One common area for post-divorce conflict is child-related expenses. To minimize this, it is important to discuss before the divorce is final how will you and your ex share your child’s expenses.
Even with a clear agreement in the divorce papers, this unfortunately can be a minefield on many levels. It leads to disputes about what expenses should be incurred, what should be shared, what’s the fairest way of sharing them, getting reimbursed and on it goes …
It can also fuel competition between parents with each parent wanting their child to participate in their preferred activity and debates over what technology the child needs. And competition between parents is never good for a child.
It’s easy for one parent, usually the one who does the work of sign ups, to feel they’re carrying the responsibility for all the expenses and then never getting fully reimbursed. When that happens the debts accumulate, creating on-going hardships. Sometimes the only way to get paid is to take legal action and that is never fun.
So what can you do during the divorce negotiations to reduce the potential for conflict in the future? If you’re already divorced, is it too late to re-negotiate this? What are your options if you and your STBX have different philosophies?
Joining me for this Conversation is family law attorney Alan Plevy of SmolenPlevy in Virginia. Plevy has been practicing family law for over 30 years and says that out-of-pocket child expenses has been growing concern. Find out why and what you can do by listening in to our Conversation below (email subscribers click here) or keeping reading …
Child Support Doesn’t Cover All Expenses
Child support guidelines came into being in the 1980’s and they are intended to cover the necessities such as basic clothing, food, utilities and a place to sleep. School supplies and sport activities are not included. Nor is the clothing that is required for those sporting activities. And nor are the electronics that have now become a part of every child’s life.
“Now they’re living in two different homes, do we transport the laptop or computer from home to home?” said Plevy. “Where is the child going to be using that equipment and who is going to pay for that?”
If your child is in elementary school then these expenses may seem like a minor expense and not worth discussing. You might think that you’ll just sort it out as go along. And that may work … until the expenses become more significant. Come high school you could be talking about things like tutoring, college entrance exam prep, college entrance exam fees, driving lessons, and car insurance.
“These are big ticket items,” said Plevy. “We’re not talking about pencils and notebooks anymore. We find that judges by using the child support guidelines cannot order these things.”
It is worth noting that anticipated out-of-pocket medical expenses and child care expenses can be included in the child support calculations and through that process these expenses are shared relative to each person’s income.
Create A Flexible Agreement
Since child support does not cover expenses beyond the bare necessities, you need to create your own agreement and incorporate this into your legal divorce agreement, such as your Parenting Plan.
I’ve seen some people make these agreements very specific with for example, parents agreeing to alternate the back-to-school supplies each year or dad buying the shoes while mom buys the winter coats. These are not my preferred agreements – I think they are too restrictive, and inevitably fail to accommodate all the expenses. They also leave little room for adjustment when one year the back-to-school supplies call for big ticket items such as a graphing calculator. I suspect these agreements are rooted in one party’s distrust of the other party, that the other party has a different philosophy and will either skimp on the items or go spend too lavishly. They also come when there’s a big difference in the incomes of the parents.
Plevy agrees. “Sometimes they work, sometimes they don’t. More often than not, it depends on the parents and how they’re working together even though they are no longer married.”
Colorado works on a system of parenting time and decision-making, as opposed to “custody.” Most of my clients have shared decision-making and this means that participation in extra-curricular activities is subject to agreement from both parents. Given this, then expenses for agreed activities become shared in accordance with a formula agreed at the time of divorce.
“If expenses outside of child support are not addressed in the divorce, then if a parent wants their child to be involved in an activity they have to foot the bill or the child doesn’t get involved in the activity,” said Plevy. If you and your ex have a civil relationship, then you may agree on a cost-sharing arrangement even though it wasn’t in the divorce.
If you’re already divorced and your paperwork doesn’t include an agreement on extra-curricular expenses, then Plevy recommends trying to come to an agreement with your ex since you’d both likely benefit. If you are able to come to an agreement then you will want to file it with the court so it does become a court order.
First Step Is Agree On Activities
One of my guiding principles is that assuming there is shared decision-making then neither parent should be blindsided or surprised by an expense.
This means the first step with extra-curricular activities is to agree on the activities your child is going to participate in. This can be on a semester-by-semester basis, although I have seen some parents negotiate these activities in their initial parenting plan. This would be particularly important where one parent doesn’t fully support an activity in which the child is currently enrolled or where the child’s current activity means significant expenses or would intrude on the parenting time of one parent, such as travel soccer.
This sounds simpler than it often is.
“Some people like to have their children involved in an activity every day of the week aside from homework,” said Plevy. “Some parents believe one sport per season may be enough for their child while paying attention to academics.”
In discussing an activity, you do want to be informed of the expenses that can reasonably be expected with that activity. If you’re expecting your other parent to share in those expenses, then be prepared with a comprehensive list.
If you do have an agreement that identifies specific activities, then it needs to be worded in such a way as to provide some flexibility especially to accommodate the child’s preferences. For example, what if your child wishes to play soccer instead of football?
How Will The Expenses Be Shared?
Rather than parents agreeing to pay for specific items, Plevy says it’s typical for parents to state that costs will be shared equally or in portion to their incomes such as stated in the child support calculation.
In theory basing it on the share of income in the child cupport calculations would allow for the proportions to change when child support changes but Plevy says this doesn’t happen very often.
“My experience dealing with this is that once parents have been through this, they’re not looking forward to going back to court to deal with a change in child support or spousal support. Sometimes those things remain the same for the child’s entire school life.”
When parents can’t agree on activities, sometimes the solution lies with who pays for the activity. If you want your child to do cheer-leading and their other parent is not supportive, they may consent to the activity if you’re willing to cover the expenses 100 percent. The other element to this type of agreement is to be sure that the other parent is consenting to the activity even when it falls on their parenting time and isn’t saying that the child can only participate when it is on your parenting time.
Settling Up The Expenses
With any expense that is shared, the third step in the process is to agree how often you’re going to reconcile what each of you has spent.
When I talk to my clients about this, the reaction often includes groans, and eye-rolling. With combined finances this is a step most married couples are spared but there’s rarely any getting away from this with divorce.
“What I tell my clients to do is to get an envelope, take all the receipts that represent a fee or an application and put them in the envelope,” said Plevy. “Then you and the other party can either agree to exchange these items for reimbursement once a month or quarterly.”
I’m a fan of spreadsheets so I’d still have the envelope so the other party can see actual receipts but I would reconcile the expenses using a spreadsheet.
How often you reconcile is up to you. Plevy says that once a year is probably too infrequent. If one parent is the one paying for the expenses up front, then an annual reconciliation could create a financial hardship either for the parent making the payments upfront or for the parent who has to repay their portion in a single payment. Once a year could also mean that you’re dealing with a large number of receipts which can be burdensome.
Some parents agree to settle individual expenses in excess of $150 on a monthly basis and then do the others less frequently.
“Don’t sweat the small stuff,” says Plevy. “If you hold on to a receipt for $2, is it really worth going to battle for that?”
Don’t Mess With Child Support Or Spousal Support
If you’re the one who is paying child support and/or spousal support and your other parent owes you for extra-curricular expenses, you might be tempted to deduct what’s owed from the support payments. It’s one way to make sure you get reimbursed and it sounds like it streamlines the process.
Plevy however recommends against doing this. “Think of your child support and spousal support as written in granite.” If there is ever a court hearing about support payments, you’ll want to demonstrate that you have made all court-ordered payments. You’ll have an easier time doing this if you can match amounts owed exactly to withdrawals from your bank accounts or copies of checks.
Similarly, if you and your parent do ever agree to a different payment amount for either child support or spousal support, you will want to file the agreement with the court and get an updated court order.
Who’s Legally Responsible?
Regardless of the agreement you and your other parent have made, you’ll likely have a hard time finding any organization that is willing to do shared or split billing. Most organizations will simply bill the person who signed up the child and that’s the person they will pursue for payment and debt collection.
And yes, that doesn’t seem fair and yes, that can lead to financial hardships and yes, that can impact your credit score. But that’s the way it is and being aware of that is important.
Ultimately, if you don’t get reimbursement from your other parent, your recourse is legal action and that may take some months and additional expenses to get resolution
For out-of-pocket medical expenses, medical providers typically bill the person who carries the insurance even for out-of-pocket expenses that you’ve agreed to shared. Following the date of service there could be two to three months before the Explanation of Benefits is issued showing what’s owed so there’s a longer lead time before medically-related expenses can be reconciled.
“In our agreements, we have the Explanation of Benefits or what’s going to get paid by the insurance company before we make any reimbursements,” said Plevy.
Handle College Expenses Separately
Plevy says that the courts presume that most children are 18 or older when they go to college and so the court has no jurisdiction over those expenses. That means the court cannot order parents into an agreement on how college expenses will be shared.
I’ve found that parents who have a child who is either in college or in the last couple of years of high school, often do want to come to an agreement on how those expenses are going to be shared. Parents with younger children are better off focusing on making an agreement around saving for college rather than committing to the expense side of the equation. Either way, whatever agreement you make and include in your divorce papers will become an obligation that is enforceable by the court.
My guest for this Conversation was family law attorney Alan Plevy of SmolenPlevy of Virgina. Check out their website for some awesome videos and resources on divorce.