Advice Needed [Division of assets due to divorce]

[wfrobinette]

First off I am not seeking any legal advice.

DW and I have decided to separate and dissolve the marriage. We have agreed in principle to do this amicably and neither one wants to screw the other. I am strongly considering paying most of her alimony off in a lump sum and this will require a less than equitable division of retirement assets. I would expect this division of assets to occur with in the next 8 weeks.

Right now we are 100% VTI in 401k and IRA.

My question is a follows:

Would It be better to move toward an all cash or cash equivilant position? MY reasoning is that I went from a 20 year horizon to a 3 month horizon. another 20% loss will force me into raising my out of pocket monthly alimony substantially.

Am I being foolish here?

[Jack FFR1846]

If you have 1000 shares of VTI, you draft the divorce agreement to give her 500 shares, if it happens to be 50/50. Why would you sell anything?

[Call_Me_Op]

If you have 1000 shares of VTI, you draft the divorce agreement to give her 500 shares, if it happens to be 50/50. Why would you sell anything?

I am not a lawyer, but I would be concerned if the market were to crash between now and when the shares are transferred. Such situations have been the basis for lawsuits in certain estate cases. I would at least want to get the concurrence of the other party ASAP that this the way we agree to do it.

[LadyGeek]

This thread is now in the Personal Finance (Not Investing) forum (financial planning).

Please stop and get qualified legal advice. There is absolutely no need to sell anything. Divide the investments with a Qualified domestic relations order (QDRO) and pay off your alimony that way. The transfer of shares should not be a taxable event in a divorce - including a taxable account.

My opinion is based on a situation I'm familiar with. The state is PA. (My situation is not your situation and I'm not a lawyer.)

[MikeG62]

If you have 1000 shares of VTI, you draft the divorce agreement to give her 500 shares, if it happens to be 50/50. Why would you sell anything?

I suspect this is because they are agreeing to a fixed dollar value and not a % of shares.

[TomatoTomahto]

How much of a discount are you getting for doing lump sum alimony? It seems to me (neither an accountant nor a CPA) that you’re assuming additional uncompensated risk.

I’m glad that your intentions are to be amicable; I hope that attitude persists.

[LadyGeek]

If you have 1000 shares of VTI, you draft the divorce agreement to give her 500 shares, if it happens to be 50/50. Why would you sell anything?

I suspect this is because they are agreeing to a fixed dollar value and not a % of shares.

On that point, you can agree to a dollar amount and transfer an equivalent number of shares based on a price at an agreed-upon date.

For example - The share price is $10 on June 15, 2022. You want to pay $1000. The agreement would result in a transfer of 100 shares based on the $10 price of June 15, 2022.

This is why you need a lawyer who specializes in divorce cases. They know how to do this.

[wfrobinette]

If you have 1000 shares of VTI, you draft the divorce agreement to give her 500 shares, if it happens to be 50/50. Why would you sell anything?

I don’t have to sell but I am prepaying her alimony with cash and more retirement assets. If the value of said retirement assets fall before we divide assets i will owe either more shares or more cash.

[H-Town]

First off I am not seeking any legal advice.

DW and I have decided to separate and dissolve the marriage. We have agreed in principle to do this amicably and neither one wants to screw the other. I am strongly considering paying most of her alimony off in a lump sum and this will require a less than equitable division of retirement assets. I would expect this division of assets to occur with in the next 8 weeks.

Right now we are 100% VTI in 401k and IRA.

My question is a follows:

Would It be better to move toward an all cash or cash equivilant position? MY reasoning is that I went from a 20 year horizon to a 3 month horizon. another 20% loss will force me into raising my out of pocket monthly alimony substantially.

Am I being foolish here?

OP, get a lawyer. Many couples said that they plan an amicable divorce, but often times it turned ugly. Having a lawyer can help things done right and quicker.

[wfrobinette]

First off I am not seeking any legal advice.

DW and I have decided to separate and dissolve the marriage. We have agreed in principle to do this amicably and neither one wants to screw the other. I am strongly considering paying most of her alimony off in a lump sum and this will require a less than equitable division of retirement assets. I would expect this division of assets to occur with in the next 8 weeks.

Right now we are 100% VTI in 401k and IRA.

My question is a follows:

Would It be better to move toward an all cash or cash equivilant position? MY reasoning is that I went from a 20 year horizon to a 3 month horizon. another 20% loss will force me into raising my out of pocket monthly alimony substantially.

Am I being foolish here?

OP, get a lawyer. Many couples said that they plan an amicable divorce, but often times it turned ugly. Having a lawyer can help things done right and quicker.

Again not asking for any legal advice. We’ve talked to an attorney, gotten ball park alimony numbers and such. I’m Simply asking if moving to cash to preserve capital that absolutely will be needed in the next 3 months. None of this will create a taxable event.

[Keith5337]

Again not asking for any legal advice. We’ve talked to an attorney, gotten ball park alimony numbers and such. I’m Simply asking if moving to cash to preserve capital that absolutely will be needed in the next 3 months. None of this will create a taxable event.

Yes. Move what you need to settle the divorce to cash.

If your spouse won't agree to the possible decline in value by splitting the account based on the number of shares, and thus also doesn't want to benefit from a possible increase in value, your only options are to take on that risk yourself or not.

[THY4373]

Two questions I have one, I assume you are getting some sort net present value discount for paying alimony early? If not then it doesn't make a lot of financial sense to do it perhaps even more so in today's financial environment. Two, it sounds like these are retirement assets? If so is your spouse good getting retirement assets in lieu of alimony given the tax consequences of accessing them early (or are you liquidating them and taking the tax hit)?

You might want look into a financial neutral to work through this stuff for you. My ex and I went through a collaborative divorce and the financial neutral who was like 1/3 the hourly rate of our lawyers was without a doubt the most valuable person we hired during our divorce. She came up with the most equitable deal for us to split. Taking into account things like future taxes, our wishes, etc.

[Lee_WSP]

First off I am not seeking any legal advice.

DW and I have decided to separate and dissolve the marriage. We have agreed in principle to do this amicably and neither one wants to screw the other. I am strongly considering paying most of her alimony off in a lump sum and this will require a less than equitable division of retirement assets. I would expect this division of assets to occur with in the next 8 weeks.

Right now we are 100% VTI in 401k and IRA.

My question is a follows:

Would It be better to move toward an all cash or cash equivilant position? MY reasoning is that I went from a 20 year horizon to a 3 month horizon. another 20% loss will force me into raising my out of pocket monthly alimony substantially.

Am I being foolish here?

OP, get a lawyer. Many couples said that they plan an amicable divorce, but often times it turned ugly. Having a lawyer can help things done right and quicker.

Again not asking for any legal advice. We’ve talked to an attorney, gotten ball park alimony numbers and such. I’m Simply asking if moving to cash to preserve capital that absolutely will be needed in the next 3 months. None of this will create a taxable event.

If the agreement is a sum certain or pecuniary amount of the retirement accounts, then yes. Going to cash is what you do. If it is a fractional or percentage share of the retirement accounts, and she’s taking it in kind, then it doesn’t matter. I’d leave it alone in that case.

[wfrobinette]

Two questions I have one, I assume you are getting some sort net present value discount for paying alimony early? If not then it doesn't make a lot of financial sense to do it perhaps even more so in today's financial environment. Two, it sounds like these are retirement assets? If so is your spouse good getting retirement assets in lieu of alimony given the tax consequences of accessing them early (or are you liquidating them and taking the tax hit)?

You might want look into a financial neutral to work through this stuff for you. My ex and I went through a collaborative divorce and the financial neutral who was like 1/3 the hourly rate of our lawyers was without a doubt the most valuable person we hired during our divorce. She came up with the most equitable deal for us to split. Taking into account things like future taxes, our wishes, etc.

Great points here. I'm trying to get a decent offer and verbal agreement in place before we even officially retain counsel.

Am I giving up more than I should here? Maybe. But with a 16yo daughter in play, there is more at stake here than just money.

There is value to sanity, keeping the relationship cordial with her and her family. Most importantly, my daughter sees me "taking care" of her mother.

[wfrobinette]

First off I am not seeking any legal advice.

DW and I have decided to separate and dissolve the marriage. We have agreed in principle to do this amicably and neither one wants to screw the other. I am strongly considering paying most of her alimony off in a lump sum and this will require a less than equitable division of retirement assets. I would expect this division of assets to occur with in the next 8 weeks.

Right now we are 100% VTI in 401k and IRA.

My question is a follows:

Would It be better to move toward an all cash or cash equivilant position? MY reasoning is that I went from a 20 year horizon to a 3 month horizon. another 20% loss will force me into raising my out of pocket monthly alimony substantially.

Am I being foolish here?

OP, get a lawyer. Many couples said that they plan an amicable divorce, but often times it turned ugly. Having a lawyer can help things done right and quicker.

Again not asking for any legal advice. We’ve talked to an attorney, gotten ball park alimony numbers and such. I’m Simply asking if moving to cash to preserve capital that absolutely will be needed in the next 3 months. None of this will create a taxable event.

If the agreement is a sum certain or pecuniary amount of the retirement accounts, then yes. Going to cash is what you do. If it is a fractional or percentage share of the retirement accounts, and she’s taking it in kind, then it doesn’t matter. I’d leave it alone in that case.

Thanks you! I thought this is what to do but wanted to get some other voices.