Divorcing and handling shared and split assets after divorce

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Iwas1
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Divorcing and handling shared and split assets after divorce

Post by Iwas1 » Thu Mar 30, 2017 3:17 pm

Hi everyone, I'm new to this forum. I was referred here when I posted elsewhere about getting good financial advice.

I already looked at as many discussions in this forum as I could find on divorce and none got deep enough to answer the kinds of questions I still have.

I basically am trying to figure out the best arrangement for splitting assets that we may share even after divorce, while also staying as economical as possible in regard to taxes and fees.

Here goes -- the background:

My soon-to-be-exwife and I are divorcing soon and decided to do a "nesting" arrangement with the marital home where our two children (ages 13 and 11) will stay full time and my ex and I would take turns living there 50/50. Knowing this, we also bought a condo nearby that we also share, so we have a place to stay while the other parent is parenting. We have two cars that we shared (minivan for use with kids, sedan for use at condo). I have an income of about (let's say) $130K annually and my wife was a stay at home mom for 6-7 years and has no income; previously she had been in a decent paying job at about (let's say) $80K annually. I will pay her maintenance/alimony to cover her expenses and I will pay all of the joint expenses involving our living spaces and our children until she gains an income of her own. There wouldn't be any child support in this scenario. Yes, we are both represented by attorneys. No, I won't go into why we are getting a divorce.

Once the children reach the age of majority, we would liquidate/split whatever is left that we were still co-owning... that is 5-7 years from now.

Some specific numbers for reference:
House value: $500K; mortgage amount: $150K
Condo value: $300K; mortgage amount: $150K
No auto loans or other outstanding debts beyond the mortgages; cars are worth $15K and $5K each.
Liquid cash about $20K, dwindling with legal fees
My 401K has $280K, her 401K has $140K

I understand that there is a year after the date of the divorce that we can exchange property/assets without tax implications. I don't know exactly what this means. I suspect that we are better off if we put the cars in each of our names as separate property, and then put the condo in one of our names as sole owner, and then balance the condo equity value by balancing across 401Ks and liquid cash. I wonder if we are better off having one of us buy out the other's portion of the house now rather than splitting it later, and then both properties would have sole ownership and joint tenancy.

So my questions are:

1) is it better to split the jointly owned property 5-7 years from now or in the next 12 months?

2) what split would you suggest given the above and why?

If this is too much for a post, I'll gladly take that feedback. I'm going to start calling around to financial advisors also, but I thought it would be interesting to see the power of the community in coming up with interesting and diverse insights. I welcome the exposure of any incorrect assumptions I may be making about how all of this will work.

Thanks so much in advance!

Carefreeap
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Re: Divorcing and handling shared and split assets after divorce

Post by Carefreeap » Thu Mar 30, 2017 5:18 pm

I wish you the best of luck and hope it works out. It does sound complicated with the two of you sharing two homes.

If you are both on the mortgages you will be linked financially until the loans are paid off or refinanced. That means that if either of you pay late both of your credit histories will be affected. Also the ability to borrow will be affected by having those two mortgages. It could get even more complicated when/if either of you remarry.

I wouldn't assume that your wife will be able to walk back into an $80k job if she's been out of the workforce for 6-7 years. She's likely going to be entering back into the workforce at a near entry-level position. What did she do? Is she planning on doing the same type of work? Has she done anything like gone back to school to keep up her skill set?

tibbitts
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Re: Divorcing and handling shared and split assets after divorce

Post by tibbitts » Thu Mar 30, 2017 5:48 pm

It seems like this arrangement is just too complicated. Have you considered trying to work out something that's much simpler and doesn't involve any sharing (except for the kids)?

delamer
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Re: Divorcing and handling shared and split assets after divorce

Post by delamer » Thu Mar 30, 2017 5:50 pm

There are financial counselors who have special training for the issues that come up in divorce. That might be worth checking out if you feel you are not getting good (or enough) advice from your lawyer.

Two things that stand out for me: 1) Do you both have sufficient life insurance to cover your lost income (or future in her case) in the case of premature death? and 2) I would not want to have any more financial entanglements than absolutely necessary with my former spouse. Given that you each basically have unlimited access to two homes, I am really not sure how to do that. What happens if one of you gets mad and locks the other out of the previous family home? But I'd try to disentangle the money part at least.

Boats day
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Re: Divorcing and handling shared and split assets after divorce

Post by Boats day » Thu Mar 30, 2017 6:16 pm

I'm sorry your marriage didn't work out. I've been thru a divorce so here is My 2 cents.

Do not wait until after divorce to split assists. This will only result in more attorneys fees.

Your idea for sharing the nest is not a good idea. Once you divorce you each need your own space. Imagine 2 years from now and you both remarry how awkward would that be trading spaces ever other week.

As far a child support goes it depends on your state law. In states I am familiar with no judge would not allow a split to have no provisions for child support.

Best of luck

Boats.net day

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Steelersfan
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Re: Divorcing and handling shared and split assets after divorce

Post by Steelersfan » Thu Mar 30, 2017 6:22 pm

If you split the property now, and the wife needs to qualify for a mortgage, it's not likely she can qualify for one with no income. She could become the owner on the deed but you'd have to co-sign the (new) mortgage. It may not be easy to find a mortgage company who would do that.

That is could still be an issue 5 - 7 years down the road, but maybe not since size of mortgage required may be less and she should have income by then.

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CAsage
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Re: Divorcing and handling shared and split assets after divorce

Post by CAsage » Thu Mar 30, 2017 6:23 pm

Do either of you have any interest in keeping either the condo or the house? If you keep them in both names, you might look into what the capital gains are on selling (not sure it works for dual properties). You clearly have more equity in the house than the condo, and if you are valuing them for splitting, don't forget it will cost you about 10% to sell (fees, commissions, etc). It's likely the house will appreciate more than the condo. If you were going to split them up now, it might be good to do it based on the current value (less 10%, less mortgage), in which case house = $300k, condo = $120k. If you equalize the retirement now, of course you need to transfer her $70k to make them equal. If you are going to sell them both (don't forget the children may have college ahead of them, not just age 18), then consider the occupancy rules on capital gains. Maintenance on two properties will be needed, as well.
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StevieG72
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Re: Divorcing and handling shared and split assets after divorce

Post by StevieG72 » Thu Mar 30, 2017 6:52 pm

The whole "nesting" idea is for the birds!

While it is admirable to try to do what you feel is best for the kids, I think you will soon find that "nesting" is not practical.

Kids are resilient, they can deal with mom and dad living in two different homes.

Shared custody ( 50/50 ) is a great idea, sharing a home is a terrible idea.
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WJW
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Re: Divorcing and handling shared and split assets after divorce

Post by WJW » Thu Mar 30, 2017 7:01 pm

I am sorry your marriage did not work out, perhaps it can be salvaged. Having gone through a divorce myself, I can tell you it was one of the most emotionally and financially challenging times of my life. Now over 7 years later, I am getting married (with a prenup of course) in a month and I would not have been able to live the life I lived nor been able to develop this relationship if I was shuffling houses and spending a lot of time with my ex-wife. That being said, I would suggest you stop feeding your attorne'ys insatiable appetites and agree to an equitable split of assets, as well as child support / alimony now as opposed to later. The kids are resilient and could have bedrooms at both houses. And you could be flexible and helpful to one another in your childcare arrangements.

maria00200
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Re: Divorcing and handling shared and split assets after divorce

Post by maria00200 » Thu Mar 30, 2017 7:05 pm

Speaking as a divorced woman myself,(and I have a child with my ex), the nesting idea is horrible! How unbelievably awkward. Especially when either of you find another significant other. I would divide all assets now. she takes the house, you take the condo. Divide everything else.
Last edited by maria00200 on Thu Mar 30, 2017 7:12 pm, edited 1 time in total.

maria00200
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Re: Divorcing and handling shared and split assets after divorce

Post by maria00200 » Thu Mar 30, 2017 7:12 pm

Since the house has $200k more equity than the condo, she can somehow compensate for that by not taking the alimony, and/or taking some money out of the 401k, and letting you keep the 20k in cash. Probably won't add up to the 200k she would owe you, but at least the kids can stay living in the family home and you wouldn't be disrupting their lives by moving.

DireWolf
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Re: Divorcing and handling shared and split assets after divorce

Post by DireWolf » Thu Mar 30, 2017 7:16 pm

People seem to be forgetting that fair distribution of assets does not always mean equal. If one spouse earned much more than the other, it is certainly fair for him/her to keep more of the assets. A lot of this comes down to who's at fault for the divorce and whether or not it is contested in court. Also, the concept of alimony is practically extinct.

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Re: Divorcing and handling shared and split assets after divorce

Post by Meg77 » Thu Mar 30, 2017 7:22 pm

maria00200 wrote:Speaking as a divorced woman myself,(and I have a child with my ex), the nesting idea is horrible! How unbelievably awkward. Especially when either of you find another significant other. I would divide all assets now. she takes the house, you take the condo. Divide everything else.
Agreed.
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flyingbison
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Re: Divorcing and handling shared and split assets after divorce

Post by flyingbison » Thu Mar 30, 2017 8:13 pm

Split the joint assets now, 50/50.

DireWolf
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Re: Divorcing and handling shared and split assets after divorce

Post by DireWolf » Thu Mar 30, 2017 8:18 pm

flyingbison wrote:Split the joint assets now, 50/50.
Never just do 50/50. Do what's fair... that could be 90/10

2comma
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Re: Divorcing and handling shared and split assets after divorce

Post by 2comma » Thu Mar 30, 2017 8:22 pm

I'm a little surprised you will be able to pay for two homes, two kids, an ex and yourself on $130k/yr. It seems part of the plan is for your ex to find similar employment to pre-SAHM status. Will she be able to? Will she want to? What happens if that part of the plan fails?

When I got divorced our primary goal was to make it as normal as possible for our son. Our second priority was to resolve all of our financial issues ex-lawyers. We accomplished both as best we could. Making the break early and final probably works best for most.

We had one prolonged verbal agreement that we'd pay equally for my son's college education. He let the cat out of the bag that he had college loans. My assumption is that she may have pocketed my share and put the loans on him. I really don't know or care to know. Maybe she only put her part of his college expenses on him. The point is if there is any doubt in your mind make as clean a break as possible to let both of you to get on with your lives.
If I am stupid I will pay.

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8foot7
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Re: Divorcing and handling shared and split assets after divorce

Post by 8foot7 » Thu Mar 30, 2017 8:33 pm

With all due respect, this is a terrible terrible plan.
Split everything equally and then take it from me: agree to a date by which ex will be treated financially as if she is earning 80k/year regardless of if she is or not. Even the most motivated among us can get awfully used to someone else paying us. Learned the hard way.

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Mlm
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Re: Divorcing and handling shared and split assets after divorce

Post by Mlm » Thu Mar 30, 2017 8:46 pm

" I will pay her maintenance/alimony to cover her expenses and I will pay all of the joint expenses involving our living spaces and our children until she gains an income of her own. "

That is a very open ended statement. How do you legally define an income of her own? :oops:
I have been there and done that. Just make a clean financial split, provide for your children with a court approved agreement and move on with life.
130K won't cover anything near what you are promising.

stan1
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Re: Divorcing and handling shared and split assets after divorce

Post by stan1 » Thu Mar 30, 2017 9:01 pm

Repeating, but maybe it will help.
Nesting is a bad idea. Settle up now. Kids are resilient.
Most healthy adults move on. If there's a mental health or similar complex issue involved I don't think generic internet advice will help you out.

GoldenFinch
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Re: Divorcing and handling shared and split assets after divorce

Post by GoldenFinch » Thu Mar 30, 2017 9:09 pm

It's laudable that you are trying not to disrupt the lives of your children, but there are so many practical issues regarding moving on with your lives that you may be overlooking. For example, if one of you decided to remarry during this 5-7 year period, your plan would become extremely complicated, or fall apart altogether.

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Iwas1
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Re: Divorcing and handling shared and split assets after divorce

Post by Iwas1 » Thu Mar 30, 2017 9:13 pm

Carefreeap wrote:I wouldn't assume that your wife will be able to walk back into an $80k job if she's been out of the workforce for 6-7 years. She's likely going to be entering back into the workforce at a near entry-level position. What did she do? Is she planning on doing the same type of work? Has she done anything like gone back to school to keep up her skill set?
She was a project manager. I'm assuming at this point she should be able to get at least $30K somewhere and start working her way back up over the course of 7-10 years.

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Iwas1
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Re: Divorcing and handling shared and split assets after divorce

Post by Iwas1 » Thu Mar 30, 2017 9:15 pm

tibbitts wrote:It seems like this arrangement is just too complicated. Have you considered trying to work out something that's much simpler and doesn't involve any sharing (except for the kids)?
It's interesting to see a lot of replies basically questioning the nesting idea. I couldn't think of anything simpler. The moment we start setting up separate homes, the expenses pile up even higher and the logistics with the kids and the divorce negotiations go up. It seems that once you consider kids, everything gets complicated.

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Iwas1
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Re: Divorcing and handling shared and split assets after divorce

Post by Iwas1 » Thu Mar 30, 2017 9:19 pm

delamer wrote:1) Do you both have sufficient life insurance to cover your lost income (or future in her case) in the case of premature death?
We each have term life insurance for up to $650K plus I have additional life insurance for something like 3x my salary. We seem to be covered there.
delamer wrote:2) [...] Given that you each basically have unlimited access to two homes,[...] What happens if one of you gets mad and locks the other out of the previous family home?
I don't think we'll get to that point, but I've read enough to know that I'd have to go to court and point her to the written agreements.

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Iwas1
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Re: Divorcing and handling shared and split assets after divorce

Post by Iwas1 » Thu Mar 30, 2017 9:23 pm

Boats day wrote:Your idea for sharing the nest is not a good idea. Once you divorce you each need your own space. Imagine 2 years from now and you both remarry how awkward would that be trading spaces ever other week.
Yes, I agree there. My hope is that as income stabilizes and she finds more income herself, we'll be able to get a third place. Or, if one of us does meet someone, there may be options I cannot anticipate today, like an additional living space option. Likely, the nesting arrangement would stop at that point. I know that it's not forever.
Boats day wrote:As far a child support goes it depends on your state law. In states I am familiar with no judge would not allow a split to have no provisions for child support.
We're in Illinois. My attorney is pretty confident on this point. It would be ridiculous on her part to ask for additional money... for what? She's not got any additional expenses and she submitted her expense claims already. Her attorney has only drawn a negotiation line at maintenance/alimony.

Bliss
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Re: Divorcing and handling shared and split assets after divorce

Post by Bliss » Thu Mar 30, 2017 9:26 pm

Just curious, what do your respective lawyers think of this nesting idea?

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Iwas1
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Re: Divorcing and handling shared and split assets after divorce

Post by Iwas1 » Thu Mar 30, 2017 9:31 pm

WJW wrote:[...]I am getting married (with a prenup of course) in a month and I would not have been able to live the life I lived nor been able to develop this relationship if I was shuffling houses and spending a lot of time with my ex-wife.
maria00200 wrote:Speaking as a divorced woman myself,(and I have a child with my ex), the nesting idea is horrible! How unbelievably awkward. Especially when either of you find another significant other.
I agree with both of you. Right now I cannot even think romantically and am trying to just get untangled as much as I think I can. I wish I could go all the way, but with young kids that need help in school and in life, now doesn't seem like the time that I can put my life first or I may lose them and be even worse off financially than I am now. I appreciate the honest feedback though!

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Iwas1
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Re: Divorcing and handling shared and split assets after divorce

Post by Iwas1 » Thu Mar 30, 2017 9:33 pm

maria00200 wrote:Since the house has $200k more equity than the condo, she can somehow compensate for that by not taking the alimony, and/or taking some money out of the 401k, and letting you keep the 20k in cash. Probably won't add up to the 200k she would owe you, but at least the kids can stay living in the family home and you wouldn't be disrupting their lives by moving.
I like the general idea -- house for many other things on the balance, but I wish it didn't come with basically leaving her with the kids. I feel I've had a tighter relationship with my sons than she did, and infidelity was involved. If anyone's leaving this marriage, she has.

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Iwas1
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Re: Divorcing and handling shared and split assets after divorce

Post by Iwas1 » Thu Mar 30, 2017 9:36 pm

DireWolf wrote:People seem to be forgetting that fair distribution of assets does not always mean equal. If one spouse earned much more than the other, it is certainly fair for him/her to keep more of the assets. A lot of this comes down to who's at fault for the divorce and whether or not it is contested in court. Also, the concept of alimony is practically extinct.
Well from a fault standpoint, I'd have her dead to rights on an infidelity charge, but this is a no-fault state. I've been told by my attorney that I cannot expect to walk away without "rewarding" her alimony (seems like a horrible word in that context), unless she were to agree. She wants it, so I'm resigned to figuring out how to make this work.

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Iwas1
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Re: Divorcing and handling shared and split assets after divorce

Post by Iwas1 » Thu Mar 30, 2017 9:40 pm

2comma wrote:I'm a little surprised you will be able to pay for two homes, two kids, an ex and yourself on $130k/yr. It seems part of the plan is for your ex to find similar employment to pre-SAHM status. Will she be able to? Will she want to? What happens if that part of the plan fails? [...]
My "case study" numbers in the original post were general numbers. My actual income is slightly higher and I can reasonably expect bonus payments most years. I've done the math and yes, it's tight, but doable if we stay very conservative in our spending. She does not have to return to pre-SAHM income levels for this to work, but if she makes even just 30-40% of her old salary, we start getting a little more comfortable again.

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Iwas1
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Re: Divorcing and handling shared and split assets after divorce

Post by Iwas1 » Thu Mar 30, 2017 9:42 pm

8foot7 wrote:With all due respect, this is a terrible terrible plan.
Split everything equally and then take it from me: agree to a date by which ex will be treated financially as if she is earning 80k/year regardless of if she is or not. Even the most motivated among us can get awfully used to someone else paying us. Learned the hard way.
Yes, I'm worried about this too, but she *seems* motivated to move forward. She has to know that maintenance is not forever, and she'll be nearly destitute if she doesn't work aggressively on her own plan. She's very capable. I'm trying to play the long game.

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Iwas1
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Re: Divorcing and handling shared and split assets after divorce

Post by Iwas1 » Thu Mar 30, 2017 9:45 pm

stan1 wrote:[...]I don't think generic internet advice will help you out.
You are probably right. I see most of the replies here are advocating going for a 50/50 split right away, but not offering possible *financial* reasons for doing so. I still value everything everyone has shared and I appreciate all of the feedback. I put in several calls to financial advisors and hope to set up appointments to discuss the possible paths to make this work.

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Iwas1
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Re: Divorcing and handling shared and split assets after divorce

Post by Iwas1 » Thu Mar 30, 2017 9:50 pm

Bliss wrote:Just curious, what do your respective lawyers think of this nesting idea?
I haven't heard an opinion from the opposing attorney, but my attorney thought it was not the best thing I could do. For reasons like complexity and awkwardness, she couldn't convince me (but didn't try hard) that the traditional way was any smoother or less expensive. It seems to me, it's all hard. The question is, which of the bad situations do I want?

That being said, we already have been doing the new living arrangement for the last few months and it's been working. If she or I find someone, I think it could actually lead to more options. I won't see someone who doesn't respect my priorities with the kids. One way to achieve this is if the next person I begin to see is someone who has had a similar life situation and understands it personally.

2comma
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Re: Divorcing and handling shared and split assets after divorce

Post by 2comma » Thu Mar 30, 2017 9:55 pm

Iwas1 wrote:
maria00200 wrote:Since the house has $200k more equity than the condo, she can somehow compensate for that by not taking the alimony, and/or taking some money out of the 401k, and letting you keep the 20k in cash. Probably won't add up to the 200k she would owe you, but at least the kids can stay living in the family home and you wouldn't be disrupting their lives by moving.
I like the general idea -- house for many other things on the balance, but I wish it didn't come with basically leaving her with the kids. I feel I've had a tighter relationship with my sons than she did, and infidelity was involved. If anyone's leaving this marriage, she has.
I thought you said you weren't going into the reasons for divorce? Just messing with you. It will get better believe me, I have been known to say out loud that "I got divorced and all it cost me was a house". Not big of me but we are all human. Now happily remarried to the right person, kid seems to have adjusted well and life is very good. I wish you the very best.
If I am stupid I will pay.

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Re: Divorcing and handling shared and split assets after divorce

Post by flyingbison » Thu Mar 30, 2017 9:56 pm

DireWolf wrote:
flyingbison wrote:Split the joint assets now, 50/50.
Never just do 50/50. Do what's fair... that could be 90/10
Or 50/50

Bliss
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Re: Divorcing and handling shared and split assets after divorce

Post by Bliss » Thu Mar 30, 2017 10:06 pm

It seems like you're trying to rationalize your preferred outcome while still in an emotional fog. It appears that the Bogleheads and your own lawyer disagree with your plan. I hope you take these contrasting opinions into account. Best of luck to you!

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Iwas1
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Re: Divorcing and handling shared and split assets after divorce

Post by Iwas1 » Thu Mar 30, 2017 10:29 pm

2comma wrote:[...]I thought you said you weren't going into the reasons for divorce? Just messing with you.
:D Ha ha, right. Trying hard not to.

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Iwas1
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Re: Divorcing and handling shared and split assets after divorce

Post by Iwas1 » Thu Mar 30, 2017 10:33 pm

Bliss wrote:It seems like you're trying to rationalize your preferred outcome while still in an emotional fog. It appears that the Bogleheads and your own lawyer disagree with your plan. I hope you take these contrasting opinions into account. Best of luck to you!
That's a powerful point, and believe me, it's occurred to me also. However, I'm certain that I'm quite clear-headed on this and I'm interested in more details on the alternatives, specifically how they are better, aside from enabling a faster chance at finding someone new.

So is it horrible? Definitely, yes. Are there alternatives that are not as horrible? Probably not.

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Iwas1
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Re: Divorcing and handling shared and split assets after divorce

Post by Iwas1 » Thu Mar 30, 2017 10:42 pm

Those points being said, I'm still interested in knowing how others would approach the financial splits, assuming decisions had been made already on the living arrangements. Definitely, it sounds like splitting sooner rather than later is the common feedback.

One person asked if I preferred the condo or the house. Well, I personally prefer the house; the condo was actually picked out by my wife and she said she could imagine retiring there (no snow to shovel, no grass to cut). I'm wondering if we should change title ownership for both places. One person mentioned in the replies above that she might not qualify to hold either mortgage... that is food for thought... I didn't think about the chance that she would have to qualify for the mortgage. I thought it was just removing names from the documents. She would have income: the alimony.

Also regarding the house: she worries that if I get the house, and then the housing market finally explodes again, she'll miss out on a much greater appreciation from the house. Even in this depressed market it's worth more than we initially paid. On the other hand, if it doesn't appreciate much, the seller will have some typical 20-year first-time maintenance items like getting rid of broken and dated bathroom and kitchen details and appliances, roofing, etc.

We haven't even discussed how to pay for college education either... since the money we initially set aside for college ended up going toward the condo, we thought about using equity from the house once we sell it to help fund college.

This is the kind of stuff I was hoping to hear about from Bogleheads in this community.

denovo
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Re: Divorcing and handling shared and split assets after divorce

Post by denovo » Thu Mar 30, 2017 10:42 pm

Iwas1 wrote:
tibbitts wrote:It seems like this arrangement is just too complicated. Have you considered trying to work out something that's much simpler and doesn't involve any sharing (except for the kids)?
It's interesting to see a lot of replies basically questioning the nesting idea. I couldn't think of anything simpler. The moment we start setting up separate homes, the expenses pile up even higher and the logistics with the kids and the divorce negotiations go up. It seems that once you consider kids, everything gets complicated.
Divorce generally sucks for everyone involved. But let's think for a moment, someone has decided to divorce because you guys can't put up with each other. Your divorce agreement has you guys entangled financially and in a very difficult living arrangement. Its not gonna work.


According to all the studies, divorce leads to poorer outcomes for children and generally the adults are worse off financially. It is what it is. You can't draft an arrangement to fix all this stuff.
"Don't trust everything you read on the Internet"- Abraham Lincoln

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Iwas1
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Re: Divorcing and handling shared and split assets after divorce

Post by Iwas1 » Thu Mar 30, 2017 11:00 pm

denovo wrote:[...]According to all the studies, divorce leads to poorer outcomes for children and generally the adults are worse off financially. It is what it is. You can't draft an arrangement to fix all this stuff.
I agree. :( I know I cannot "fix" this. What I'm exploring here is what caveats and suggestions people can suggest to minimize the collateral damage of taxation and early retirement savings hits. The earlier point about my wife having to pass the bar of income requirement to own a mortgage is an example of one of the great points raised in this discussion topic so far.

Emily1980
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Re: Divorcing and handling shared and split assets after divorce

Post by Emily1980 » Fri Mar 31, 2017 1:20 am

Out of curiosity, what is your plan to disentangle financially in the 5-7 years?

As of right now, you have approximately 500k in home(s) equity. You also have approximately 450k in cash, stocks, and bonds. On a 130k salary, you technically can afford 300k worth of mortgage. But it's going to be tight. And you will not have either home paid off in the 5-7 years. Your wife will have to qualify for the mortgage to disentangle. I know this because my friend went through a divorce and, though she kept the house in the settlement, she could not get her husband's name off the deed until she qualified for the mortgage herself. This requires an income of a certain amount, for a certain amount of time, verified. It will not matter if you wish to disentangle if she cannot qualify for the mortgage. Your name will stay on both mortgages and your credit will be affected no matter what you and your ex may think you agree to. You can agree to who will pay for college in the future, too, but if she doesn't have any money in the future it won't matter.

You mentioned that your wife is concerned that property values may take off again. It's also possible that stocks may take off again. And, actually, I would much rather take a stock portfolio than a house any day. But that's just me. Purely financially speaking, that is. So are you planning to draft, into your agreement, that you will split the value of your estate (both homes and 401ks) at the time in which you actually intend to disentangle financially? Say in 5-7 years, on X date, wife will take ownership of condo (since it's what she wants anyway), husband will take ownership of primary residence, and 401ks will be split in whatever way makes up the difference? This is beginning to get very complicated. It sounds like what you want is to separate for 5-7 years and then get divorced. Which, if you are committed to remaining entangled 5-7 years into the future anyway, might be a better option.

How do you feel about selling the 300k condo and buying whatever condo can be bought for 150k cash. No mortgage for your wife to qualify for. It won't be as pretty, and I don't know what the cost of living is in your area, but if you buy something in a more rural area the two of you could deal with it. And you could then roll approximately 175k of your retirement plan into her retirement plan and be done with it. All finances separated now. She is not left with no job, no place to live, and no way to qualify for a mortgage. You are not forced to sell the house your children grew up in. You are also not on the hook for two mortgages. And you can work out whatever shared living arrangements you want for as long as you want. And if you find you no longer want, that will be okay too, because your finances are already separated. If your wife does, in fact, get a good job and work her way back up in the world, she can sell the condo and use the money for a down payment on a nicer place when she can actually qualify for the mortgage herself. Nothing is lost.

But I honestly don't see a way, financially, for you to get everything you want. How are you going to pay for college, retire early, or whatever your other goals are if you try to maintain the same standard of living for two people, separately, on the same one salary? Something is going to have to give. My friend didn't want to sell her house either, for the kids' sake she said, and I didn't argue with her because it's her life. But she would have been so much better off (edit: financially) if she'd just accepted her new financial reality and adjusted accordingly.

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Iwas1
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Re: Divorcing and handling shared and split assets after divorce

Post by Iwas1 » Fri Mar 31, 2017 1:32 am

Emily1980 wrote:Out of curiosity, what is your plan to disentangle financially in the 5-7 years?
Emily, you guessed it, we'd liquidate and split things off when the kids are emancipated in 5-7 years. We'd have the agreement in place up front, this year, to spell out how it would work in 5-7 years. But then I learned how there was a one year tax free period after divorce and it seemed like this would change the landscape of options, if we needed to leverage that to get a better result financially.
Emily1980 wrote:How do you feel about selling the 300k condo and buying whatever condo can be bought for 150k cash. No mortgage for your wife to qualify for. It won't be as pretty, and I don't know what the cost of living is in your area, but if you buy something in a more rural area the two of you could deal with it. [...]
Very interesting idea. I'm going to mull over that one some more.
Emily1980 wrote:[...]I honestly don't see a way, financially, for you to get everything you want. How are you going to pay for college, retire early, or whatever your other goals are if you try to maintain the same standard of living for two people, separately, on the same one salary? Something is going to have to give. My friend didn't want to sell her house either, for the kids' sake she said, and I didn't argue with her because it's her life. But she would have been so much better off (edit: financially) if she'd just accepted her new financial reality and adjusted accordingly.
Yes, something has to give. I really appreciate your post and ideas. I will be talking with my wife about these points you raised also.

Emily1980
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Re: Divorcing and handling shared and split assets after divorce

Post by Emily1980 » Fri Mar 31, 2017 1:58 am

If neither of you thinks you can stomach living in a 150k condo, you could also pull another 150k out of your primary residence and pay off the 300k condo in cash. You would still have a 300k mortgage, but only on the home you'd keep in your name. Again, no mortgage for your wife to qualify for. That would knock your primary residence equity down to 200k, and it would make it just about even if you didn't mess with your retirement plans at all. And all of your finances would be separate.

bluejello
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Re: Divorcing and handling shared and split assets after divorce

Post by bluejello » Fri Mar 31, 2017 2:17 am

Here's a suggestion:

1. Take out a home equity line on the primary residence to pay off the mortgage on the condo in the husband's name only.
2. Remove wife's name from the house mortgage as well as the deed to the house. Remove husband's name from deed to condo.
3. Assign a car to each person instead of switching cars every time you switch houses.
4. Wife gets her 401k ($140k), condo ($300k), and cash ($20k) for a total net worth of $460k.
5. Husband gets his 401k ($280k), house ($500k), and all mortgages (- $300k) for a total net worth of $480k.


This way, there's no issues with the wife not qualifying for a mortgage. Division of net worth is more or less equal (if you want to make it exactly even, you can transfer $10k from your 401k to hers).

With this division I don't think there's any need for you to pay alimony or support since the wife has a paid-off condo, paid-off car, and $20k in cash. She can find a job to pay for her own living expenses once the $20k is used up. Or, she can sell the condo for a cheaper condo and live off the cash difference for a while.

Also make a plan for handling joint expenses for the house and kids with this "nesting" arrangement. Who will pay for utilities, groceries, kid's clothing, activities, etc.? Will you each contribute to a joint account for this?
Last edited by bluejello on Fri Mar 31, 2017 2:23 am, edited 1 time in total.

Emily1980
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Re: Divorcing and handling shared and split assets after divorce

Post by Emily1980 » Fri Mar 31, 2017 2:22 am

Lol. That's what I just said. But you said it way better. :sharebeer

cherijoh
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Re: Divorcing and handling shared and split assets after divorce

Post by cherijoh » Fri Mar 31, 2017 5:42 am

Iwas1 wrote:
tibbitts wrote:It seems like this arrangement is just too complicated. Have you considered trying to work out something that's much simpler and doesn't involve any sharing (except for the kids)?
It's interesting to see a lot of replies basically questioning the nesting idea. I couldn't think of anything simpler. The moment we start setting up separate homes, the expenses pile up even higher and the logistics with the kids and the divorce negotiations go up. It seems that once you consider kids, everything gets complicated.
You ARE setting up two homes - but both of you are sharing them. What expenses do you think you are going to save by this arrangement?

Jags4186
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Re: Divorcing and handling shared and split assets after divorce

Post by Jags4186 » Fri Mar 31, 2017 6:05 am

Depending on the laws of your state some like this will happen.

Let's assume all of the assets you listed are marital assets. (you had 0 when you get married and now have this $750k or so)
Marital assets will be split 50/50.

Wife will get home with $350k equity. Refinanced into her own name.
You will get home with $150k equity. Refinanced into your own name.
401ks will get split and you will give your wife $70k through a QDRO.

Your wife owes you $100k. She will need to get a new $250k mortgage on her house to give you that $100k. She has no job, she won't qualify. House will get sold she'll downsize. Oh and you'll both need to pay the lawyers that could be $10k, $15k, $20k, each depending on how much each of you want to fight.

That's the gist of whats going to happen here unless you're willing to give up more than you should.

Oh and your wife will have to get a job and depending on how much she earns you can expect your alimony to decrease based on that. If she was previously earning $80k she should be looking for those types of jobs. Getting a job as a lunch lady at a middle school won't cut it.

You'll likely pay child support even in a 50/50 custody situation.

I know you want to make this as easy on your kids as possible. If they have two parents who love them and who don't use them as pawns in this divorce then they will be fine. Do not short change yourself. Get every penny out of the marital assets you are deserved and start your life over.

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Re: Divorcing and handling shared and split assets after divorce

Post by bluejello » Fri Mar 31, 2017 6:27 am

cherijoh wrote:
You ARE setting up two homes - but both of you are sharing them. What expenses do you think you are going to save by this arrangement?
Totally agree. With my suggestion above (wife gets paid off condo and cash, you get house but assume all mortgages, each person keeps their own 401k) I'd add that it's probably much easier for the kids to move between homes than for you and the soon to be ex wife to do so.

This way, condo can be her home and house can be yours.

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Tamarind
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Re: Divorcing and handling shared and split assets after divorce

Post by Tamarind » Fri Mar 31, 2017 7:19 am

I would also suggest avoiding prolonged shared ownership, as I strangely got myself into a similar position without a divorce being involved. I currently own my home with my mother JTWROS (her idea, a kind but misguided way of helping younger-me buy even though she didn't feel comfortable making a gift of the down payment). We are both on the deed and mortgage but I pay the expenses. I'd like to get married and you can imagine my GF and mother are both a bit perplexed about the idea of being in a financial relationship with each other. It is awkward enough when all parties like each other and have adequate separate income and there is no dispute about ongoing expenses or eventual ownership. The correct remedy is to unwind the asset sharing!

Please imagine that in two years from the divorce being final, your ex-wife tells you that she's getting married and will be adding her new spouse to the deed of both properties.

[Edited to remove suggested split not as good as the one immediately above]

Getting the condo nearby was a good idea. It reduces the practical impact of having equal custody and having the kids move back and forth. Tween and up kids are not bird's eggs, and are plenty resilient enough to handle moving back and forth. The important part for their well being is that you and your ex both prioritize them over your differences, not that nothing changes.

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CAsage
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Re: Divorcing and handling shared and split assets after divorce

Post by CAsage » Fri Mar 31, 2017 7:35 am

After rereading all this, I think the suggestion about putting the condo in her name, with either no mortgage or a very small one, and keeping the house in OP name makes the most sense. She might miss appreciation, but the issue of who has to pay for maintenance will be much clearer. And no un-tangling 7 years from now! And you avoid the issues with selling and having to be resident to minimize capital gains. Just count the house and condo as worth less due to the costs of sellng! And put a time limit on spousal support. In some states, it's 1/2 the length of the marriage....
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

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