Missing Divorce Agreement Clauses

OVERVIEW: Clauses Parents Wish Were in Their Divorce Agreements but Often Are Missing

In this episode, Rob Roseman interviews Abbey Flaum, a family wealth strategist at HB Wealth, discussing the critical aspects of financial planning and estate management post-divorce. They explore common pitfalls in divorce agreements, the importance of having a financial team, and the evolving needs of modern families. Abby shares insights on essential clauses that should be included in divorce agreements, the impact of tax planning, and the necessary steps for newly single parents to take in managing their estate and financial responsibilities.

HIGHLIGHTS

• Divorce agreements often lack clarity, leading to conflict.
• Parents need to be proactive in their financial planning post-divorce.
• It’s essential to have a financial team to navigate complexities.
• Common missing clauses include passport access and holiday schedules.
• Legal obligations must align with financial realities for effective planning.
• Modern families require new clauses addressing blended family dynamics.
• Tax implications can significantly affect asset division in divorce.
• Newly single parents should prioritize updating their estate planning documents.
• Communication with financial professionals is crucial after divorce.
• Understanding the nuances of asset value is vital in divorce settlements.

TRANSCRIPT

Rob: All right, welcome to the divorce lawyer.com podcast. Today we are lucky to be joined by Abbey Flaum. Abbey is a family wealth strategist at HB wealth. After 16 years as an estate planning attorney, Abbey now helps families create smart tax efficient plans around wealth, legacy and life transitions. She is especially passionate about guiding parents through the financial gaps often left in divorce agreements. And today we are talking about clauses parents wish were in their divorce agreements, but often are missing. How’s it going today, Abbey?

Abbey: Great. How are you doing?

Rob: I’m doing very well. As we were talking a little bit before camera, how important and how big of a step that people miss with estate planning and wealth after their divorce. Is that something you see with a lot of clients?

Abbey: You bet, and I don’t think it’s their fault at all. I just think you’re balancing so many things and oftentimes there isn’t really a quarterback sort of guiding you through all the things you need to think about post divorce, but absolutely.

Rob: Yeah, remember, it’s like, you just want to get it done, you get it done. And then you just want to like collapse into a ball on your couch. And it’s like, yeah, I’ll get to that later. I’ll get to that later. And then three years later, you haven’t gotten to it. And that’s what we’re going to talk about today. Why, why there’s still time to do it and why now is important time. But let’s talk a little bit about your background real quick. What got you from practicing estate law into becoming a family wealth strategist?

Abbey: Well, I think I’m one of the few former practicing attorneys you’ll ever meet who says, I really loved practicing law. I never thought that I would leave. But then this opportunity arose. HB Wealth approached me to become family wealth strategist, which is really like a consultant for our wealth management clients about all things sort of estate planning. Because I’m not a financial advisor. But when this opportunity arose, after I said no several times I started thinking about it and I realized that this really would afford me the opportunity to dive in deeper with both my clients and my children because I’m a divorcee myself and when you have shared custody of your children you want to make sure that you are devoting yourself 200% to your 50% time.

So, when I left the billable hour, I think that gave our clients at HB Wealth, the feeling of freedom to really dive in deep and talk with me about all of the things that influence their estate planning lives, family dynamics, know, concerns, legacy, the things that oftentimes they feel a little inhibited about talking to their lawyers about because of the billable hour. So I have the luxury of time to dive in deep with them. And I also have the luxury of time to dive in deep with my children and be there for all of the things that I want to be there for.

Rob: Yeah, it’s such a gap that I feel like we’re missing where we have our lawyer, our diverse lawyer, and they handle this. And then maybe we have somebody that handles our wealth management, or they used to when we were married. And now we’re divorced. So are we working with the same wealth manager? And what happens to all these assets? it kind of seems like it gets ignored. And you almost could get away with that when you were married. And it seems like it’s something that you just really can’t afford to get away with once you get divorced.

Abbey: Absolutely, I mean, and oftentimes in a marriage, there’s usually one person or the other who’s sort of the financial partner that handles all of the financial stuff. At least I hope there is at least one person. But after a divorce, certainly you have to be the quarterback for your own financial life. And whether that means you are thinking of all of the things or you’re working with the right people who are thinking of all the things for you. I mean, that’s something that you need to figure out.

Rob: Yeah, it’s something we always preach that I wish I did more of and now I’ve learned is like, figure out your team be around people smarter than you. You don’t have the bandwidth to do it all. Maybe you could try and pull it off before but now it’s like, go find people smarter than you that specialize and work with them because you know, like it’s too much for one person to handle and when you’re dealing with it all when you’re divorced, I feel like it’s it’s more important than ever.

Abbey: 100%. I totally agree.

Rob: Let’s hop into a couple of these rapid-fire questions. What is the most common clause missing from divorce agreements that parents later regret?

Abbey: Well, I can say that there’s a theme that I’ve seen a lot, and it’s that divorce agreements don’t always do a great job of anticipating how the agreements themselves may create conflict. And all too often, I hear from clients and friends that their ex seems more intent on just being contrary than on doing what’s right for the children.

So divorce agreements often need to do a better job of fleshing out what is meant at the time of negotiation than just leaving certain clauses to one’s interpretation. And oftentimes the only remedy if someone isn’t doing what they’re supposed to be doing under the terms of an agreement is to drag them into court and file for contempt. And practically, you know, that’s expensive from a financial perspective. It’s expensive from a time perspective. And at the end of the day, all it really does is escalate tensions. So if divorce agreements could do a better job of fleshing out exactly what is intended and meant by each provision, hopefully, you know, all the conflict could be avoided and the whole idea of having to go to court and call for contempt could be moved ideally.

Rob: Yeah. And I’m putting you on the spot here with this. Is there a small example you can think of of something that like, if that small clause was in a divorce agreement, it would have made a big difference to avoid a lot of this expensive conflict?

Abbey: I mean, I have a few. One, for example, a common one that I’ve seen is passport access. Some agreements do a really good job of saying who’s going to hold the passports for the children and what the protocol is for requesting the passports and time under which they must be produced. And some agreements don’t address passport access at all and leave it to the parents to sort of duke it out.

Another one, I think this is a it seems like a small thing, but it’s very common and it can be really big, is that a lot of divorce agreements will divide up breaks, like winter break is divided into two halves. Okay, but it really doesn’t specify when the first half ends and the second half begins. If there’s an odd number of days, you know, what’s the time on the middle day that the children are exchanged and who brings them to who? And if there’s an even number of days, how is it divided? Including a provision like that could really eliminate a lot of anger, frustration, nasty texts, and all kinds of heartache.

Rob: Yeah, and it seems so tedious and like, really, we need to put all this in. But like, in hindsight, it’s better to have it set it up, and then use that as a fallback and adjust as needed versus just have it way too loose. And then you have nothing you have nothing to fall back on or to go besides going to a lawyer and maybe going back to court.

Abbey: And look, you know, I don’t want to put too much on divorce attorneys because I will say that while there are lots of conflicts that we could anticipate as humans, you know, you really can’t anticipate all of them. You really can’t anticipate how unreasonable some people might be. But I will say I’ve seen a lot of divorce agreements, both in my prior life when I was brought in as a consultant about estate related provisions. And now in my life as a family wealth strategist with clients that want to talk their settlement agreements through. And I can say a lot of them fall short of really fleshing out what they need to, to avoid.

Rob: Is that something that people are always coming to you after the divorce is settled? Are you seeing people start to bring in a estate planner, a well strategist, the papers are drafted and before things are signed?

Abbey: Well, yeah, so our clients, although they all understand that I no longer give out tax or legal advice, I’m really nearly here in a consultative role and they ultimately need to consult with their attorneys. And I think they see me as a legal sounding board resource. And so I am working with many of our company’s clients on structuring what might be best for their family in divorce settlement agreements. Because look, the statistics, what they are, about half of all marriages end in divorce. And our clients need that kind of help. We’re happy to provide it for them.

Rob: Yeah, so important to talk to have your team and talk to them and don’t just get in this like echo chamber where it’s you and your lawyer and your family telling you what you should do. It’s like, talk to professionals and the fact that you’ve been through divorce, I always find like, very authentic, very relatable to people. Here’s here’s a mistake I made. Maybe you should talk to your lawyer about adding this provision in or seeing what they think.

Abbey: And that’s a good lesson and it’s a lesson on why you need help because I can tell you that I’m a lawyer with experience in this world and I definitely made mistakes in my own divorce. And that’s because when you’re in it, it’s really hard to take a step back and focus on certain aspects of what it is you’re agreeing to. It’s definitely good to have an outside party here to help guide you through.

Rob: We’ve kind of talked about this already, but how do you see financial and legal planning overlapping when it comes to protecting the kids after divorce?

Abbey: They’re really two sides of the same coin. Legal language will create an obligation in a divorce settlement agreement, but the financial planning actually makes it work in real life. I I could agree to something all day long in a settlement agreement, but if I’m not properly planning for it in real life, it doesn’t matter.

For example, one parent might say that they will be fine to pay for the children’s college education. A lot of divorce agreements, by the way, don’t address college education because divorce attorneys, if there’s a conflict, will say that a judge is not going to mandate what happens after the age of 18. However, a parent might say, yep, I’m happy to pay for college education.

But if behind the scenes they aren’t doing all of the things that will enable them to afford it, it doesn’t matter what that agreement says. If they can’t pay for college, they can’t pay for college. And then the child, the other parent, everyone’s sort of out of luck.

Rob: It’s such a unique circumstance because all of this is hard enough to save and to organize when you’re married and you’re on the same page. And then all of a sudden you’re single parenting, you’ve got your own finances. We’ve talked about before, I usually both people take a hit when they get divorced financially. Nobody’s coming out ahead usually. And then you’ve got college. it’s a very just, I always empathize with people how overwhelming it is for anybody listening that’s going through divorce that all this now falls on you and you’ve got to coordinate it with an ex who may or may not be amicable, may or may not have the same interests. yeah, think once again, just building your team, talking to somebody like you and having them in your corner is more important, I feel like in a lot of ways, post-divorce.

Abbey: Yeah, absolutely, I totally agree.

Rob: With blended families and modern family structures, what new clauses are becoming essential today?

Abbey: Well, there’s several. mean, families today aren’t the families that existed a generation ago even. And there several things to consider. From my perspective within a state planning lens, I’ll say many people when they’re getting remarried want to ensure maybe that they’re providing for their new surviving spouse if something should happen to them if they pass away. But ultimately, most people, when they get remarried, and this doesn’t make it right or wrong, but most people feel that they want their assets to ultimately pass for the benefit of their children from a prior marriage or prior relationship. And there are good time-tested ways to structure that. So a lot of times what I’m seeing is clients wanting to put an obligation in the divorce settlement agreement that provides that each of the parents will structure their estates to ultimately provide for the children.

Georgia is one of many states where you can make a contract regarding your will and obligate yourself to do something under the terms of your will.

Some other clauses that I see come into play with blended sort of modern families include clauses about how to introduce a new partner to the children. Timing, you know, under what circumstances are we involved in the other parent or not? And these clauses can be really, really helpful, but they can also cause problems if they’re not properly worded. And you have to think about this for yourself. If you’re including this clause in an agreement because you’re extremely concerned about what your ex is going to do, whether or not you believe it right now, this clause may turn around and bite you, okay, if we’re going to structure it so that it applies equally to both parents. You might not foresee that you might meet someone that you’re going to want to introduce to the children, but it happens all the time. So it’s important to think about that.

Another one, just to mention this, because this is where we are today, is clauses regarding digital rules. Things like social media boundaries, when the children will have phones, who’s gonna pay for those phones, what the parental controls might be. This wasn’t a concern 20 years ago, but these days it’s fodder for argument frequently. So these are really good kinds of things to contemplate when you’re in the throes of negotiation of a divorce settlement agreement.

Rob: I’m sure every generation says, it was harder in my generation. But I contend with all of these different variables and tech and communication we have, we have a lot more balls in the air and factors to juggle than I’m like, what was divorce like 30 years ago and before cell phones? It had to be different on many levels.

Abbey: My gosh, I know. At so many levels, I can’t imagine. A divorce attorney who I love here in Atlanta once said to me, if it feels good, don’t text it. And I take that advice in life generally. But imagine if texting didn’t exist with everything going on in divorce. That would be something.

Rob: Yes. Right. Write that in a letter and mail it and see how it feels when it arrives. Let’s get into a question at least lightly. How does tax planning factor into making divorce agreements truly work long term?

Abbey: Yeah, that’s right. Well, I will say this. Unfortunately, I’ve seen the work of many divorce attorneys and clients who don’t understand that a dollar is not always a dollar is not always a dollar. So for example, if you have a cash account worth $100,000 and you have a 401k worth $100,000. Those aren’t the same for purposes of division of assets because with the 401k, there’s going to be restrictions on how they can be accessed without penalty. And also when they are accessed, unless it’s like a Roth 401k, there’s going to be income tax consequences for withdrawal of the funds. Whereas a cash account is a cash account. You access it when you want to, and there aren’t necessarily going to be any tax ramifications for doing so. So it’s important to keep in mind that a dollar is not always equivalent to another dollar.

A few other examples – dividing retirement accounts requires special orders. And if those aren’t drafted correctly, you could face penalties and unexpected taxes from withdrawal from retirement accounts or from dividing them up incorrectly. For divorces finalized before 2019, alimony was usually deductible to the payer and taxable to the recipient. But after 2019, that all changed or if your divorce was modified following 2019 and adopted the new law, alimony was no longer deductible and it no longer was taxable to the recipient. The IRS sort of got out of the alimony business for new divorces. That’s something else to keep in mind.

The last thing I’ll mention is with regard to property transfers, things like this spouse gets the house. Well, OK, much like I said before, a dollar is not a dollar. If the house is worth $500,000, there’s likely embedded capital gains within the house value. So if the spouse who receives the house goes to sell that house one day, yes, they may get an upside or a downside with regard to value, but also they may have to pay capital gains taxes as a result of the sale. So there’s a lot of taxi sort of considerations relating to divorce.

Rob: Yeah. And when I hear it, can remember like when I was going through mine, it’s like you take this, you take this, the numbers match up. That sounds good. But in reality, to your point, like some of those numbers for better or worse, they’re very different. The 100k may actually be 70k when you deal with the tax consequences. So once again, before signing anything, don’t necessarily just trust your divorce lawyer. Talk to, you know, an estate plan or talk to a wealth strategist, get another expert opinion that can like point out like, just so you know what you’re signing here. You know, I think that’s very important, especially when you’re, as we talked about just emotionally overwhelmed and really just want to get it done.

Abbey: Yeah, and I want to say, I want to say there’s so many divorce attorneys and we have some really, really wonderful divorce attorneys in Atlanta that do all of the things, or in Georgia, that do all of the things you would want to see them do. But I’ll also say, and this applies for so many important financial structures that you’re implementing in life, it really can’t hurt to have more than one expert in the room looking over what you’re doing.

And so important, as you said earlier, it’s important to have the right financial team sort of looking over your shoulder.

Rob: Right. And a lot of times you get one shot at this. mean, you can make a difference, but it can be very expensive. So it’s like if you’re in the ninth inning, like maybe that is the time to pause. And even if you have to bring in somebody just for peace of mind, and even if that costs a little bit of money, it can save you so much time, money, peace of mind.

Abbey: All of the things.

Rob: One last question here. For a newly single parent reviewing their settlement, what’s the very first thing that they should check?

Abbey: Well, of course, I’m a lawyer by training, so it’s hard for me to give just one thing. I’ll say, I’ve seen all too often where divorce attorneys are so excellent at being laser focused on getting their clients divorced, but not necessarily as excellent on guiding their clients on the next steps to be taken to implement the provisions of an agreement. So for example, if an agreement says one parent is going to retain what was the marital residence, well, that will require oftentimes a quitclaim deed to be prepared and filed in order to reflect the new ownership. It will also often require that the new sole owner will have to refile for homestead exemption.

I think an important thing to do is to look at the agreement and go through it with your attorney and sort of have a list of each and every provision of the agreement that requires some action on your part following the judge signing that order. The other thing I really have to mention, because I can’t just give one thing, is obviously a lot of what I do is covered is colored by an estate planning lens.

And I think a newly divorced parent needs to also ensure that they put proper new estate planning documents in order, a will, revocable trust, advanced directive, and financial power of attorney at a minimum, those four, what I would call four documents, to ensure their estate is structured to pass when they pass the way that they want it to, to ensure that guardians are named pursuant to the provisions of their will in the way that they would want them to be. And also in looking at the estate plan, it’s important to look at all titling and beneficiary designations because those can supersede the terms of your will and also your divorce agreement and that can cause an expensive conflict later.

Rob: Let me ask you just anecdotally, because I experienced this a lot of people, they’re divorced. So it’s all on them now. Let’s say they do get all of these documents in order. Who does it? Who holds it? Where does it go? Normally, it’d be like, tell your husband or your wife, right? Here’s all the documents if something happens to me. What do you tell somebody that’s like on their own now? And they get all this done.

Abbey: Yeah, there needs to be a trusted person and that person doesn’t have to know what your documents say. They don’t have to know what your assets are, the values, but they have to know who to contact in the event something happens to you. And hopefully that would be a professional in your life, your lawyer, your CPA, your wealth strategist, your financial advisor, your team who will work with you to have a list of all the assets because this is important to know.

When you pass, there is no sort of database that you can log into that’ll tell someone what your assets are and where they are. It used to be back when I started practicing law that if someone didn’t know where mom and dad’s assets were, they would watch the mailbox and see what statements came, but that doesn’t happen anymore. So you need a trusted person to at least know who to contact. And whether you have an individual named as your executor or trustee or you’ve named a professional trustee at trust company, someone needs to be getting in touch with them to let them know, you know, where all the bodies are buried.

Rob: Yeah, and again, every time we talk about it, you realize like, it’s almost it should be a mandatory thing for people going through divorce, like a little bit of training, like, okay, you’re to get your divorce license, now you need to go take care of these things. Because before, you could rely on somebody now you do want to make sure these things are, you know, because a lot of this will fall on your kids, and you could end up in probate and all these things that like, is the last thing we want, we want our kids to go through.

So I really appreciate this and hopefully this helps people out there listening that are in the process or as we said, already divorced and have been putting this off. Abbey, let people know where they can connect with you.

Abbey: So, like I said, I’m Family Wealth Strategist at HB Wealth, and we are located in Atlanta. So, you Google me up, you can find all of my contact information, whatever suits you or you can also submit an email inquiry via our website. Lots of people don’t like to make the first call, and I’m happy to do it.

Rob: Thank you so much, Abbey.

Abbey: Thank you.

The DivorceLawyer.com Podcast with Rob Roseman, Featuring Abbey Flaum, J.D., LL.M., MBA Partner, Family Wealth Strategist at HB Wealth

Contact Information – Find Abbey’s HB Wealth profile here, Abbey Flaum – HBWealth.com or visit HB Wealth here, Homrichberg.com.