Raising children is perhaps one of the most rewarding, yet financially demanding, journeys. From infancy to adulthood (and sometimes thereafter), parents face a multitude of expenses that evolve as their children grow. When parents break up, it is crucial to understand these expenses for financial planning. Child support in New Jersey is calculated by taking the children’s expenses into consideration.  For cases in which the combined income of parents is greater than $250,000 (gross), a parent seeking support will be asked to create a budget specific to the child or children.  When the combined income is below that threshold, there can be exceptions to the amount automatically set by the Court when the circumstances justify a deviation. Yet, amid what might be a contentious custody fight or divorce, it is sometimes difficult to focus on and remember all of the combined costs of raising a child. In this blog, we will delve into the various types of children’s expenses that parents commonly encounter.

Basic Needs: From Diapers to Clothing

The first few years of a child’s life come with a range of basic needs that require consistent investment. Diapers, baby formula, baby food, and hygiene products contribute to the initial costs of parenthood. As a child grows, clothing and shoes (including attire for summer, school, and special occasions) become significant and frequent expenses, especially during growth spurts when it seems that a pair of shoes or pants fits for about 15 minutes!

Personal Care and Hygiene: Growing Needs

As children enter into adolescence, personal care products and hygiene items are normally purchased more frequently. This includes skincare products, make-up, toiletries, and potentially specialized items like acne treatments.

Transportation

Transportation costs include everything from car seats and strollers for infants, to eventually covering driving lessons, insurance, and a first car. Does the child use transportation other than a school bus? The costs associated with public transportation, if applicable, can also be factored in.

Healthcare: Prioritizing Well-being

Healthcare costs are a critical consideration. Regular check-ups, vaccinations, and occasional medical expenses are part of the package. What are the likely co-pays, and do you, or will you, have a high-deductible insurance plan?  A child’s healthcare also extends to dental and eye care, with potential costs associated for braces, glasses, or contact lenses.

Work-Related and Other Childcare:

For working parents, childcare is a significant expense. This includes daycare, nannies, after-school programs, and summer camps. The cost varies based on location and the type of care chosen. Don’t forget about babysitting costs which may be needed for any given reason, such as school conferences, social engagements, and the like.

Technology

In the digital age, technology expenses are increasingly relevant. Tablets, laptops, mobile phones, and educational software may be essential.

Entertainment

Entertainment costs, such as family outings to movies or theme parks, also factor into the budget.

Education: A Lifelong Investment

Investing in a child’s education is a substantial financial commitment. This expense encompasses school fees, textbooks, uniforms, and supplies. This may be related to private school or extracurricular learning as well as college.

Extracurriculars

Parents often allow their children to engage in various extracurricular activities such as music lessons, sports teams, and tutoring to enhance their child’s development. Don’t forget the costs of these, making sure you are forward-thinking.  Is your 7-year-old taking violin lessons?  Keep in mind that the violin that is the correct size this year will not be two years from now.  Art lessons, uniforms, dance costumes, cheerleader bows, Girl Scout minimum cookie orders and Boy scout popcorn sales, and travel team costs, including tournament fees and hotels, are all expenses that not only add up, but should be factored into the extracurricular budget.

Celebrations and Gifts: Special Occasions

Birthdays, holidays, and other celebrations bring forth expenses for gifts, parties, and decorations. While these are occasional costs, they can accumulate over time.

Savings and Investments: Securing the Future

Not all students can get a full scholarship to college or trade school. Setting aside funds for your child’s education or other aspirations is a prudent financial step. Options include dedicated savings accounts, investment portfolios, and college funds like 529 plans. This is an important consideration for a parent’s budget.

Conclusion

Raising children is a rewarding journey, but it requires careful financial planning to ensure their needs are met at every stage of development. By understanding the various types of children’s expenses, parents can create a comprehensive budget that supports their children’s growth, education, and overall well-being. Adapting to changing needs and seeking cost-effective solutions can help parents navigate the financial aspects of parenting more effectively.

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Divorce can be a challenging and emotionally draining experience, leaving individuals with numerous legal and personal matters to resolve. Amidst all the turmoil, it is vital for people to understand the significance of updating beneficiaries on various accounts and financial instruments. Failing to update beneficiaries after a divorce is over can have serious consequences, as illustrated in the recently decided case of In the Matter of the Estate of Michael C. Jones.

In this particular case, Michael and Jeanine Jones were married in 1990 and divorced in 2018. Their divorce settlement required Michael to pay Jeanine $200,000, with a provision that any outstanding payments would become a debt owed by his estate in the event of his death.

Despite their divorce, Michael and Jeanine maintained a relatively amicable relationship. In November 2019, Michael became ill and underwent emergency surgery but unfortunately only survived several days thereafter. Prior to his passing, Michael executed a banking power of attorney appointing Jeanine as his attorney-in-fact while he was in palliative care. Jeanine organized Michael’s funeral, paid his bills, and took care of their former marital home, which Michael had kept post-divorce. At the time of his death, Michael had already paid Jeanine approximately $100,000 in accordance with their divorce settlement.

During her time at Michael’s residence, Jeanine discovered several US series EE bonds which designated her as the pay-on-death beneficiary. She cashed them in and received over $77,000.

Following Michael’s death, his daughter from a previous relationship applied to the court to be appointed as the administrator of his estate. She argued that since Jeanine had received $77,000 from the bonds, the estate only owed her $23,000 in accordance with the divorce settlement. Jeanine countered this claim, asserting that the bonds were not included in the money still owed to her under the terms of the divorce agreement.

Under New Jersey law, a divorce or annulment automatically revokes any beneficiary nominations on financial instruments, unless explicitly stated otherwise. It also terminates the former spouse’s interest in jointly held property, such as assets held as tenants by the entirety or joint tenants with right of survivorship. The purpose of this law is to protect individuals who unintentionally neglect to update their beneficiary designations after divorce.

Jeanine, however, argued that federal law governed the beneficiary designations on the treasury bonds, and therefore federal law superseded state law in this matter. The trial court disagreed and included the $77,000 as part of the $200,000 owing to Jeanine according to the divorce settlement. Jeanine subsequently appealed to the New Jersey Appellate Division, which sided with her, stating that federal law takes precedence over state law and that she was entitled to both amounts.

The key takeaway from this case is the critical importance of reviewing and updating beneficiary designations after a divorce. By ensuring beneficiaries are up to date, individuals can ensure that their assets, such as life insurance policies, retirement accounts, and investment portfolios, are passed on to the intended recipients. Failing to update beneficiaries may result in an ex-spouse receiving assets meant for someone else. Conversely, if it is desired for a former spouse to remain as a beneficiary, it is crucial to explicitly document this intention. Neglecting to do so can lead to unintended financial consequences and potential family conflicts.

Divorce is a complex process that requires meticulous attention to detail, particularly in matters of financial planning. Updating beneficiaries is a critical part of this process and should not be overlooked.

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The “Nuts and Bolts” of a divorce includes understanding the income and assets of each spouse. When one party is a highly paid executive, income is often more than simply a salary that is reported on a W-2. It is important for the non-working spouse to be familiar with all forms of compensation.

Executive deferred compensation refers to a form of compensation that allows executives to defer a portion of their earnings and receive it at a later time. This provides executives with a range of financial benefits, including tax advantages and retirement planning. It also provides an incentive to stay with the company. This blog will explore the different types of executive deferred compensation and their significance for organizations and executives. A later blog will discuss how these forms of compensation are distributed in a divorce.

Deferred Cash Plans:

Deferred cash plans involve postponing a portion of an executive’s salary to a future date. This compensation often accumulates interest or earnings until the deferred amount is paid out. These plans offer flexibility, as executives can choose when they receive their deferred amounts, such as upon retirement or at a specific age. Deferred cash plans allow executives to diversify their income sources, making it easier to manage financial well-being during retirement as well as take advantage of tax savings.

Stock Options:

Stock options are a popular form of deferred compensation that provide executives the right to purchase a company’s stock at a predetermined price in the future. When the stock price appreciates, executives can exercise their options and buy stocks at the lower price, turning a profit. This form of deferred compensation aligns the interests of executives with shareholders, as their financial success depends on the company’s performance. Stock options often come with vesting periods to incentivize long-term commitment. When the stock price is higher than the price which it can be purchased for, this is known as being “in the money.” Even though the executive may not have access to the stock option at the time of a divorce, the asset can still be distributed.

Restricted Stock Units (RSUs):

Restricted stock units grant executives a specific number of company’s shares after a predetermined period or the achievement of certain performance goals. Unlike stock options, RSUs have intrinsic value and cannot be purchased at a discounted price. Executives receive the shares when they vest, and they can be subject to certain resale restrictions. RSUs not only reward executive performance but also offer long-term incentives to remain with the organization. RSUs typically vest on a three-year schedule. Like options, although the executive may not have access to the stock at the time of a divorce, the asset can still be distributed.

Phantom Stock Plans:

Phantom stock plans are a type of synthetic equity, where executives are awarded units that correspond to a company’s stock price. These units accumulate value over time based on the company’s performance. When the executive reaches a specific milestone, they receive a cash payout representing the value of their phantom stock units. Phantom stock plans offer executives the opportunity to benefit from a company’s growth without directly owning the shares.

Cash Bonus Deferrals:

Cash bonus deferrals enable executives to defer their annual cash bonuses and receive them at a later date. This allows for tax deferral and potential investment growth. Through such deferrals, executives can align their financial goals with the long-term objectives of the organization. Cash bonus deferral plans often come with various payout options, offering executives flexibility when receiving their deferred bonuses.

Supplemental Executive Retirement Plans (SERPs):

SERPs are designed to provide executives with additional retirement benefits beyond their regular pension or 401(k) plans. These plans allow an executive to defer a portion of their income, which is invested and paid out at retirement or upon reaching a specific age. SERPs often offer attractive features such as competitive investment returns and the possibility of remaining with the organization beyond the normal retirement age.

This list is not exhaustive of the types of compensation an executive may receive. It is meant to demonstrate the importance of obtaining all information in a divorce.

 

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Divorce is a challenging process for any family, but when special needs children are involved, it brings a unique set of concerns and considerations. Parents of children with differences must prioritize the well-being and best interests of their children, taking into account their specific needs and creating a plan that ensures their physical, emotional, and developmental growth.

Understanding Unique Needs:

Divorcing parents need to have a thorough understanding of their special needs child’s condition. While this sounds obvious, oftentimes in an intact family one parent has the majority of information and knowledge. This involves familiarizing themselves with the child’s medical, therapeutic, and educational requirements. Collaborating with medical professionals, therapists, and educators who have expertise in the child’s condition can provide valuable insights and guidance during the divorce process. This is the time to leave egos at the door to the health care professional’s office and seek all the information possible. By developing a comprehensive knowledge of their child’s needs, parents can make informed decisions regarding custody arrangements, support systems, and other important aspects of their child’s life including financial needs.

Maintaining Stability and Consistency:

Children with special needs often thrive in environments that offer stability and consistency. Therefore, divorced parents must work together to establish and maintain a stable routine for their child. This includes minimizing disruptions in their living arrangements, educational support, and therapeutic interventions. This may mean that a resolution needs to created whereby a child stays in the family house when it may have been sold in a more typical situation. The consistent presence of familiar caregivers and professionals can help the child feel secure and enable them to better cope with the changes brought about by the divorce. These expenses need to be considered when creating a budget that is child centric. Regular communication and collaboration between parents can facilitate a united front in maintaining stability and consistency. Now is the time to let go of the marital problems that led to the divorce and focus on what is best for the child.

Co-Parenting and Communication:

Effective communication and co-parenting are crucial when dealing with divorce and special needs children. Parents should strive to keep lines of communication open and transparent, exchanging important information about the child’s progress, medical updates, and any relevant changes in caregiving routines. Regular meetings or check-ins can help parents stay informed and make joint decisions regarding the child’s well-being. Encouraging open and respectful dialogue promotes a collaborative approach that benefits both the child and the divorced parents. There are several applications, such as Our Family Wizard, which can help with this.

Creating a Comprehensive Parenting Plan:

Divorcing parents of special needs children should develop a comprehensive parenting plan that outlines the child’s daily routine, medical needs, and therapy schedules. This plan should address topics such as custody arrangements, visitation schedules, financial responsibilities, educational support, and healthcare decisions. By documenting these details, parents can ensure consistency and minimize potential conflicts in the future. It may also be beneficial to involve a mediator or family therapist with experience in special needs cases to help parents navigate the process and facilitate effective communication. If one parent is going to have most of the custodial time, respite care is a consideration that should be addressed.

Financial Considerations:

Divorces involving special needs children often have significant financial repercussions. Properly assessing the child’s long-term needs, including specialized therapies, medical care, and educational support, is crucial when discussing child support and alimony. Collaborating with financial planners and taking professional advice can help ensure that both parents are aware of the financial obligations and develop a sustainable plan for the child’s future. Open and honest discussions about financial concerns and expectations can assist in finding mutually beneficial solutions. The simple wording of a settlement agreement can have profound effects on future entitlements to government programs, so it is crucial to address this at the time of settlement.

Forming a Support Network:

Divorcing parents of special needs children should actively seek out and cultivate a support network. In addition to providing emotional support, this network can offer practical assistance, advice, and access to resources specific to their child’s needs. Connections can be made with support groups, local organizations, and online communities that cater to the needs of families with special needs children. This can also include attorneys who have experience with entitlements, special needs trust, and education law. Engaging in these networks can help parents maintain their own well-being while navigating the complexities of divorce and caring for their child.

Divorcing parents with special needs children face unique challenges, but with careful planning, open communication, and commitment to their child’s well-being, they can successfully navigate the process. Understanding their child’s specific needs, maintaining stability and consistency, effective co-parenting, and creating a comprehensive parenting plan are essential.

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