and compromise. (But hey, being single doesn’t guarantee that you get what you want when you want it, either.)

4. You’re open to learning new skills. As I frequently tell my clients, no one is taught how to have a successful marriage. We may think that because “we love each other,” that love will naturally sustain a marriage. Unfortunately, this is not so. You have to protect your love in order for it to continue to thrive for a lifetime.

What’s amazing is that researchers have been studying healthy and happy marriages for decades and have been able to pinpoint certain behaviors and patterns that are absolutely essential for a marriage’s success. If you’re open to learning these new skills and gaining this knowledge, seek a therapist who specializes in couples therapy. You will receive the tools that you need to truly see if you can make it work and get the kind of marriage you and your spouse have always wanted.

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Does Your Lawyer Tell You the HARD TRUTH or Does He Just Waste Your TIME/MONEY??

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Here’s a Way that We Help Grandparents Have More Time With Their Grandchildren

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Some 40 million Americans and approximately 13% of the U.S. population are persons over the age of 65. I’ll bet there’s a lot of grandmothers and grandfathers in that group. Sadly, some of those grandparents can’t see their own grand-kids. Frequently this happens because of a break-up or disagreement between the children’s parents and then oftentimes an entire side of the family gets cut-out of the lives of children who love them and NEED THEM!

We can help you have more time with your grandchildren.

We’ve recently gotten extensive grandparent visitation ordered in a case where the mother of 1 and 2-year-old kids died suddenly and then the father totally cutoff the grandmother and the deceased mother’s siblings from the two children’s lives. So two cute little kids went from seeing their grandma and aunts on a weekly basis to NO CONTACT. Relatives who loved these kids were removed from their lives in the blink of an eye. Fortunately, the grandmother is a co-worker of one of our former clients and she contacted the Chicago Family Law Group, LLC. We filed her Petition to Establish Grandparent Visitation and now grandma has holidays and vacations and a number of days each week with her grandchildren.

When is a grandparent entitled to visitation with grandchildren?

  • When a parent is deceased, incarcerated, or on active duty military.
  • When parents were never married and are separated.
  • When the grandparent previously had possession of the grandchildren for more than 6 months.

Those are a few of the big areas where grandparent visitation is possible (other scenarios exist too). The past relationship between the grandparent and grandchild/children is critical too. If that relationship had previously been extensive and the loss of that relationship would have a big negative impact on the minor, grandchild that’s a case where a court would order grandparent visitation.

 

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PARENTING PLANS IN ILLINOIS

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What is a parenting plan?

It is an agreement that parents make outlining the custody of their children.  A typical parenting plan specifies parenting time (also known as visitation) and who has the responsibility for the major decisions regarding the child’s education, health care and religious training. Plans also specify the specific procedures that parties must follow when one or both of the parties want to change an agreement or when a dispute arises. The are also known as “Joint Parenting Agreements,” “Parenting Agreements,” or “Parenting Judgments”.

What should be included in a parenting plan?

Parenting Time, also known as a Visitation Schedule. This agreement should include the regular schedule, as well as when each parent has parenting time during school breaks, holidays and summer vacations. The plan should be detailed, defining when a holiday starts and ends, and who is responsible for transportation at the beginning and end of the non-custodial parent’s parenting time.

Payments. In divorce cases, financial matters are generally handled in what is known as a “Marital Settlement Agreement.” However, in cases where the parents were never married, financial matters should be addressed in a parenting agreement. This agreement should include activities, education, child-care, and medical and dental insurance.

Procedures for Changes and Notifications. A parenting plan is not static, as children get older and life happens, the parenting plan may become outdated. An agreement should provide guidance on how a parent will notify the other parent when there are changes in jobs, addresses, phone numbers, school activities and life events.

Residential Custody. The parenting plan should specify who is designated as the residential parent. This is the parent the child spends more than 50% of the time with. If the parents split their parenting time 50/50, one parent should still be designated as the residential custodian for school district purposes.

Legal Custody. The parenting plans should specify whether the parties have joint custody or whether one parent has sole custody. Joint custody requires the parties consider each other’s opinions on the major issues, such as healthcare, education, and religious training. Sole custody does not require agreement for the major decisions.

Right to Information. The parenting plans should specify that both parents have the right to school records, medical records, and notice of all parent-teacher conferences and extracurricular activities.

Dispute Resolution. Joint custody requires that the parties attempt mediation before resorting to litigation. The parenting plan should specify the procedure for resolving disputes to prevent litigation.

Removal. Parties agree on not moving the child out of state without consent of the other party or court order. Some parties negotiate a mileage distance for how far the custodial parent can move with the child before coming to court.

Basic Behavior. The parenting plan can include various instructions for how the parents and third parties must behave around the child. For example, the child should never be used as a messenger for conversations that should be had by the parents and the parents should never speak poorly of the other parent in front of the child and should not allow third parties to do so, either.

There are a lot of basic elements in a parenting plan that will be similar from agreement to agreement, much of it is an explanation of your legal rights and responsibilities. However, the details of your parenting plan will be negotiated and drafted to best suit your family’s individual circumstances.

We offer free consultations and can review your parenting agreement.  If it is now outdated or there has been a change of circumstances, you may need to file for a modification.

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Just Do It!

Presidential Seal

Decisions are made by those who show-up.
~~President Josiah Bartlet, The West Wing.

This is analogous to the practice of family law in that you’d be amazed at how many case outcomes don’t turn on some grand legal argument or some astonishing factual admission, nope, many, many cases are won or lost just by showing-up and actually participating in a case (or lost by not showing-up). We lawyers spend a lot of time analyzing case law and strategizing how to get the best results for our clients…that’s a what good lawyers do. But I’d estimate that 10%-20% of cases are won simply by one party taking initiative and one party doing nothing.

Here are some major rulings we have won on behalf of clients in the last year where we were all ready to win on the substance of the case but then the other party flopped, did nothing, and our clients won without even having to put up much a fight:

  1. Client Wins Custody Change When Former Husband Gives in at First Court Date. We recently represented a mother of two adolescent girls who were living primarily with their father. The father had remarried and was now living with a new wife and several additional step-children. Our clients two daughters had been depressed and one of them had even gotten involved in some cutting of her wrists…so pretty serious stuff. We thought we had a pretty good case although changing custody of children requires you to meet a pretty high legal standard. Well, we drafted a very thorough and probably 50 page Petition to Change Custody, served the father/former husband, scheduled a court date, and….instead of the 6-9 month battle we were expecting the father just GAVE-UP at the very first court date. Permanent custody changed to our client all at the first court date.
  2. Client Wins Removal of Son to Missouri. Client wanted to re-locate to Missouri with her high school aged son due to a job change by her current husband. And these cases even favor the non-custodial parent. But after some whining and criticism of our client/mother, the father and former husband barely participated in the court proceeding and ended up signing-off on an Agreed Order allowing our client to re-locate with the parties’ son to Missouri.
  3. Client Wins Custody Change When Former Husband Skips Court Dates & Doesn’t Do Alcohol Evaluation. Here our client won custody of her 12-year-old son after the father/former husband basically stopped participating in the child’s life and eventually stopped participating in the court proceeding. Again we drafted a thorough and probably 50 page Petition to Change Custody, served the father/former husband, scheduled a court date. Custody of the son was immediately changed on a temporary basis due to some allegations concerning alcohol abuse on the part of the ex-husband/father. Here the case proceeded for approximately 4-5 court dates over 6 months. But over time the ex-husband/father totally stopped seeing his son, did not complete a court ordered alcohol assessment, and eventually he missed enough court dates that our client was awarded the custody change without getting to a real, full-out custody trial.

Court cases are very often won by the party who shows-up. We live in a society where people love to comment and criticize and complain, but then do nothing substantive to actually change the circumstances that they’re commenting/criticizing/complaining about. Take action! DO YOU WANT TO:

  • Give your kid a better life.
  • Improve your financial position by modifying child support or getting your kid the financial resources necessary to go to college.
  • Secure that parenting relationship that your Ex is trying to rip away from you.

Start your court case now; just do it! Click to Schedule above (top right) and take action now.

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Happy Father’s Day

Happy Father’s Day to all of the involved fathers out there! Fathers are important contributors to child development.

According to the 2011 U.S. Census Bureau, over 24 million children live apart from their biological fathers. That is 1 out of every 3 children. In 2002, it was reported nearly 40% of children in father-absent homes have not seen their father at all during the past year. And more than half of all children who do not live with their father have never been in their father’s home.

The sitting President of the United States addresses the very real problem of absent fathers each year:

“The single biggest social problem in our society may be the growing absence of fathers from their children’s homes because it contributes to so many other social problems… Without a father to help guide, without a father to care, without a father to teach boys to be men, and to teach girls to expect respect from men, it’s harder.” – President Bill Clinton, October 1995

President Clinton Father

“Over the past four decades, fatherlessness has emerged as one of our greatest social problems. We know that children who grow up with absent fathers can suffer lasting damage. They are more likely to end up in poverty or drop out of school, become addicted to drugs, have a child out of wedlock, or end up in prison. Fatherlessness is not the only cause of these things, but our nation must recognize it is an important factor.” –President George W. Bush, June 2001

Bush Father's Day

 

And some inspiring comments by our current POTUS:

“As fathers, we need to be involved in our children’s lives not just when it’s convenient or easy, not just when they’re doing well – but when it’s difficult and thankless, and they’re struggling. That is when they need us most.” President Barack Obama, June 2009

“In the end, that’s what being a parent is all about – those precious moments with our children that fill us with pride and excitement for their future, the chances we have to set an example or offer a piece of advice, the opportunities to just be there and show them that we love them.” President Barack Obama, June 2011.

“Any fool can have a child. That doesn’t make you a father. It’s the courage to raise a child that makes you a father.” – President Barack Obama, June 2008.

Obama strolls with Malia (left) and Sasha at the White House. obama-03

So, to the fathers already actively involved in their children’s lives, thank you, your efforts are appreciated. To the fathers ready to get involved and need help obtaining court ordered visitation or custody, give us a call at (312) 893-5888 or schedule a free initial consultation online.

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TIME SENSITIVE: 3 Things You Can Do Right Now To Save Money

What’s the catch? You must meet the 2 following criteria:

  • You are the parent of a child or children who are 17-18 years of age.
  • You or the other parent have been subject to a court-ordered child support obligation, divorce, or parentage order.

If you meet those two criteria there are 3 things you should be considering in the next month to save yourself some money and to help your son or daughter. Here’s the list of what ‘To Do’ and also common mistakes I see:

  1. Terminate Child Support in a Timely Fashion. According to Illinois law, child support should be terminated when a child turns 18, 19, or when a child is graduated from high school. In my experience 80%-90% of kids turn 18 and then graduate from high school sometime during the year that they are 18-years-old. Thus, high school graduation is the most common event requiring the termination of child support. Common Mistake:  Most people who are not our clients do not file to terminate child support soon enough. If your son or daughter is set to graduate from high school on say June 10, 2013, you should be filing your petition to terminate child support NOW! Courts don’t move quickly. Why pay a couple extra months (or years) of child support when you don’t have to?
  2. Pursue Support for Post-High School Educational Expenses. If your son or daughter is planning on attending any sort of post-high school training from a traditional college setting to any sort of vocational school this is absolutely an area where you or your child shouldn’t be stuck footing the bill by yourselves…the other parent has an obligation to financially support the child. The is even more critical when a child is mentally or physically disabled. Common Mistake:  In my experience this sort of financial obligation is not as well known as traditional child support and thus is not as likely to be pursued. Also, people wait and then miss-out on any contribution towards earlier periods of schooling…you can only recover these costs from the date you file and thereafter.
  3. Money for Summer. Granted my parents were not divorced, but I surely spent my summers during college back at home with the folks living off of their dime (for the most part). And in a typical situation where parents are not living together a child will spend the majority of summer living with one parent. From the very first summer after high school graduation to all those summers in-between each year of school…get the financial support that you and your child are entitled to from the other parent. Common Mistake:  In my experience this sort of financial obligation is not as well known as traditional child support and thus is not as likely to be pursued. Or even if a college expense contribution is made, these periods of “recess” are ignored even though they are part of the statute.

Act now because with the above items, time is money!

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