Bill, a 45 year old divorced father of two teen age children, received a phone call from his 16 year old son, Brian, who lived with Bill’s ex-wife. Brian wanted to take karate lessons and his mother would pay half if Bill paid the other half. Bill was silent for a few moments and then remarked: “Let me get this straight. Since I’m giving your mother alimony and child support, I’m already paying for 100% of your karate lessons. It sounds like your mother is asking me to pay 150% of your karate lessons!”
When John and Nancy were divorced, their son was eight and their daughter was six. When their son reached sixteen, John bought him a car as a birthday gift. Shortly before reaching sixteen, their daughter asked John what kind of car he was planning to get her? John’s response was “Talk to your mother. Since I paid for your brother’s car, it’s your mother’s turn to pay for this one.”
Lorraine and Sid, the divorced parents of two daughters, agreed to split the cost of the girls’ college educations. Their older daughter, Casey, decided to change her major in her junior year with the result that it was going to take her five and half years to graduate. Lorraine told Casey that she didn’t intend to spend her money on a perpetual student. If it was going to take her more than four years to graduate, Casey needed to get her father to pay for the extra semesters.
All three of these scenarios are based on actual families (names have been changed to protect privacy) and illustrate the way money is used as a battle ground where ex-spouses continue the war that began with their divorce. All too often, their children are numbered among the casualties. This need not be the result. A movement that began about 15 years ago in Minnesota offers parents going through a divorce a model that helps them provide a much greater chance of emotional success, less financial loss and better chance of children emerging intact and unharmed. In the early 1990s, a small group of divorce lawyers in Minnesota spearheaded by Stuart G. Webb developed a new model of client representation in divorce cases called Collaborative Divorce; the lawyers and their clients agreed in writing that if the divorce wound up in court, the lawyers would withdraw and the clients would have to find new representation. The agreement changed the focus from adversarial representation to one in which the parties worked with rather than against each other and concentrated on finding solutions that met the needs of the entire family. Today, not only lawyers but financial professionals and psychologists are involved in practicing collaborative law in every state, Canada and at least half a dozen European countries. In the words of Constance R. Ahrons, Ph.D., author of The Good Divorce: Keeping Your Family Together When Your Marriage Comes Apart, this collaborative focus on the entire family allows parents to form a limited partnership that nurtures the parent-child relationship of both ex-spouses.
E. Mavis Hetherington and John Kelly point out in For Better Or For Worse that divorce or separation often involves an abrupt transition for the children from a predictable, orderly and financially secure life to its opposite. If you are thinking about using the collaborative law approach, make sure you carefully define the financial goals and financial obligations arising out of divorce or separation.
Over the years, we have worked with families – both intact and divorced – that are dealing with issues of children and money. Based on these experiences, here are some key areas where separated or divorced parents should try to resolve specific financial issues involving their children.
- Allowances. Structured correctly, an allowance not only teaches budgeting skills but also reflective thinking, which is the ability to think in terms of choices, alternatives and consequences. John Gray, Ph.D. in Children Are From Heaven ranks reflective thinking among “essential life skills” and Stanley Greenspan, M.D. a leading child psychiatrist, describes self-reflection as a “gift” that enables children to become responsible citizens. Minor children should receive a consistent allowance. Often parents have joint custody and the children alternate living with each parent for a week or a month at a time. Both parents should agree on the amount of the allowance, the items covered by the allowance and the frequency (weekly, biweekly or monthly) and the children should receive that allowance consistently, no matter whose house they are at. Will there be a separate clothing allowance? If so, how much and what does it cover? Does the allowance come out of child support or is it extra? This same question applies to extra curricular activities, from piano lessons to sports equipment.
- Cars. Do the children get cars when they are 16? Does it come out of child support or is it extra? If cars don’t come out of child support, which parent is responsible to provide the money? Is the cost split between the parents? How do they decide on the type of car and the amount to be spent? What about gas, maintenance and insurance? Consider using an Alternatives Grid, which is a decision making tool which we discussed in our first book, Silver Spoon Kids: How Successful Parents Raise Responsible Children (McGraw-Hill, 2001). Make a grid with four columns, labeled Alternatives, I’ll Try It, I’ll Consider It and No Thanks. Under Alternatives, the parents can list each possible approach to the issue in question. If the question is who pays for car insurance, alternatives could include (i) Father, (ii) Mother, (iii) Split Equally, (iv) Comes out of Child Support, (v) Child and (vi) Split Three Ways (Father, Mother and Child). Each party then selects among Yes, Maybe and No for each alternative. Such an Alternatives Grid would look like this:If an alternative is marked I’ll Try It by both parties, a clear choice exists. If none of the alternatives are marked I’ll Try It by both parties, further discussion is in order, starting with alternatives that were marked I’ll Consider It. Of course, the Alternatives Grid is not restricted to dealing with who pays for a teenager’s car. It can be used for virtually all of the children and money issues discussed in this column.
- College costs. Who pays for the costs of college? How many years are included? Is the child expected to maintain a minimum grade point average or successfully pass a minimum number of units each semester or quarter? What about room and board, and travel expenses to return home to visit one or the other parents? What if the parents now live in different cities or states? If the child is attending college in Chicago, is the mother living in California expected to pay for part of her young adult child’s travel expenses to visit his or her father in New York during Spring Break? Here, again, the Alternatives Grid is a useful tool. We know divorced families in which every college expense was a call to renewed battle, with the children ending up as the primary casualties. We’ve also worked with divorced families where the father, having higher earning power than the mother, announced that he would pay for all undergraduate expenses and told the children to talk to him about their financial needs during college and not to ask their mother for money. All of the children are now college graduates and a major area for potential discord between the ex-spouses was eliminated.
- Dueling Estate Plans. Estate planning for the separated or divorced family is a sensitive but vitally important subject. Divorced or separated parents should be encouraged to jointly plan for their children, especially if they are minors. Among the issues that should be addressed are the identity of the guardians and trustees and the terms of any trusts for the children. Eileen was involved as a consultant in a matter where the parents were divorced when their daughter was four years old. The father died when she was eleven. During the seven years following the divorce, the father and mother were back in court several times arguing over child support and alimony. The father’s Will left his estate in trust for his daughter’s benefit and named his brother as trustee. The brother blamed his ex sister-in-law for the divorce. The daughter is now sixteen and the five years since her father’s death have been filled with litigation between the mother and the trustee over every possible issue, ranging from trust investments to the appropriate amounts to be distributed to the daughter. In reality, the ex-wife and her former brother-in-law are simply continuing an acrimonious divorce in the Probate Court, with the brother-in-law becoming a surrogate for her dead ex-husband.
As Divorce Magazine (www.DivorceMagazine.com) points out, it is important for divorced or divorcing parents to resist the urge to be petty or spiteful; their actions will hurt their kids more than their ex. The concept of collaborative divorce gives ex-spouses a way to resolve vitally important financial issues with relative amicability.
Eileen and Jon Gallo are the authors of Silver Spoon Kids: How Successful Parents Raise Responsible Children (McGraw-Hill/Contemporary 2001) and The Financially Intelligent Parent: 8 Steps To Raising Successful, Generous, Responsible Children (Penguin USA/New American Library 2005). Their website is www.galloconsulting.com. Portions of this material have been adapted from their books.