Finance Q for those that have gone through Divorce

[Labrat]

I'll try to be brief:
I'm planning to file for divorce within the next month or so, and am debating whether to offer a direct buyout upfront, or to go through a more 'typical' lawyer assisted division of assets and on-going child support and maintenance payments. I'm interested in thoughts from folks here who have gone through this and am looking for some advice.
Specifics:
Both in mid 40's, and married for 15 years.
2 kids, 11 and 13.
Single income (me) household. Roughly $300k/yr
I expect 50/50 child custody.
2 houses, and approx $2M net worth.
All assets are completely co-mingled.
State is CO (no fault), and either option is legally viable.

Now for the question. I'm preparing to offer her %70 of everything we have, including both homes. In addition to this, I'm planning to offer a few thousand a month for a couple of years. After that timeframe ends, I would pay nothing moving forward. Essentially, I would be broke except my retirement accounts and a very small amount of savings to cover any emergency needs, but I get to keep my income.
Option 2 is to simply retain counsel and go through the traditional asset division, and pay forever in terms of child support and maintenance.
To me, it's more or less is a wash in the long term financially. Rip the bandaid off, or slowly peel it away? Has anyone successfully navigated a buyout in a divorce?

I appreciate the input from this group. Labrat.

[JGoneRiding]

Ianal but it is my understanding in most states the judge ifs going to decide child support and would generally want ongoing incl for college.

You do not have to use a lawyer for splitting you could use a mediator. Would be cheaper assuming goal is to be equitable which it sounds like you want to be. I would esp go for this as it is probable given the massive difference that a judge would order you to buy for wife lawyer too so if you can agree with a mediator on split you save twice.

How angry is she going to be? Does she see this coming? I for see that massively affecting the outcome.

[FelixTheCat]

In CA, Half of the marital assets go to each spouse. You will pay child support until child reaches 18. Spousal support for 10+ years of marriage is for life until the receiving spouse remarries. Children usually go to Mom with Dad getting one evening a week and every other weekend. In some states, you may have to pay for college.

[Labrat]

OP here:
I will have college covered via 529's which are already sizeable.
CO is very different than CA in terms of rules, but I was just hoping to get as clear as I possibly can and as soon as I can.
I am confident it will be 50/50 custody, and while she does see this coming, you can never tell when rational thought ends, and bitterness begins. Hence my desire to cut as soon and clean as possible.
I'm still interested if anyone has been able to successfully do a buyout in a divorce, or if it's almost always a full division of assets.

[CAsage]

You really need the counsel of a Colorado lawyer. Possibly not the same one you would hire to mediate or file for the divorce, but to review your options. I can foresee you forking over 70%, and then being sued for child support anyway! Or what happens if you cannot work? Courts are very protective of the child's right to support through age 18, and will probably (I'm guessing) not allow anyone (like your soon to be ex) waive that.

[Iliketoridemybike]

I went through a divorce in Colorado. It's a 50/50 state and the expectation is that the two of you will work out what is fair and the judge will sign it.
The devil is in the details though. We were going to self divorce and then her girl friends starting whispering in her ear that she was going to get ripped off. So in came the lawyers. In the end the agreement was what we would have worked out anyway, but now the assets we divided were $15,000 lower due to legal fees. Your situation will probably be harder than you think and the emotions sometimes don't kick in until you are further down the road. I wish you luck. Divorce is very hard. You are on a 2 - 3 year journey to get completely through all this.

[lthenderson]

The buyout as proposed doesn't seem like a good deal to me if I were in her shoes. Yes she get a lot of assets up front, but essentially she would be very cash poor with only a "few thousand a month" and no job with two kids to raise 50% of the time. I'm sure a competent lawyer would point this out to her. It might be different if a significant percentage of your net worth can be liquidated to cash for her to live on for some years until the kids are gone and she can support herself.

Like the others, I would consult a divorce lawyer in your state to see what your options for a clean break my entail.

[Dottie57]

If op wants clean break, what about a period certain SPIA for child support. Then split the rest (which I think will include retirement accounts). Go for a 50/50 split after child support.


Do ralk to a colorado lawyer.

[BanquetBeer]

Why is everyone talking about child support if custody is split 50/50?

[swimfin]

Divorce is difficult and emotional, regardless of your gender. It sounds easy to say to yourself, "I'll offer a lot of property and cash to my spouse and I'll be done with it. " The truth is you will never be done with it. And you will make some irrational decisions that sound like a good idea at the time.

You are so better off with a lawyer who is there to guide you through the land mines. Expensive...yes. but you'll be glad you did it in the end.

[8foot7]

Why is everyone talking about child support if custody is split 50/50?

Custody may be split but incomes may be unequal.

[downshiftme]

In addition to the options of 1) agree on a proposal between yourselves and 2) hire lawyers and fight it out, there is a third option in most states. There are specialized divorce mediators who help couples reach a cooperative agreement that looks like option 1) but is guided by an impartial mediator experienced in divorce issues. It can help a lot for the individuals to feel that their soon to be ex isn't trying to trick them into an inferior agreement, while possibly avoiding the scorched earth of a divorce lawyer slug fest.

Couples who cannot agree even after mediation, may face the unpleasant reality that fighting over $300 worth of personal effects costs them $3000 in legal costs. You want to avoid that if you possibly can.

In many states, child support is a separate issue that considers the income of both parties as well as the percentage of custody. A partner with a larger income can still be liable for child support, even if they have most of the custody. Also, since child support is considered a right of the CHILD it is usually not supposed to be a factor in the divorce settlement. Although it does happen, most judges do not like agreements where child support has been bargained away in favor of property given to the ex-spouse. The ex-spouse is not supposed to be able to trade the children's right to support for material gains for the ex-spouse.

[JGoneRiding]

Why is everyone talking about child support if custody is split 50/50?

Because the OP makes 300k a year and the wife is a sahm. The point of child support is to "make living situation equal" really not always fair but he is definitely going to be paying it. Might get out of spousal though

[8foot7]

OP, you have nothing to lose by trying the buyout offer but I would be real sure up front about that 70% figure. You're giving away over two thirds of your assets voluntarily. You will find out that there is very little stopping her from dragging you back to court as long as your children are under 18, no matter how tight your equitable division and spousal support agreement is, and your generous offer up front may well have absolutely no bearing on future conflicts and their resolution.

Also re: college I do not know if CO is this way, but in NC, one cannot be forced to pay for college unless one says one will pay for college and it's memorialized into the decree. Even if you have the 529s, I'd be really, really hesitant to agree to pay for college because if it works the same way there that it does here, you're on the hook even if your financial situation changes.

[protagonist]

You really need the counsel of a Colorado lawyer. Possibly not the same one you would hire to mediate or file for the divorce, but to review your options.

+1.

Courts are very protective of the child's right to support through age 18,

Age 23 here in Massachusetts. If you don't come to an agreement, courts like to impose formulaic settlements, because they are easy and, if it goes to court, judges hate to have to explain why they diverged from standard recommendations.

The longer the divorce takes, the longer you will be earning money to which she is entitled to 50%. If you can work out an amiable settlement with which you are both satisfied, I would highly recommend that. But I wouldn't make any proposals without discussing them first with your lawyer. And even if you mediate (recommended if possible), having your own lawyer to bounce things off is probably worthwhile given the amount of assets.

[NotWhoYouThink]

How good is she at managing money? How well could she manage physical and financial upkeep on 2 homes for the next 10 years? If she isn't used to handling the money, this could go very wrong for her. She could get bad financial advice from a 'trusted family friend' and find herself in a bad place. I get the desire to come up with a number and be done with it, but life doesn't always work that way.

[goingup]

I have seen friends divorces drag on (and on) because of spousal support issue. Unless she can support herself in the manner you both live in now, you're on hook for more than a couple thousand for a couple years.

[Gnirk]

If I were her, I would NOT go for your deal. Yes, she is receiving assets (houses), but they are also liabilities as far as maintenance and taxes are concerned. In addition to ongoing maintenance and taxes, if she sells the houses, she may very well owe capital gains taxes on one or both of them, as well as the costs required to ready them for sale.

A fair division would be 50/50 of all assets (or more), plus state-mandated child support, and enough support for her until she's able to find a good, full-time job which pays her enough to support herself close to her current level of living. If she gave up a career to raise your family, then she should receive even more, in my opinion. If she has not been working, she has no social security credits built up, she will need health coverage for her and the children, and I assume she has no retirement accounts at this point.

If I were her, I would consult an attorney. Your division may seem fair to you, but I don't think it's fair to her in the long run.

[Pajamas]

The nature of your relationship will change after divorce, but you will still have a relationship because of your children and the financial issues. Most of the problems that I have seen post-divorce could be attributed to not making decisions jointly between the ex-spouses, as they would do in most other relationships.

Since all of your assets are marital and none are separate, seems like the best thing to do would be to at least try to discuss it with your spouse if the current status of your relationship and the reason for the divorce might be conducive to that rather than just making a proposal on dividing the assets. The less one-sided and adversarial the process is, the better all around, and especially for your children.

[8foot7]

If I were her, I would NOT go for your deal. Yes, she is receiving assets (houses), but they are also liabilities as far as maintenance and taxes are concerned. In addition to ongoing maintenance and taxes, if she sells the houses, she may very well owe capital gains taxes on one or both of them, as well as the costs required to ready them for sale.

A fair division would be 50/50 of all assets (or more), plus state-mandated child support, and enough support for her until she's able to find a good, full-time job which pays her enough to support herself close to her current level of living. If she gave up a career to raise your family, then she should receive even more, in my opinion. If she has not been working, she has no social security credits built up, she will need health coverage for her and the children, and I assume she has no retirement accounts at this point.

If I were her, I would consult an attorney. Your division may seem fair to you, but I don't think it's fair to her in the long run.

OP is willing to give her 1.4 million in assets plus some support. OP keeps roughly $700,000. What exactly is unfair?

[djpeteski]

tl;dr: The more you can avoid a fight, the better off you both will be.

The money I spent fighting with my the mother of my children would have paid for all of them to go to school. However, she wanted to fight so we did. The biggest issue is that the kids were victimized.

I would prefer that you retain council who initially acts in an advisory role. These days 50/50 custody is quite common, which greatly reduces the child support burden for the non-custodial parent. Perhaps the 70% is a bit too much, perhaps too little. If things get ugly, then you already have a guy in your corner.

If your spouse is reasonable she will see that it is in her's and the children's best interest. It is a bit of an oxymoron, but do your best not to fight with her during these emotionally charged times.

Here in Florida, the court much prefers that the parties settle on a mediated settlement.

I'm still interested if anyone has been able to successfully do a buyout in a divorce, or if it's almost always a full division of assets.

To answer this question, yes, there is always a possibility of buyout or other kinds of settlements. Again, my ex was very unreasonable. But in the end I had something she wanted. Our final settlement allowed me to not pay child support for about one year in exchange for her getting what she wanted. They have to sell it to the judge, in the right way, but it is possible.

[CoAndy]

OP I went through a divorce in Colorado five years ago. A couple thoughts...Is your wife aware this is coming? If not, brace yourself. If you two can agree on everything yourselves, then lawyers are not needed. I got one and in the end, I view it as totally wasting $7,000. In regard to child support, there is a worksheet to fill out which takes into account income, number of overnights each person has with the kids, as well as factoring in who pays for health insurance, dental, etc. This calculation will be enforced, regardless of what the two parties wish. With your income that high and your wife not having any income, be prepared to pay a very large amount of money per month, even if you do get 50-50 custody.

Feel free to PM me if you have any questions.

[Kuznec]

OP I went through a divorce in Colorado five years ago. A couple thoughts...Is your wife aware this is coming? If not, brace yourself. If you two can agree on everything yourselves, then lawyers are not needed. I got one and in the end, I view it as totally wasting $7,000. In regard to child support, there is a worksheet to fill out which takes into account income, number of overnights each person has with the kids, as well as factoring in who pays for health insurance, dental, etc. This calculation will be enforced, regardless of what the two parties wish. With your income that high and your wife not having any income, be prepared to pay a very large amount of money per month, even if you do get 50-50 custody.

Feel free to PM me if you have any questions.

The income should be simply high, or more than the wife? If both spouses work.

[downshiftme]

OP is willing to give her 1.4 million in assets plus some support. OP keeps roughly $700,000. What exactly is unfair?

OP is also retaining the future income of 300K (plus reasonable increases) while the soon-to-be-ex has unknown earning potential but almost certainly much much less than 300k annually. In only a few years, OP will be able to accumulate new assets from those earnings, while ex will likely be spending down assets to pay living expenses.

Viewed in isolation a 70/30 split seems favorable, but when seeing the larger picture with future income included it is not so clear that this is equitable.

[FelixTheCat]

Why is everyone talking about child support if custody is split 50/50?

The children need to be provided for. You can't have lobster at one house and mac n cheese at the other.

Family court will determine payment based on custody and income.

[BigLaw Survivor]

OP, your wife will be counseled by everyone she talks to, including any lawyer, that this is a painfully obvious bad deal for her. A previous poster nailed it right on the head: you are just starting your peak earning years, and before you know it your net worth will catch up and surpass hers. No chance she will agree to this.

Buy outs are for rich people. You are not rich.

[staythecourse]

I have NO experience with any of this, but common sense tells me this is less of what you think is best, but more of what the other party will agree to in the end.

So unless you already know how she is going to lean then starting there is the best suggestion. No one on here is going to give any advice that will matter since no answer will sway her decision which ultimately will decide what happens.

Good luck.

[Meg77]

I don't think the 70% offer is necessarily unfair - it may be close to what you'd end up paying anyway over time if you split everything 50/50 but then add spousal support (which you say you're willing to pay for a "few years" anyway). She can sell the homes to avoid the maintenance if she wants to, and a $1.4MM portfolio will provide $56K a year of income indefinitely.

Depending on what you guys, the lawyers, and/or a judge decide is appropriate, you can always offer a "buy out" or one time delivery of assets that is equal to the present value of any future income stream your wife agrees to. I'm not sure in your case if you have enough assets to do so though, depending on the spousal support CO requires. If she is entitled to half your current assets plus 40% of your current income for life, for example, even giving her the whole $2MM probably won't get you there.

Also though, remember that spousal support ends if she remarries. If she is likely to do so in your estimation, it could end up being cheaper to give her less up front but agree to spousal support, which could be relatively short lived.

[Labrat]

OP Here:
Thanks to everyone for their perspective and opinions. There were a few financial questions that I will address below.
In the offer, I committed to covering all of the kid's insurance (health, dental, vision, etc) 100% myself until adulthood.
I also committed to taking out additional insurance on myself to cover everything (with her as beneficiary) in case bad things happen to me in the near-term.
I committed to covering all college education costs 100% myself.
I do understand that child support shouldn't normally be negotiated against property, but I am offering a few hundred thousand in cash up front with some level of cash/month for a limited time.
It sounds like the consensus here is that I should likely abandon the buyout offer if she doesn't immediately accept.
This will not be any surprise to her, and we are both very civil and get along very well. This is a joint decision, but again, I'm simply worried that, as one poster mentioned, her friends start whispering in her ear and cause the situation to change.
Labrat

[sergeant]

If I was her friend I would yell in her ear not to take your deal. She would be much better served splitting current assets, receiving spousal support, and child support until kids age out.

I have a friend that did buy his wife out in a lump sum. No kids were involved and they were only married 8 years. It cost him close to a million, His pay was about half of yours. There was a QDRO done due to a pension. Looking back he says it was worth every cent. They used a mediator.

[Steelersfan]

Every state is different, but in my equitable division state the norm is that child support is set by formula and spousal support (alimony) is 1/3 of the difference in incomes for 1/3 of the term of the marriage. Whatever is worked out by the parties, with or without advice of lawyers, is rubber stamped by the judge.

[Grt2bOutdoors]

Present the offer
Each of you obtain independent counsel for a fixed fee, that is told upfront you want a simple independent valuation of the offer. Some attorneys (sorry folks, its true) are vicious sharks looking to drive the tolls costs higher.
If I were her - I would not take an asset that is saddled with current and future liabilities - maintenance, upkeep and taxes.
And just how many years would you continue paying her alimony? I've seen where alimony for a SAHM is ordered to be paid until FRA for Social Security or for the length of the marriage before it was dissolved - in your case, that would be 15 years of alimony plus child support until child was emancipated from household of guardian/parent (if child has disability it could be a very long time for child support).

Good Luck.

[Hubris]

OP, you have my empathy for what your family is going through, it's a hard time no matter how amiable things might be or how much the change is needed.

I was divorced in CO in 2011 and we used a mediator and we were fairly pleased with the process, costs, etc. The divorce was (is) mostly amiable. We had been together for close to 30 yrs and married for just over 20. I was the primary breadwinner for most of our time together, and at times the sole earner; and we had a couple million dollars to split arrayed in a very diverse set of assets. No children involved.

One caution I'd express for you is that you might have some reflex behaviors or patterns from your time together that you may not be aware of, I did. For me, it was the instinct to take care of my spouse. While we split everything equally, the reflex resulted in in me taking my 50% as most of the illiquid assets and getting her 50% to her in mostly liquid asssets. This exposed me to a great deal of risk. We also hadn't properly accounted for transaction costs in liquidating some of the real estate which reduced my assets further since I absolutely had to liquidate due to lack of liquidity (Iwas going through employment changes at the same time.)

The good news for me is that the mediation process preserved goodwill between us. As a result, I was able to renegotiate our agreement directly with her about a year later, with the help of a skilled professional who we both trusted.

I was reminded of my realization of this protective reflex when I read about your intended offer and the accompanying phrase about being broke if it were to be accepted. Please remember to take care of yourself.

[BolderBoy]

2 kids, 11 and 13.

It used to be in Colorado that if dependent children are involved then lawyers are mandatory. Is this not the case anymore?

[tolerable2323]

marriage seems like a terrible contract for a high earner.

[3CT_Paddler]

It sounds like you are thinking about presenting an offer close to the time that you tell her the news. I think that is a big mistake if that is what you are thinking. She will need time to process this emotionally, and it will likely blow up in your face if it comes across as rushed or like you are trying to pull a fast one.

And if I was your spouse, I wouldn't see your offer as a fair deal. She stands to gain more through the courts and a lawyer.

[pepeblanco]

OP, you have my empathy for what your family is going through, it's a hard time no matter how amiable things might be or how much the change is needed.

Couldn't agree more, especially with kids. A neighbor called it "traumatic" and I think she was spot on. Ours was and I think continues to be as amicable as one could hope for and yet the first couple of years can be really challenging. It sucked for me, the ex-wife and the kids as well as the grandparents and everyone else close to us. It'll put your life in turmoil temporarily. If you can mend your marriage, do so.

We couldn't. I used a lawyer and I think it was some of the best money I've ever spent. He was older gentleman, late in his career, not sure if that made the difference, but he had a calming effect that was priceless to me.