Equity split in home - How?
I got a question for anyone. My s2bx and I are trying to settle our marital
estate. Major asset is the house, with 80k of equity and 34k of debt. We
have two kids, pre-teens and she has primary placement. We had no other
cash savings, not that I am aware. I however have a retirement plan at work
(17 plus-years) and I had established some IRAs prior to our 14 year
marriage, covered by a pre-nup for reasons that you don't want to know.
So the only tangible asset of current value is the equity in the house. The
rest is funny-monry not touchable until I am old and gray. I want and will
need my equity I believe to pay off all the debt I have been saddled with,
from old credit debt to new attorney fees, about 15K. However, she or her
attorney want me to sign over the house without paying a dime in exhange for
the retirement monies. Just walk away Renee. Can't be done. I see her
point in so far as the kids remaining in their home and neighborhood and
school.
Anybody ever faced with this and what did you do to solve it?
Here are some approaches. The approaches do not necessarily conform to
your state law, and they are not likely to work out if lawyers are
involved or if there are any kind of hostilities. They are based on my
training in economics and good sense (variation1 from the legal
system).
The value of the assets is, in fact, the net value - after costs of
selling the house (approx 9% of gross value) and after paying taxes on
the pension (approx 28%, assuming you invested the money on a pre-tax
basis). This is variation #2 from the legal system which wants to use
"gross" values.
Notes on pension valuation. If you quit work totay, then applied for
your pension at normal retirement age, what would be your monthly or
annual cash benefit? Look up life expectancy tables for someone of
your age and gender (Vital Statistics of the U.S. is one source; also
see IRA and pension publications of tax code). Construct a speadsheet
of your expected annual payments from normal retirement age (as
defined by your pension program) to normal life expectancy. Each
annual benefit is "discounted to present value". This is the reverse
of an interest earning calculation. Use the average interest for 3
figures from the something like "Government Pension Benefit
Corporation" -- I don't remember the exact name. Based on current
rates, it will be about 6.5% per year.