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Post by mirrororchid on Jul 4, 2022 6:42:50 GMT -5
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Post by DryCreek on Jul 4, 2022 12:14:32 GMT -5
A point I’ll offer on the topic of negotiating… a dollar is not worth a dollar. I.e., don’t use simple math when calculating a split.
Taxes are a huge factor; when weighing the value of certain assets you need to consider the tax impact. Liquidity is another point to consider.
That is… if you agree to take an asset worth $100 but you’ll have to pay $35 in tax on it when you sell it, then the asset is really only worth $65 to you. Then, if it is an asset that’s hard to sell (say, a remote piece of land that would have to be priced at a deep discount to sell quickly) or can’t be accessed (like an annuity or a retirement account), that affects its short-term value.
Take a house, for example. If you’ve owned it for a while, it’s probably appreciated a good amount. If it’s the one you’ve lived in, those profits can be tax-free in the USA, to a point. If you sell it while married, the first $500k of profit is tax-exempt; however, if you take it in a divorce and sell it later, your exemption is only $250k. (Consider whether it’s financially smarter to sell the house during the divorce instead of taking it in a settlement.)
Many other assets (property, stocks, crypto) can qualify for long-term capital gains treatment. If they’ve been held for more than a year, the tax rate will be much lower - maybe even 0%. It’s important to know the holding period and the “basis” for these assets (the amount paid for it) so you can calculate the profit and the tax on that profit (which reduces its cash value to you).
Then there are retirement accounts, which have pluses and minuses. On one hand, the money can’t be touched until age 59.5 without paying a penalty tax on the profits - so, that reduces its immediate value. These accounts are tax-advantaged, but how depends on the type of account…
A) for a traditional 401k/IRA account, the tax advantage was realized when the money was put in (deducted from taxable income); you don’t have to pay taxes while it’s growing, but in the end all the money comes out as taxable income.
B) Roth 401k/IRA accounts are a different breed, and a lot more valuable in my opinion. Not only are the contents tax-free, but all the profits they’ll ever earn are also tax-free. To a savvy investor, Roth dollars are worth far more than a dollar.
(These accounts can be split by the court without triggering taxes; don’t cash them out.)
On a recurring basis, know that child support and alimony are no longer considered taxable income to the recipient. At the same time, the spouse who’s paying no longer gets to take the deduction - so don’t forget that the payments come out of after-tax income.
Lastly, don’t overlook how your tax return for that last year will be filed. Filing as married may afford you some key benefits, like the extra $250k exemption on profit from the home. But also raise some stinky issues like how the tax bill or tax refund will get split. Ongoing, who gets to claim the children as dependents / tax deduction is also a popular issue that might be ironed out ahead.
DC
p.s. - It should go without saying, but… this is just a broad brush to illustrate the things to consider. Because so much depends on individual details (income, etc.), you’d want to seek specific advice from a local CPA, not just your lawyer.
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Post by dallasgia on Jul 8, 2022 22:22:08 GMT -5
Thank you for this! Spouse does revolve our debt around and has cc cards in only my name. He moves debt from one interest free balance transfer to the next. As luck would have it, the debt on the card in only my name was just moved to his. Taking this opportunity to call and close that card. Perfect timing, perfect advice. I can try to lock down my credit but if he discovers this it will be a big red flag. I recognize that I am in real serious financial trouble. I have very low financial IQ. The mountain I must climb here is steep. Peace has a price. I am willing to pay. |
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Post by dallasgia on Jul 8, 2022 22:23:31 GMT -5
A point I’ll offer on the topic of negotiating… a dollar is not worth a dollar. I.e., don’t use simple math when calculating a split. Taxes are a huge factor; when weighing the value of certain assets you need to consider the tax impact. Liquidity is another point to consider. That is… if you agree to take an asset worth $100 but you’ll have to pay $35 in tax on it when you sell it, then the asset is really only worth $65 to you. Then, if it is an asset that’s hard to sell (say, a remote piece of land that would have to be priced at a deep discount to sell quickly) or can’t be accessed (like an annuity or a retirement account), that affects its short-term value. Take a house, for example. If you’ve owned it for a while, it’s probably appreciated a good amount. If it’s the one you’ve lived in, those profits can be tax-free in the USA, to a point. If you sell it while married, the first $500k of profit is tax-exempt; however, if you take it in a divorce and sell it later, your exemption is only $250k. (Consider whether it’s financially smarter to sell the house during the divorce instead of taking it in a settlement.) Many other assets (property, stocks, crypto) can qualify for long-term capital gains treatment. If they’ve been held for more than a year, the tax rate will be much lower - maybe even 0%. It’s important to know the holding period and the “basis” for these assets (the amount paid for it) so you can calculate the profit and the tax on that profit (which reduces its cash value to you). Then there are retirement accounts, which have pluses and minuses. On one hand, the money can’t be touched until age 59.5 without paying a penalty tax on the profits - so, that reduces its immediate value. These accounts are tax-advantaged, but how depends on the type of account… A) for a traditional 401k/IRA account, the tax advantage was realized when the money was put in (deducted from taxable income); you don’t have to pay taxes while it’s growing, but in the end all the money comes out as taxable income. B) Roth 401k/IRA accounts are a different breed, and a lot more valuable in my opinion. Not only are the contents tax-free, but all the profits they’ll ever earn are also tax-free. To a savvy investor, Roth dollars are worth far more than a dollar. (These accounts can be split by the court without triggering taxes; don’t cash them out.) On a recurring basis, know that child support and alimony are no longer considered taxable income to the recipient. At the same time, the spouse who’s paying no longer gets to take the deduction - so don’t forget that the payments come out of after-tax income. Lastly, don’t overlook how your tax return for that last year will be filed. Filing as married may afford you some key benefits, like the extra $250k exemption on profit from the home. But also raise some stinky issues like how the tax bill or tax refund will get split. Ongoing, who gets to claim the children as dependents / tax deduction is also a popular issue that might be ironed out ahead. DC p.s. - It should go without saying, but… this is just a broad brush to illustrate the things to consider. Because so much depends on individual details (income, etc.), you’d want to seek specific advice from a local CPA, not just your lawyer. Thank DC - I appreciate this advice like you can’t even imagine. Also, barely understand it. It scares me how much I do not know. |
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Post by DryCreek on Jul 9, 2022 2:13:19 GMT -5
Thank DC - I appreciate this advice like you can’t even imagine. Also, barely understand it. It scares me how much I do not know. Cool! I think the important takeaway is not to understand it, but to realize it’s “a thing” and an advisor can help. If you share this with them, it should spur some useful discussion. Best wishes! DC |
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Post by mirrororchid on Jul 11, 2022 4:29:54 GMT -5
Thank you for this! Spouse does revolve our debt around and has cc cards in only my name. He moves debt from one interest free balance transfer to the next. As luck would have it, the debt on the card in only my name was just moved to his. Taking this opportunity to call and close that card. Perfect timing, perfect advice. I can try to lock down my credit but if he discovers this it will be a big red flag. I recognize that I am in real serious financial trouble. I have very low financial IQ. The mountain I must climb here is steep. Peace has a price. I am willing to pay. Any particular areas you'd like to shore up about your self-describe "low financial IQ"? Budgeting? Economizing? Paying off debt? (you can ignore the come-ons for classes and premium content. Just this one page is good enough.) Investment / Retirement planning? Job Hunt? Entrepreneurship? (cuz "working for the man" is the chump's plan.) |
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Post by angeleyes65 on Jul 12, 2022 8:50:54 GMT -5
I don't know if this will be helpful in any way but my now ex I think kept us in debt so I couldn't leave. That's speculation I have no proof. I paid the bills. I finally told him if he keeps spending like that I was going to quit paying everything but the utilities and when they take the house and car I'm getting an apartment. As usual he didn't take me seriously so when we still had a house phone we started getting calls on the answering machine for house payment and others. He asked me why he didn't pay it I told him he already spent the money. He asked why I didn't tell him . I told him I'm not your mother I'm tired of repeating myself. They can take it all I don't care. He is very materialistic so he panicked and was finally willing to let me explain the budget to him. And the issues. So we cut up all our cards but one. Went through his EAP from his work for financial issues. They did a debt consolidation it took 5 years you pay them they pay the creditors and at the end of 5 years they wipe the slate clean. Yes it doesn't help your credit but it bounces back. Meanwhile I paid off cars saved money made sure everything was paid on time to help out credit. When I left the only debt we had was the house. Which I left him with and instead of buying me out I took half his 401k normally it is half of his minus mine. By law but he agreed to this.
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Post by worksforme2 on Jul 16, 2022 10:38:30 GMT -5
Thank you for this! Spouse does revolve our debt around and has cc cards in only my name. He moves debt from one interest free balance transfer to the next. As luck would have it, the debt on the card in only my name was just moved to his. Taking this opportunity to call and close that card. Perfect timing, perfect advice. I can try to lock down my credit but if he discovers this it will be a big red flag. I recognize that I am in real serious financial trouble. I have very low financial IQ. The mountain I must climb here is steep. Peace has a price. I am willing to pay. I would suggest that you apply for several other credit cards before you close the only CC you have in your name. I would also suggest that your phone should be in your name. CC's from stores like Kohl's, Walmart, Lowe's Are also a good idea. You don't have to use them often to etablish a credit history for yourself. |
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Post by petrushka on Oct 22, 2022 16:06:26 GMT -5
I find it mind-boggling how many people manage their finances. Multiple credit cards, sometimes several maxxed out, buy household items on credit or hire/purchase, or take 'no interest for 5 years' type deals ...
{sigh} if you get into that, you end up being a bankers' dupe.
And the important thought to have about this: if you are a banker's dupe, you pay twice as much for *everything* you buy than I do. Mmmmm-hmmm. You pay twice as much as I do.
1 - I don't buy stuff that I want but don't need unless I already have the money to pay for it. Seriously. Learn to tell the difference. In fact, make it an ironclad rule.
2 - if you use a credit card at all, make sure it's always paid off before the end of the month. Credit card interest rates are extortionate. Wrack and ruin. Don't be tempted to use several cards.
One card, and use a phone app or something to keep track of how much you owe. I don't know if you have these in your country, but if you have trouble managing a credit card, you can get a
'Debit Card' where you pay money in when your paycheck arrives, and you can't spend more than what's actually on that card. No penalty interest or such.
3 - don't buy stuff just because it's sparkly and shiny, and the neighbours have one. You probably do NOT need it. It may take a little self control, but worth it.
Some of my not so wise friends used to always live at the far end of their bank overdraft. You pay fees, charges, interest. None of that stuff is given you you out of the charity of a banker's loving heart.
They'd get a loan for putting up a cabinet making workshop (a worth while enterprise) and then spend the money instead on a stainless fridge, entertainment electronics, and he continued to use MY workshop,
paid me rent (which I tried to refuse, but he insisted), all the while paying interest on a loan for a workshop that wasn't making an income to pay for the loan because it didn't exist. That's how you get into a hole.
Then they wondered how I could afford driving a Volvo. Envy ensued.
Simple: I drove an old beater until I had saved up for a 2nd hand Volvo in good condition. Then I bought it. No loan, no 'finance', no charges and on-going expenses except petrol - and while they were still paying off
stuff, I could begin saving up for the next item on my list, because I wasn't handing all my income over to the bankers -- not even ANY of it... other than mortgage payments on the farm that was actually generating money, rather than being a drain.
If you think about it in those terms, it's clear as mud. Common (uncommon?) sense. It just takes a little thought and a moderate amount of discipline.
If you feel the urge, the immediate need to buy something shiny or sparkly - stomp on it, think about it for a few days - then think if you really need it.
Disclosure: I have spent many a night 'researching' items to buy on the 'net and review sites and comparing prices, stomped on the urge to buy buy buy for a few days, and then realized that no, that item was not going to add value to my lifestyle.
So I don't have a tv, I don't have an Alexa, or a Siri, a fashionable i-phone (overpriced and they lock you into the Apple eco-system), I don't have a collection of 35 guns, I don't have a single piece of jewelry ... but I have huge concrete house with underfloor heating, an indoor swimming pool (really the only form of exercise suitable for my body) and my wood-shop in the yard. And I don't owe anyone a cent ...
Unfortunately the bankers have found another way. The investment bankers have lost 300k of my rainy day fund ...{sigh} in less than a year . I'm ready to spit brass tacks.
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Post by jim44444 on Oct 23, 2022 8:17:50 GMT -5
I ... and my wood-shop in the yard. That is all you really need, put a small cot to sleep on and a beer cooler in the shop and life is good. |
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Post by DryCreek on Oct 24, 2022 1:39:35 GMT -5
dallasgia, a few items to add to the list… * Taxes due. All the way through the date it becomes official, though the tax filing might be a year away. You could have an accountant calculate the amount owed to-date and have an estimated tax payment made as part of the settlement (form 940/941). Things like Roth IRA conversions can trigger large taxes that aren’t covered by payroll deductions. * Rewards points and cash-back balances. These can really add up! Credit cards, hotels, and airline programs. I’d suggest resisting the urge to assign everything a value. Trying to establish the value of a house will have so much latitude that you’ll want good will on your side; bickering over small items like kitchen appliances will probably cost you in the long run. For non-financial items, maybe go for big buckets that cancel each other out… you keep your hobby gear, and he takes the sports memorabilia, etc.
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Post by allworkandnoplay on Nov 4, 2022 23:20:18 GMT -5
It is difficult for me to really give advice here. I ran our finances for our entire marriage (she is not good with handling money), and no matter how much I begged her, she would not take part. She made me do it. Consequently, I spent years covering for her overspending, etc. I finally forced her to sit down and figure stuff out while going through the divorce process. We made our settlement together and had it analyzed by two different lawyers who both approved it. One said it was the most evenly split and fair settlement she had ever seen in a divorce.
However, there are things we did not anticipate. All of our credit and credit cards were already split years ago, but I was listed as an "Authorized User" on a few of her cards and never as a joint owner. Our state is a community property state so any debt accrued even privately by one spouse is shared by both, but all of these new balances were created after the divorce was final. I never saw these cards on my credit report before, but now that she has overspent and racked up some balances (without me to help reign her in), lo and behold they are on my report now, and it has affected my credit (it was perfect just 6 months ago). I was removed from those cards well more than 6 months ago. I know because I helped her do it, even before the divorce was finalized. Our settlement agreement had language assuring this would not happen as well, so those credit companies should not report me as an authorized user (and 6 months is time to reflect any change like that), but alas they did. I have had to begin dispute proceedings and it is a real pain in the ass; supplying copies of the divorce decree and settlement agreement, fun stuff.
So I guess my advice is to prepare the best you can, but also know that unexpected situations WILL happen. We prepared specifically against this very thing and it still happened. My Ex didn't do anything on purpose, and it all happened after the divorce was done. Luckily we have all of the proof, we just have to go through the hassle of fighting with the bureaus to fix it. You can still get free copies of your credit reports every week, I think through 2023, and there are free services that will let you monitor your actual credit score as well. Do all of that and do it consistently.
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Post by mirrororchid on May 12, 2023 6:03:27 GMT -5
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Post by dallasgia on May 16, 2023 7:43:38 GMT -5
Thank You - I have listened to this several times. |
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Post by mirrororchid on Jun 15, 2023 4:45:21 GMT -5
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