Equitable Distribution Sucks

Get financial tips on divorce and asset division including child support laws, property division, and divorce settlements.

Re: Equitable Distribution Sucks

Postby minuette » Thu Jun 07, 2012 9:37 am

I'll pitch in two cents (and it's worth every penny):

Let's say you have $30k in an IRA and a house valued at $150k with a $130k mortgage, both joint assets/liabilities.

You want to keep the house, she doesn't. What is an equitable distribution?

You get the house - $150k asset value - $130k mortgage = $20k net asset value. She gets $20k from the IRA - $20k net asset value. The remaining $10k in the IRA is divided evenly - $5k each. In effect, you are keeping the house and get $5k from the IRA, she gets the remainder and both walk away with equal net worth ($25k). It is not an equal distribution of assets or debt, but it is equitable.

But as another poster pointed out, the only assets and debt subject to equitable distribution should be joint assets and debt. However, some things need to be looked at carefully, like 401(k)s and IRAs. If the account was started before marriage, the present net value of the separate property should be confirmed prior to pitching the remainder into the marital asset/liability pot.
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Re: Equitable Distribution Sucks

Postby chi6488 » Thu Jun 07, 2012 12:27 pm

All the items up for discussion are joint and to be divided. Premarital stuff has been excluded.

The stuff I listed are stuff I am taking away and she is taking away. The numbers are the results.
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Re: Equitable Distribution Sucks

Postby hoosier_dad » Thu Jun 07, 2012 1:31 pm

This adds a little bit of complexity, but as you negotiate keep liquidity and after-tax values in mind as you split things up. 25k in cash is worth more than 25k in a 401k due to early withdrawal penalties and income taxes.
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Re: Equitable Distribution Sucks

Postby mbxdad » Thu Jun 07, 2012 3:07 pm

chi6488 wrote:All the items up for discussion are joint and to be divided. Premarital stuff has been excluded.

The stuff I listed are stuff I am taking away and she is taking away. The numbers are the results.


OK, then you are correct that you should, all else being equal, adjust so that you both net out equal.

But there are various things you may want to adjust for, if you can agree to it....

- real estate fees for selling marital house (e.g. if one of you is going to keep it but only for a few years, or only for the sake of keeping the kids in a stable environment)

- taxes, as hoosier mentioned

- debt. if you take on debt, you may want to adjust for interest you know you'll need to pay

...etc.
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