This post is from Scott Clarke, a Certified Financial Planner and Certified Divorce Financial Analyst currently in private practice in the Dallas-Ft. Worth area, who has been in the financial advising business since the early 1990s and has specialized in the divorce financial aspects for the past 6 years, and from from Curtis Harrison, a collaboratively trained family law attorney working for the law firm of Albin | Harrison | Roach in Plano, Texas. Harrison is board certified in Family Law by the Texas Board of Legal Specialization and serves on the Board of Trustees for the Collaborative Law Institute of Texas.
This previous blog post outlined some of the common approaches that parents take in regard to child support. In this post, we would like to review some of the more common alternative methods that parents frequently choose in the collaborative process. These include:
1. Establishment of a Joint Support Account. Using this method, the parents agree to establish a joint checking account for the purpose of paying for agreed expenses relating to the children. The parents determine in advance the following:
(a) the categories of expenses that will be funded through the account;
(b) the frequency in which they will review the cost of these expenses;
(c) who will have access to the funds; and
(d) the method for determining the amount to be contributed by each person.
Here is an example of a very basic joint support account:
Categories: Private school tuition, school related activities, extracurricular activities, and clothes.
Frequency of Review: Semi-annual review to evaluate activities and ensure sufficient funding.
Access to Funds: Mother with pay for all agreed upon expenses.
Contribution: 60% from Father; 40% from Mother.
This method is excellent for parents who believe in proactive planning for upcoming expenses and hope to minimize the changes associated with the children’s lifestyle.
2. Debit/Credit Account. This is exactly the same concept as the joint account EXCEPT all agreed upon expenses are charged to a credit card instead of funding a bank account in advance. Using this method, the expense is incurred first and then the parents pay the bill based after-the-fact, based upon a pre-arranged percentage formula. All other aspects of the joint account are the same.
3. Combination approach. This method combines one of the approaches described above with one of the payment methods described in the previous blog post on this topic. A commonly-seen example of this occurs when the parents agree during the collaborative process to establish a Joint Support Account to handle specific expenses in addition to a fixed amount of monthly child support that is paid by one parent to the other.
In the collaborative process, each of these options (including ones described in the previous blog post) is reviewed and evaluated to determine if it would be appropriate given the parents’ goals, concerns, and interests. The parents can then determine the method that makes most sense for them as a restructured family.
All of the foregoing options have been tried and tested in many Texas collaborative divorce cases. They can be extremely effective in addressing the ever-changing needs of the children while also building in more financial flexibility for the parents. In the long run, such customized solutions can reduce the chances that either parent will feel the need to seek a future support modification, as they are not straight-jacketed by a one-size-fits-all child support order.