FWIW, I’m familiar with two women who elected to keep the family home in the divorce.
One is well to do, the house was worth approx $2.5 million. She got it free and clear as part of the property settlement. She thought it would be a great investment because it is in the best school district in our metro area and there is always high demand for houses there. This was in 2006. She couldn’t unload the house until 2013 for anywhere close to that price, never mind the carrying costs.
Another was the wife of one my H’s closest friends during residency. We practically grew up together in the early years. She kept the house because she wanted their two kids to have a stable lifestyle after the divorce. Her post-divorce income was not quite enough to support all the house expenses. Child support, while fair and very generous, went to pay for the kids’ support, as it should, with a little left over. She eventually let the house go into foreclosure. I was shocked, as was her ex-H.
I’m not saying that this will happen. But any household or lifestyle that required the contribution of the other spouse to sustain during the marriage should not be considered a reasonable option going forward.
The mother keeping the house instead of selling it seems very risky. (mortgage, property taxes, maintenance, risk of home value going down) She needs to have everything she owns in her name only. Start with a clean slate. (close out old credit cards and establish new ones. Make sure no more purchases can be made on joint accounts- close them fast.)
Think about this issue- Two incomes used to provide for one home. Now with the split two households have to be maintained which will cost more. He wants to get out of it as quickly and as cleanly as possible. (pay out least amount to lawyer, kids, and exwife) Use that to your advantage in negotiating. He can get out quickly but he has to agree to these terms and ask for a very generous amount to fully secure the kids in a properly written settlement agreement.
Make sure cost of living adjustments and how they will be handled is documented in the agreement so that she doesn’t have to keep going to court. Watch how she is being billed closely. Don’t let the attorney take advantage.
Easier said then done, think with the mind not the heart. Make sound decisions for the future no emotional ones.
Thinking long road ahead. As kids are growing up he may decide to settle down again. He may have more kids.
With new wife and kids comes more expenses so he will do his best to do the least amount possible for his previous family. If he can he may try to lower the child support claiming he has all these new additional expenses. You just have to be prepared for anything.
Thanks for passport tip. I messaged a friend about it, as her friend is owed 6 figures or more by her ex, including child support. I’m sure she will share the info.
that would be my concern if the primary home doesn’t become hers free and clear or sold. The youngest is 5, that would be a long time to “co-own” a home and expect good cooperation when deciding whether a new roof is needed or whatever. Intact couples have a hard enough time agreeing to things like remodels and upkeep; I can’t imagine divorced folks amicably agreeing to split the cost of a new A/C unit when one doesn’t even live there.
[QUOTE=""]
Of course, once all the dust settled she figured out what a jerk he was.
[/QUOTE]
the way this all went down is a big red flag to me. If he has plans to soon remarry, perhaps have more children, then the concern would be that the new family would trump the old one. I think a top divorce atty could foresee all the likely problems that these scenarios later have.
My friend left her husband after years of counseling resulted in no change, he was stunned. She allowed him to keep the family home (all the kids were grown), but with the market etc., though he appeared to have a good income, he was unable to refinance and remove her. It took 5 years until he remarried and sold that house (thank God he and new wife did not keep it) and finally got her name off. It was generally fine, except it showed up on ex wife’s credit report all that time, meaning if her credit report was run she could see the loans on the house, including his up & down equity line. It was more intimate info than she really wanted to see and think about.
Divorced spouses should definitely get the nonowning spouse’s name off the mortgage or HELOC if at all possible. the nonowner might not be able to borrow money for other purposes because of the obligation appearing on the credit report.
" If it is your friend, then exchange future child support (college costs) for opting out of claim on the house. I don’t think I would want to spend my time going to court in trying to get the ex to pay. "
He wants money now. She can cash out stocks, and get the house and refi the mortgage to her only (I know it isn’t quite that easy).
I think if she said “no money now” they would end up in court and she would be a loser because she makes more money (50% more) and he is letting her get 100% of her job’s stock benefits (except expecting to be paid 50% of the home equity from that) and their retirements go to themselves.
She needs a financial advisor too, because he said “if you give me stock, you pay the capital gains tax” and she isn’t sure about that - if it is part of a divorce settlement, is it treated the same as any other stock transfer? Or should she put the amount of stock he will get into both their names before the divorce, and then he can take her name off it?
Re: stocks. Wow, this complicates the issues! She needs to see a financial adviser who is also well-versed in splitting of assets in divorces! Not just an ordinary one. ISOs, NQ stock, and RSU are treated differently in such situations, and not all of them maybe easily transferable to the other spouse. Some stocks vesting in the future are not marital assets depending on the nature of their grant (reward for past performance versus a vehicle for retaining an employee).
Lookingforward, to add to your post: not just any attorney, but an attorney who is familiar with stock option-related issues! You would be surprised how many aren’t because the issue never came up in their cases…
I’m sorry if I’m not clear - she has seen at least five attorneys and all (despite what their webpages might say) are indicating they don’t want the case if they don’t go to court, and she is trying to get one to take a retainer to help with mediation. She has never had a family attorney in the past, and her family is not local so theirs is out of state for her and cannot help.
Has anyone heard of this:
Certified Divorce Financial Analyst®
I found someone with that credential, but don’t know how valuable it is.
(A friend swimming around is better than nothing - a lawyer who doesn’t want to take a case equals no lawyer at all and time taken off work for nothing)
(and yes, I would think he would want his name off the house because he wants to buy an apartment after the divorce - he’s already told the kids this and (sigh) they think it will have one bedroom for each of them, as they have in their house. Wait until they find out they’ll be lucky if his apartment has two bedrooms total…)
CDFA was the type of fin asvisor my friend was looking for and interviewed several of them… A good place to start is with your state Collaborative law association or some similar entity.
Not necessarily just a forensic accountant. A taxation and stock specialist knowledgeable and dealing specifically with the division of marital assets and their tax and other consequences. Some of CDFAs have psychology and counseling degrees as well. Again, the complexity of her case will depend on the nature of the stock and options involved, so she should choose carefully.
This is getting much too complicated for online “advice.” Everyone knows what they say about free advice.
Very generally:
(1) It takes a QDRO (qualified domestic lations order) to split qualified retirement benefits like pensions, 401k accounts, IRAs and Roth IRAs. And, I’m sure you know that each of these assets carries different tax characteristics depending on one’s tax bracket when payments are made or withdrawals are taken.
Recall also that after divorce, one’s filing status is different. And Single filing status, deductions, dependents (exemptions) all affect one’s tax rate.
(2) As for transfer of stocks, that is a complex question. IIRC, the basis is the same as the transferor’s basis. And the rate of the capital gains tax would depend on the payer’s tax rate. If it’s LTCG, it can be 0%, 15%, 20% or 23.8%, depending on the income tax bracket of the person realizing the gain.
If she hasn’t successfully found an attorney, she needs to consult with her CPA (at the very least) about the tax consequence of any step she is contemplating.
Here’s a Forbes article about dividing stock options by the same author who wrote those 2 books I posted about:
If you are so inclined, look in the Table of Contents. Chapter 16 is about dividing stocks. Chapter 17 is about dividing stock options and restricted stock.