The Co-Parenting Conundrum
By Wendy Wan Turk
Whether you are consciously uncoupling, co-parenting, sharing joint custody, or whichever term you choose to use, there will always be areas where you will need to think thoroughly and tread lightly. The first issues that typically come up are generally emotional - how does each parent feel about x, y, and z - and then logistical—where will the children live, when will they visit, etc.
Often overlooked aspects of co-parenting are the financial issues that arise from a divorce/separation. Here are 4 main areas that should be addressed while discussing child support, custody, and visitation.
I found that when raising my kids, I just assumed certain things, probably based on how I grew up, only to realize that my husband had completely different thoughts. It is especially important when co-parenting to make sure you’re on the same page, especially with regards to expenses like childcare and duplicate expenses, because all too often we all make false assumptions about who is paying, or what we are paying for.
Who is buying the school supplies or paying for soccer leagues and piano classes? What type of childcare is acceptable for both parents? Is it a daycare, a nanny, relatives, and is it affordable for both? And how will these expenses be paid? Some ex-couples keep a joint account where the money is moved in (i.e.—child support) and out as expenses come up. Others might use Venmo or good old-fashioned checks. Whatever the method, use the system that is the easiest for both parents in order to help reduce confusion and conflict.
Is college a shared goal? Is this a goal at all? Some parents are split in terms of what they are able to and what they would like to provide when it comes to college savings. If college is a goal that both parents have agreed upon, it can either be done jointly or separately.
Details to decide are whether each parent will save in their own account for the child(ren), how much will go into each account, whether regularly or just on occasion, and how much to save. It’s also important to consider whether extended family, such as grandparents, will be contributing towards education expenses, since this may affect how you save and who owns the accounts.
Married Filing Separately, Married Filing Jointly, Single, Head of Household…what used to be a simple tax question has now turned into a complicated one. Discuss how you will file your taxes in the year of the divorce and the year of separation, but then further figure out how to claim the dependent children.
Are you splitting the dependents each year, are there alternating years, does one parent always claim the dependents? This choice can make a huge difference in the net income for both spouses, especially if there are years where the number of dependents might fluctuate. In years where there are more deductions, perhaps because of an additional dependent, it might make sense to make tax-sensitive moves, like earning more income, converting an IRA to a Roth IRA, selling a property, selling stocks, etc.
Even though it feels like a family is dissolving, it is especially important to protect the family. If a spouse who is providing child support passes away, what would happen to the payments? On the flip side, even if one of the spouses receives the child support, if they pass away, presumably there would be more in childcare costs, loss of college savings potential, etc.
Agreements as to how much coverage is needed and for how long should be discussed, as well as who is paying for the policies. Having life insurance will give peace of mind to both parents that the child(ren) will still be provided for even in the worst situation.
The financial part of co-parenting may be overwhelming, but taking the extra time and effort to create a thoughtful plan, and communicating the plan, will likely be less stressful in the long run. To help facilitate the planning process, I help clients before, during, and after their divorces to ensure in-depth reflection and discussion before finalizing their un-coupling.
Securities offered through LPL Financial, Member FINRA (http://www.finra.org/)/SIPC (https://www.sipc.org/). Investment advice offered through Gerber Kawasaki Inc, a registered investment advisor. Gerber Kawasaki and Gerber Kawasaki Wealth and Investment Management are separate entities from LPL Financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures the success or protects against loss.
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