PROPERTY DIVISION BASICS

            The family court’s tasks when dividing marital property are (1) to determine whether the marriage is a short-term marriage, in which case the spouses should, usually, return to their pre-marriage status; (2) for a long-term marriage or a short-term marriage in which the spouses obtained a significant property or debt, to identify marital property, value the property and equitably divide that property; (3) to determine whether   any needs-based or significant contribution-based exceptions justify an invasion ofone’s separate property for the other; and, finally, (4) to determine whether any exception to equitable distribution, including fault, discovery sanctions, litigation sanctions, and unclean hands, counsel an unequal division or forfeiture.[1] The spouse seeking to include property in the marital estate must prove a reasonably ascertainable value.[2]

A.        EQUITABLE DISTRIBUTION

            For long-term marriages, or in a short-term marriage in which the spouses have acquired together a significant item of property or debt, the family court must, usually, equitably divide the items acquired between the date of marriage and the date of divorce according to the Sparks factors, which include the duration of the marriage,                    the contribution of each party to the marital estate, their age, health and status, their needs and circumstances, their earning abilities, past relations and conduct, and general principles of equity.[3] However, “equitable” does not mean “equal,” and, although the standard is usually to divide marital property congruently, the family court should not divide property if one of the exceptions to equitable distribution applies.[4]

            1.         IDENTIFY

            The first step in the equitable distribution analysis is to identify the property subject to equitable distribution. This includes all property the parties obtained during   the marriage “by reason of the marriage,” which excludes gifts and inheritances unless comingled and passive appreciation of separate property.[5] Separate property                  that appreciated actively due to the owning spouse’s efforts during the marriage             the family court may also divide, but only to the extent of the appreciation proven.[6] 

2.         VALUE

            A common misconception is that the family court must value property as of      the date of divorce, as that is the ending-date used to identify marital property. Not so.       The family court has considerable discretion to value property as of some other, appropriate date, such as the date of separation or the date of filing for divorce.[7] Determining the appropriate date, the family court should consider factors such as when the spouses physically separated, whether and to what extent the spouses continued to commingle their assets and how financially independent or dependent they were.[8]  For example, if spouses have obtained separate residences and paid their own expenses, whether through support orders or otherwise, the date of separation is appropriate.[9]

3.         DIVIDE

            Finally, unless an exception applies, the family court must divide the property and debts. There is no standard formula or rigid rule for property distribution, but         the distribution must be equitable, i.e. “fair and equitable under all the circumstances.”[10]  This standard means that, absent a clear reason for an unequal division, the distribution of marital property must be “roughly congruent.”[11] When making this determination,        the family court must consider the applicable Sparks factors, which are the duration of the marriage, the contribution of each party to the marital estate, their age, health and status, needs and circumstances, their earning abilities, the past, conduct, and equity.[12]

C.        EXCEPTIONS

            Even if the family court finds property to divide, equitable distribution should not apply if the court finds one of the following exceptions, in addition to equity.

            1.         SEPARATE PROPERTY INVASION

            There is a strong presumption that each spouse should at divorce retain his or her separate property.[13] The spouse seeking to invade separate property bears the burden of proving the spouse needs the property, and the other is financially able to give it, and/or that the spouse significantly contributed to the property’s increase in value.[14] It bears repeating that the spouse must significantly assist in the acquisition or growth of the other’s separate property; even then, the spouse is only entitled to “compensation” that should be no more than necessary to compensate the spouse for that contribution.[15]

            2.         DISCOVERY SANCTIONS

            A family court may order sanctions for failure to comply with discovery. [16]Sanctions range from prohibiting a party form introducing a witness to outright dismissal of the entire action.[17] Severe sanctions, such as dismissal, “should be employed when there has been a flagrant and wanton refusal to facilitate discovery and not when failure to comply with a discovery request is accidental or involuntary.”[18]

            We usethe following factors to determine the sanction: (1) whether the violation was willful or accidental; (2) the party’s history of refusing to comply with discovery;     (3) the prejudice to the other party; (4) the time before trial; (5) whether there is a history of engaging in deliberate delay; (6) the degree of compliance with other orders;  (7) an attempt to timely cure the defect; and (8) what sanction serves justice.[19]

            3.         LITIGATION SANCTIONS & DISSIPATION

            A family court may also deny a spouse a share of marital property if that spouse has committed wrongs during the course of litigation, whether discovery or otherwise. For example, in Olmstead v Olmstead,[20] the family court properly sanctioned a wife for committing perjury about the nature and extent of her assets during trial.

            Similarly, and as a final exception example, the family court should sanction a spouse for dissipating assets during the marriage. When one spouse dissipates marital assets without the other’s fault, the value of the dissipate asset may be included in the marital estate.[21] For example, in Zamfir v Zamfir,[22] the family court treated over $200,000 of marital funds as if they were still available, and ordered the spouse who spent it without the other’s consent, one-half the value, a $10,000 payment. In other words, a spouse who dissipates marital assets in an effort to avoid dividing them will shoulder the burden, because the family court will still consider the value of those gone assets.[23]

[1]           See, e.g., Reeves v Reeves, 226 Mich App 490; 575 NW2d 1 (1997).

[2]           Wiand v Wiand, 178 Mich App 137; 443 NW2d 464 (1989).

[3]           Sparks v Sparks, 440 Mich 141; 485 NW2d 893 (1992).

[4]           Id.

[5]           Reeves v Reeves, 226 Mich App 490; 575 NW2d 1 (1997).

[6]           Korth v Korth, 256 Mich App 286; 662 NW2d 111 (2003).

[7]           See, e.g., Booth v Booth, 194 Mich App 284; 486 NW2d 116 (1992).

[8]           See, e.g., Kurz v Kurz, 178 Mich App 284; 443 NW2d 782 (1989).

[9]           Id.

[10]          See, e.g. Sparks v Sparks, 440 Mich 141; 485 NW2d 893 (1992).

[11]          Jansen v Jansen, 205 Mich App 169; 517 NW2d 275 (1994).

[12]          Sparks, 440 Mich 141; 485 NW2d 893(1992).

[13]          McNamara v Horner, 255 Mich App 667; 662 NW2d 436 (2003).

[14]          Reeves v Reeves, 226 Mich App 490; 575 NW2d 1 (1997).

[15]          Id.

[16]          MCR 2.313 and related caselaw.

[17]          MCR 2.313(B)(2)(b), (c).

[18]          Traxler v Ford Motor Co., 227 Mich App 276; 576 NW2d 398 (1998).

[19]          Dean v Tucker, 182 Mich App 27; 451 NW2d 571 (1990) (citations omitted).

[20]          340 Mich 156; 65 NW2d 313 (1954).

[21]          Everett v Everett, 195 Mich App 50; 489 NW2d 111 (1992).

[22]          92 Mich App 170; 284 NW2 517 (1979).

[23]          Thames v Thames, 191 Mich App 299; 477 NW2d 496 (1991).

Mortgage Traps for the Unwary

Blissful, young newlyweds on a let’s-build-a-nest high, you and your spouse purchased a half million dollar house with zero down on a thirty year mortgage with a balloon payment. Ten years later, the bliss has soured and you both want out, but the house is worth $300,000 and you’ve barely made a dent in the principal. So, your house is “underwater.” Now what?

If you are facing foreclosure. If you cannot repay your mortgage loan, your lender (or, more likely, the lender’s assignee) may begin the foreclosure process pursuant to the terms of your mortgage and federal and state law. If you face a foreclosure, contact your lender and request a meeting immediately. At the meeting, discuss what options you have to delay the foreclosure. These may include forbearance, refinancing, a longer redemption period in the event of foreclosure, a new payment schedule, and a short sale. Be proactive. Do not wait for a foreclosure notice to contact your lender or hope that your divorce will shift the debt to your spouse. Usually, it will not. Explain your legal and financial problems to your lender, and ask for reprieve. Bring financial documents, such as bank account statements and paystubs, to substantiate your financial predicament. The lender may or may not be able to sue you to collect any deficiency between the bid at the foreclosure sale and the outstanding balance on your loan. The terms of the loan will specify whether the loan is a recourse loan, rendering you liable for the deficiency, the notice, if any, required before beginning the foreclosure process, and any other rights you have independent of federal and state law to stop the foreclosure. Request a copy of your entire mortgage and note file. Read it thoroughly and make sure your lender is following every duty to a T (Was notice proper? Do you have an opportunity to cure the default? Is the note a recourse note?) Most lenders are willing to work with you if you are sincere and in good faith negotiate a repayment plan because lenders would rather have an income stream than an empty house.  

If you can negotiate a short sale. In a short sale, the lender agrees to accept less than the borrower’s mortgage indebtedness when the borrower sells the property to a third party in an arm’s-length transaction. Lenders usually agree to short sales to avoid the costs of foreclosure and having a large inventory of empty, unsellable homes. However, short sales come with their own costs. First, as a matter of contract law, a lender may pursue a deficiency if the short sale approval is not conditioned on the lender waiving the deficiency. Therefore, be sure to condition any short sale plan submitted to your lender for approval on the lender waiving any deficiency. Second, the short sale approval process is long and tedious; you and your potential buyer must be willing to wait. Large lenders have short sale packets for use. They include forms for, inter alia, comparative market analyses and brokers’ price opinions, hardship letters, financial disclosures, authorizations to release information, listing agreements, and proposed sale terms. If your lender does not, you will have to obtain these materials. A real estate agent and/or a lawyer experienced in real estate law should be able to assist you. Third, if the lender does approve the short sale and waive any deficiency, the forgiven debt may trigger income tax liability. The lender must send the borrower Form 1099-C, Cancellation of Debt, to indicate the amount of debt forgiven.[1]

If you deed the house to one spouse. If your court awards you or your spouse your home, the award does not, absent more, affect each spouse’s liability on the home mortgage. Because the lender is not a party to your divorce, the court cannot adjudicate the lender’s rights to repayment. Careful drafting in the divorce decree and all deed documents is an absolute must to avoid unintended liability. For example, in Marrow v Marrow,118 NC App 332; 454 SE2d 853 (1995), the North Carolina Court of Appeals held that a deed to a spouse “assuming the mortgage,” absent more, did not mean the spouse agreed to relieve the other spouse from liability on their home mortgage because (1) the spouse took no further action (e.g., by making full payments) and (2) the parties’ decree awarded the house to the spouse but required each of them to pay the mortgage until the house sold. To protect the non-taking spouse, the decree should require the taking spouse to refinance the mortgage into the spouse’s name immediately; if that is impracticable, the decree should impose on the spouse a continuing duty to apply for refinancing in good faith until successful and, in the interim, to hold the non-taking spouse harmless for any mortgage default and the costs thereto (e.g., interest or penalties). The decree should specify each spouse’s responsibility for property taxes, insurance, homeowners’ association fees and any other liabilities until the home is refinanced or sold. The decree should specify what recourse the non-taking spouse has against the spouse in the event of default, such as liquidated damages, a default judgment equal to the amount of the mortgage or other liabilities the non-taking spouse has to pay, mandatory attorney fees and/or contempt.

[1] Tax liability for short sales is in addition to the tax consequences in IRC 1041 (for sales and other dispositions incident to divorce) and IRC 71 (for includability/deductibility of certain periodic payments in a divorce decree or other written separation agreement). These tax issues go beyond the scope of this article. You should contact a tax attorney and/or your financial advisor for a thorough assessment of the tax laws applicable to you. IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, be advised that any federal tax advice contained in this article was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Always consult a specialist for thorough tax advice.

MORTGAGE WARS AND OTHER FIGHTS THAT HURT YOUR CREDIT: HOW TO PROTECT YOUR CREDIT SCORE

As the first of the month approached, the war between Bill and Sue escalated. Their divorce was not amicable by any means, but, usually, their animosity was a dull roar over who would take the pictures, the furniture and the motor boat– until the mortgage came due.  They lived in the same house, Bill in the basement with the dog and Sue everywhere else. Bill could not venture upstairs to Sue’s space, and she could not trudge downstairs to his. But when the mortgage came due, neither wanted to pay for any of it – not their own space, and certainly not the other’s.

So, they stalled. The first day of the month would pass with no payment. Then the second and the third. By the fourth day of the month, Bill would send an e-mail “reminding” Sue to make the payment, and Sue would leave a note on the basement door “reminding” him to do the same, with a sarcastic “DEAR” underlined angrily in black pen. By the sixth day of the month, they unleashed their lawyers. First there were phone calls accusing each other’s client of ill will. Then there were e-mails, letters and faxes. Then the seventh, eighth and ninth days of the month would pass. Still no payment.

On the tenth day of the month, one spouse always caved in: Bill. He would make the payment at lunch, then, after work, mutter past Sue in the kitchen on his way to the basement grumbling an explicative or two and anticipating the day he would no longer be tied to her.  If he ever wanted to move out of that basement, he had to protect his credit.

Joint debt is a large source of contention in divorce, second only, in my experience, to children.   What seemed like a good idea during the marriage --  that mortgage to buy a bigger home or credit card with a secondary cardholder so both of you could buy groceries and pay bills, for example – feels like the biggest mistake ever during divorce. Inevitably, one spouse insists the other pay, or cannot pay, or simply hoards money elsewhere and refuses to pay. If neither pays, well, you know what happens next: a derog on the credit score.

Join that with a hefty legal bill, a mortgage to refinance, car loans and student loans and personal loans to pay, and your credit score will crash and burn, taking your pocketbook and your sanity along with it and making you crazier than you were during your marriage and divorce.

How can you protect your credit score?

Before Your Divorce

Before your divorce begins, gather your records, find out who owes what, and set guidelines for who pays which debts, when and how. This is your first step and the most important you will take, financially, during our divorce. You must have a frank, open discussion with your spouse about your finances – it is easy for the spouse left in the dark to think the other is hiding money, which leads to the inevitable wild accusations, threats from attorneys, subpoenas for bank records, and thousands spent just to prove you really were, in fact, in debt and had no bank account worth millions in Sweden. (If you think this is incredible you either (1) are not divorcing or (2) are one of the luck few who have not faced these accusations.)

If you maintain a filing cabinet or an e-file for your bills, then start there. Make a copy of each bill (they have a way of “getting lost” or snatched for your spouse’s attorney). Create a spreadsheet that details each creditor, outstanding balance, minimum payment and how to make it, due date, and reason for the debt. Decide which debts you can pay off before you divorce (e.g., a clothing store charge card) and which you can do without (e.g., a monthly gym membership) during your divorce. If you and your spouse are one of the few amicable divorcing couples, use the spreadsheet to negotiate who will assume which debts.

If you are like most people, however, your records are not so immaculate and well-kept. You should order a credit report to determine which debts are in your name, and your spouse should order one, too, for comparison. You may obtain a free credit report each year online at www.annualcreditreport.com. You must supply identifying information, like your Social Security Number, and it will be tempting to order your spouse’s at the same time. Do not. It is a federal crime to order someone else’s credit report without the person’s authorization, even your spouse’s, and you face fines and jail time if you do.  See the Fair Credit Reporting Act, 15 U.S.C. 1681n and 15 USC 1681n.  

When you have all of the debts and who pays what listed, consider making your payment plans enforceable. Do not expect your spouse to pay one-half the mortgage or her own car loan willingly.      You are getting a divorce for a reason, after all. Consider memorializing your payment plan in a writing signed by both spouses and their attorneys and submitted to the judge for entry as a temporary order.      An order is a mandatory directive for each spouse to pay particular debts, and it carries with it the threat of contempt. If your spouse refuses to pay her share of the debt, for example, you may ask the judge to hold her in contempt, with all of the fines and punishment and attorney fees contempt entails, to compel her to make the payment and/or to reimburse you if the creditor badgers the payment from you.

However, the same is true for you. Therefore, if your finances are precarious and you will not have the funds to pay your share, you should forgo a temporary order in exchange for (1) a serious consultation with a bankruptcy attorney and/or (2) a prompter property settlement.

When You Divorce

When you divorce, negotiate your property settlement (if you settle your case) or request an order (if you try your case) that reduces the number of joint debts and has serious consequences when one ex fails to pay the joint debts that remain.

If you and your spouse cannot pay off joint debt, transfer as much as possible to the name of the spouse assuming the debt. For joint credit cards, make use of those credit card offers with the zero balance transfers and low introductory interest rates – the junk mail you normally toss out with yesterday’s news – to transfer the debt to individual credit cards. For credit cards with joint debt in just one spouse’s name, award the entire balance to that spouse and credit the spouse, if needed, with an offset of marital property (maybe you keep your entire retirement account, for example, and assume liability for the MasterCard you used to remodel your kitchen). For debt secured by property (e.g., a car loan), award the debt to the spouse taking the property. For other joint debts, require the spouse to seek refinancing ASAP; this might be a conversation you have together with a financial advisor.

If you cannot transfer joint debt to one spouse’s name, be sure your divorce decree specifies,  in  meticulous detail, each spouse’s responsibility toward the debt. The spouse taking the debt should have a continuing obligation to pay the debt and/or seek refinancing diligently and in good faith. The spouse should also have the duty to hold the other spouse harmless (meaning she will reimburse him) for any nonpayment or other liability that spouse incurs for the debt. The relieved spouse should have a right to inspect all records for payments and refinancing. Include incentives for the taking spouse to pay the debt on time. These could include actual attorney fees and costs if the other spouse has to enforce the decree for nonpayment, liens against property awarded to the taking spouse until repayment, an automatic wage assignment in the event of nonpayment and/or a requirement to maintain life insurance sufficient to pay for the debt until repayment.  

After Your Divorce

After your divorce, do not assume you are totally free from the debt your spouse assumed.

A divorce decree that requires one spouse to “assume and hold the other harmless from” a debt does not mean the relieved spouse is never responsible for paying the debt. This is because a court cannot limit the rights of third parties who are not also parties to the divorce. For example, the decree may require your ex to timely make all payments for the boat she or he wrangled from you during settlement negotiations, but if she or he skips a payment the boat company can pursue you. The burden is yours to answer for that debt, because you signed for it. Then, your option is to spend time and money pursuing your ex for reimbursement.

Another option is the credit flag. An ex-spouse whose credit score suffers when the other fails to pay an assumed debt may insert an explanation in his credit report. The explanation should state, at a minimum, that the other is responsible for paying the debt as a result of divorce. See the Fair Credit Reporting Act, 15 USC 1681j. A flag will explain the derog and may mitigate adverse reactions from potential creditors, but it is not a perfect solution. The debt remains unpaid, and you pepper your report with ties to your ex. You must still pursue your ex for your money.

Query: If she cannot pay the boat company, how can she pay you? See, now, why it is important to have that frank discussion over finances first? Otherwise, you may find yourself paying that debt to keep your credit intact, and muttering about like Bill.

CAR TROUBLE? WHAT TO DO WHEN REFINANCING WON’T DO

So your spouse is keeping the family car that is leased or loaned in your name, huh?

Most folks in your position would worry that the now ex will “forget” to make the car payment, or will not pay off the loan in time  or will wait to the last minute to do either and let your credit score take a hit in the meantime (out of spite or sheer enjoyment or otherwise). What’s worse, if your ex is unable to assume liability for the lease or refinance the purchase loan, then even if your divorce judgment says your ex is responsible for the payments, the car creditor will come after you. This is because the creditor is not bound to your divorce judgment and, frankly, does not car what your  now ex- agreed to do with the payments. Instead, the creditor will take the payment from you, or even sue you for it, then force you to pursue your ex for reimbursement.

What can you do to avoid this result if your ex cannot refinance? Consider these options --

Option 1 – Take It. The “soccer mom” van might not be the best of rides, but, if you take it, at least then you know when you make payments, that it has insurance and when, if at all, the time is right to trade it in for another vehicle. More likely than not, the vehicle will not have equity, which means you will not have to pay your ex to take it off your ex’s hands, anyway.

Option 2 – Pay It. If you prefer that your x keep the vehicle but you still want to be sure it is paid for it, then you pay for it. You could make the payments outright, as a monthly property settlement payment that is non-taxable income to your ex (and not deductible for tax purposes to you) or as alimony (that is taxable to your ex and deductible to you). Or, in most state child support schemes, you can treat the monthly payment as child support and deduct it from your child support obligation. Child support, after all, is intended for your child’s daily necessaries, and transportation to and from school, sports and activities is chief among them. However, be sure your child support order provides that you will make the payment directly to the car creditor – otherwise, you will have to rely on your ex to make the payment, and timely, or hope that your ex does.

Option 3 – Repo It.  Finally, if you do not want the vehicle and you are not paying child support or alimony, be sure to give yourself the rights of a repo man if your ex misses or delays payments. In most jurisdictions, spouses’ agreements for dividing property – including what happens when one of them defaults in an obligation – are enforceable as a matter of contract law. This means, the spouses can be creative, give each other rights and obligations, and the court must enforce them absent a public policy reason (e.g., you cannot contract to set the vehicle on fire if your ex misses a payment). So, get creative! Require in your divorce judgment, as you would with a contract, that ex provide you proof of efforts to refinance the debt every month, proof of timely payments, proof every quarter that the vehicle is properly insured, money for every day that the payment is late, attorney fees and costs if you have to sue your ex for payment, and/or an extra set of keys that you are to use only if your ex defaults in the payment obligations  and you decide to take possession of – and responsibility for – the vehicle thereafter.

Otherwise, you could very well find yourself paying for a vehicle that is not yours – while your credit score takes a hit -- and that you cannot regain, while your then ex-wife drives off scot-free.

Nine Major Money Mistakes In Divorce

The “simple and cheap divorce” is a myth.

Even simple divorces require work, such as divorce decrees that tie-up all lose ends (effective enforcement language, any one?) and post-divorce property transfer documents (deeds, notifications for COBRA, promissory notes, to name a few) to make those decrees work.        And cheap divorces should include money spent wisely.

I write should because the “cheap divorce” really refers to two divorces -- the cost-effective divorce and the avoided-costs divorce. Unfortunately, in pursuit of the cost-effective divorce, and under the mistaken belief that their wives are paying less and have, therefore, somehow “won the case,” too many men make major mistakes when it comes to their money – the very thing they are trying to avoid.

Make these mistakes, and your “simple and cheap divorce” will cost you a fortune:

1. SHE HAS TO PAY HALF THE DEBT, RIGHT?

            Most jurisdictions apply a rule called “equitable distribution” or “equitable division” to divide assets and debt. The rule sounds an awful lot like “equal” division, and, sometimes, it is. For example, retirement accounts (usually, the husband’s) that accrued during the marriage are divided equally between ex-spouses. However, the same is not true for debt. “Equitable” really means, do what is fair, and, for debt, that usually means the spouse who earns more pays more. Do not go racking up a credit card bill with the assumption that your wife will be responsible for one-half the balance. If she earns less than you, she won’t.

2. THE INHERITANCE IS TO ME, NOT US

            If you received an inheritance, you might think all of it is yours – after all, your name appears in your generous great-aunt-somebody’s will, not your wife’s. Not necessarily.              In general, any property  you acquire between the date of your marriage and the date of your divorce is considered marital property eligible for division (for those of you living in community property jurisdictions, the same rule usually applies). An inheritance might be your separate property, but only if you did not commingle it with marital property or treat it as marital property during your marriage. And that is tough to do. Imagine receiving an inheritance of $20,000 and just leaving it in an account, in your name only, sitting there, and not touching it at any time during your marriage. Most spouses don’t, especially in our economy. If you used that inheritance during the marriage, if you added it to a joint bank account, or even if the divorce court believes your wife needs a share of it, that inheritance is not yours – it’s your wife’s, too. The best thing to do, if you receive an inheritance, is title the property in your name only, deposit the money into an account bearing your name only, and do nothing but leave it alone – until you are safely divorced.

3. BUT THIS CAR HAS ALWAYS BEEN MINE

            It’s painful, but most guys’ precious belongings become prime targets in a property dispute. Some guys will buy a toy – an old car to fix-up, a train collection to repair – as a hobby  and diversion during a divorce. The problem is, those toys are property, too. Anything you do that causes the property to appreciate is work you are doing for your spouse, too. The best thing to do is leave all your precious belongings alone – don’t go fixing up that car or collection, because the more valuable it is, the more likely you will have to sell it, give it to your wife or fork over some cash to buy her out of “her share.”

4. I KEEP THE BANK ACCOUNT, SHE GETS THE RETIREMENT

            A bank account and a retirement account may have the same balance on paper, but that does not mean they have the same value. In the pursuit of a quick settlement with liquid assets, and hoping to avoid an expert’s fees, some guys will swap a bank account for a retirement account. The problem is, $50,000 in the bank now is not the same as $50,000 in a retirement account now. For one thing, to the extent you can access the retirement account, usually you must pay penalties and taxes for making a withdrawal. For another, there may be hidden costs, such as a loan in repay-status, tied to that account. On the other hand, a future stream of income is usually more value, the present day value, than cash. It’s worth a meeting with a CPA or other specialist to have those accounts valued.

5. SHE CAN HAVE ALL OF THE HOME CONTENTS

            The household furnishings and holiday decorations may seem insignificant to you, but agreeing to give your wife “all the home contents” or “whatever she wants out of the house” is like writing a blank check – for thousands. Think about it. The computers, televisions, china, entertainment systems, books, etc., all have a value. And that value really adds up. Don’t be afraid to have your home contents appraised so the value is taken into account in your overall property division. Otherwise, the divorce court is likely to assign no or a nominal value to those contents.  Obtain the appraisal before you make the argument to your wife’s attorney or in court, though – most judges, and even some attorneys, will dismiss an argument that all of that stuff has value until they have an appraisal in hand.

6. BUT WE GAVE HER THE HOUSE (SECURITY)

            You wife might want the house, and she might be able to afford it, by awarding it to her in your divorce decree does not release your liability to the mortgage company. You and your wife can make any agreement you want; the mortgage company does not care and, if she misses a payment, will pursue you for it. That means calls, collections letters and, possibly, a lawsuit. What are you to do if you have to make the payment for her? Most guys, while fearful that this will happen, do nothing in their decree to protect themselves if it does. Get creative – so long as the decree is not against public policy, the judge will sign it. For example, if she misses                a payment, you withhold alimony (more on that in the next mistake), or you get to assume        the payments and possession of the home, or you can demand the home be listed for sale and    the profits, after repaying you, divided, or you keep them. Better yet, require her to refinance     the mortgage and provide you with proof of her attempts on a regular basis until she does so.     The worse thing to do – and also what many guys do – is require her to “refinance.” This means nothing if you don’t have the enforcement language to back it up.

7. I REFUSE TO PAY ALIMONY

            Alimony is not all that bad – really. Many guys refuse to pay alimony because, they think, writing a check every month for years to an ex (who is an ex for a reason, after all) is tantamount to relieving the divorce every month for year. However, alimony is tax deductible from income to you and taxable as income to your ex-wife. You should think of it as a tax planning measure. If you have a choice of paying $5,000 a year as a “property settlement,” which is not deductible to you, and $5,000 a year as spousal support, which is, go for it. Just be sure the support amount is not modifiable upward; otherwise, your ex could reap the benefit of your pay raises post-divorce.

8. SHE NEEDS SUPPORT NOW, SO I’LL PAY IT

            If you pay child support, you will get the sob story: I haven’t received the check, I need extra money for clothes, etc. It’s tempting to make a direct payment, lest you leave a kid without food to eat and a bed to sleep on. But this is a trap. Make a direct payment, and, in most jurisdictions, you will not receive a credit toward the child support you should have paid unless the paying parent keeps a copy of the payment (no cash, please!) and a receipt and both parents agree the payment was intended to replace that support. In many states, the direct payment is        a gift – no ifs, ands or ors about it. That means, you must pay the same support twice.

9. I DON’T NEED A CPA

            Too many men would rather save costs by figuring our tax consequences on their own, maybe with one of those programs you can buy at the grocery store, or, worse yet, ignoring them altogether. However, a divorce is not just about dividing property, venting over who cheated or lied or whatever else went wrong, and making provisions for child welfare. It is a complex transaction that is rampant with tax consequences. What can I deduct? How can I avoid an assessment for property awarded to me? What happens to investments? What filing status do we use? Who claims the children as dependents? What if we owe taxes? You can make agreements in your divorce decree to answer all of these questions. Spend some time with a CPA, in addition to your attorney, to strategize.

But cheap out, and you will make a major money mistake.

WHAT TO DO WITH YOUR TIMESHARE

Timeshares are one of the most difficult assets (or liabilities) to divide at divorce.  Sometimes, the vacation spaces are so luxurious that spouses cling to them like a lottery ticket arguing over who gets to go on those vacations after divorce.  More often, however, those promises of luxury and affordability in the heyday of the timeshare business have bellied-up, and what once looked like a good idea has turned out to be years riddled with taxes and fees, strict usage schedules and a vacation no one wants and you cannot sell.  In other words, this is not something you want to deal with every year with your ex-wife.

Then what can the two of you do now with that timeshare so that neither of you have to deal with the other later? Talk to your lawyer, and consider these options –

Award It – If one of you wants the timeshare more than the other, and can afford it, then award it to that spouse. It makes little sense to fight over a timeshare you really do not want. However, keep in mind that the timeshare is either an asset or a liability. Have it appraised, and include equity, if any, to be divided between the two of you. If you keep the timeshare, then one-half goes to you spouse. If your spouse does, then one-half goes to you. If there is debt, then make sure your agreement has very specific terms for how that debt is paid and when. At a minimum, require your spouse, if she keeps it, to refinance or otherwise remove your liability within a set period of time, otherwise the timeshare goes to sale, and you may have first dibs to buy it.

Sell It – If the two of you absolutely cannot agree, or your spouse want the timeshare but cannot remove your liability, then sell it ASAP. Ideally, this will occur while your divorce is pending and not yet finalized so that the two of you can pay whatever costs are incurred from your joint funds before you divide them. If this is not possible, then whoever pays the costs should be reimbursed post-divorce (e.g., by taking less or more of a bank account, home equity, etc., or receiving a promissory note and pay back with interest). If there is a loss the two of you must pay, then consult with your lawyers and a financial advisor to determine if you can free funds from a retirement account o pay it and, if so, how.  If there is a gain, then, again, consult with your lawyers to determine what the tax consequences are and how to divide it.

Share It – In exceptional circumstances, you and your spouse may be able to share the timeshare post-divorce.  This is rarely done, and we would discourage it for all but the most exceptional, good-natured divorces. Your agreement must specify who receives the vacation time when (e.g., year by year, two years in a row, equally  each year), as well as who pays what fees when and what happens when that person fails to pay. Consequences for nonpayment are key. For example, if the person who is suppose to pay fails to pay timely, then that person should forfeit the vacation time and the now-exes must meet to decide how to address nonpayment going ahead. A one-time nonpayment may be OK, but a repeated failure to pay essentially award the vacation –and the debt – to one ex who may not have anticipated it, and this should cause both to sit down and reevaluate options  1 and 2 above instead.

Whatever you do, do not wait for the eve divorce to decide what to do with this timeshare. There are a lot of contingencies, intricacies and fees involved with these timeshares that need thorough investigation and consideration. But, have that discussion early and often, and you may be the one enjoying a vacation after your divorce.