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Carol
Ann Wilson, Certified Financial Planner, is a recognized
specialist in marital financial issues and a pioneer
in the field of divorce financial planning. Her pre-divorce
financial consulting company, Quantum Financial, Inc.
has been in business since 1985. In 1993 she founded
the Institute for Certified Divorce Planners and in 2002
she founded the College for Divorce Specialists to train
attorneys, CPAs and financial professionals in the financial
issues in divorce. She is now the president of the Financial
Divorce Association. She designed software which is widely
used by lawyers and financial planners to calculate the
financial result of divorce settlements. She has also
served as an expert witness in court in over 100 divorce
cases nationwide.
Carol
Ann is the author of The Financial Guide to Divorce
Settlement, and 40 Tips for Surviving Your Divorce.
She is the co-author of The Survival Manual for Women
in Divorce, The Survival Manual for Men in Divorce, ABCs
of Divorce for Women and The Dollars and Sense
of Divorce.
She
frequently serves as a speaker and faculty member of
high-ranking legal and financial organizations and has
been published in many professional journals.
She
has appeared on the Regis Philbin Show, Geraldo, LifeTime
Live, CNBC Financial News and numerous radio programs.
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Tip of the Month:
WHEN THE WIFE SHOULD GET THE HOUSE
There
are cases when the wife should keep the house, even when doing
so will create an unequal settlement.
Let’s look at Bill and Barbara.
Bill and Barbara are 45 and 49, respectively, and have been
married 18 years. They have one son. Bill earns net $3,675 per
month minus child support payments of $413 and maintenance payments
of $500 per month. His living expenses are $1,900 per month.
Barbara earns net $980 per month plus $413 child support and
$500 maintenance. Her living expenses with the son are $2,630
per month, which creates a negative cash flow of $812 per month.
| |
Barbara |
Bill |
| Take-home pay |
$
980 |
$3,675 |
| Living
expenses |
-2,630 |
-1,900 |
| Maintenance |
+500 |
-500 |
| Tax on maintenance |
-75 |
+140 |
| Child support |
+413 |
-413 |
| Cash Flow |
$
-812 |
$1,002 |
The following settlement was decided by the
judge. Barbara will receive the house, which had equity of $44,100
and her IRA worth $5,000. Bill will get his IRA worth $8,900.
There are no other assets. Since Barbara got the house with $44,000
worth of equity, she has to pay Bill half of that equity upon
the first of the following events: if she sells the house, if
she gets remarried, or upon the emancipation of the child. We
do not know if she is going to sell the house, or remarry, but
we do know that the son is going to reach age of emancipation
in four years.
Barbara’s house payment is $490 per month with 10 years
left on the mortgage. According to this scenario, Barbara is
heading for poverty from the outset. To
be able to pay Bill his half of the equity in the house, she will have to sell
the house. This will force her to rent at a much higher cost than her house payment
of $490 per month. In her area, rental prices start at $800 to 850 per month.
The following graph shows the result of the
court’s
decision.
This court order is forcing Barbara into severe
poverty. In this case, it seems reasonable that Barbara should
have been allowed to keep the house without paying Bill half
the equity -- an unequal but equitable settlement.
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