Divorce

[2009]

What is the name of your state (only U.S. law)? North Carolina
My soon to be x is saying she is going to contest the divorce if I don't agree to give her 75% of the equity in our home. She had the seperation papers done and the assets were agreed uopn in the seperation 50/50 and all other asset were divided. On what grounds can she contest the divorce we have been seperated for a year.What is the name of your state (only U.S. law)?

 

[mistoffolees]

What is the name of your state (only U.S. law)? North Carolina
My soon to be x is saying she is going to contest the divorce if I don't agree to give her 75% of the equity in our home. She had the seperation papers done and the assets were agreed uopn in the seperation 50/50 and all other asset were divided. On what grounds can she contest the divorce we have been seperated for a year.What is the name of your state (only U.S. law)?

She won't actually be contesting the divorce, but she can contest the property division.

NC is an equitable division state. That means that the judge can divide the property in some manner other than 50:50 if he believes it would be more just to do so. Background (and factors the judge may consider) are here:
Divorce Support - North Carolina Property Division Factors

Basically, you would start with 50:50 division of ALL assets (not just home equity). It might be desirable for her to get more of the home equity and you get more of another asset, for example. From there, you consider the factors in the above web page and you'll have to decide (with the assistance of an attorney if necessary) whether the judge is likely to vary significantly from 50:50. Without knowing what other assets you have and what the circumstances are, it would be impossible to guess, but a local attorney would have a good idea.

The other factor to consider is the cost of a protracted battle. If the amount in question isn't that great, it may be better to go along rather than spending tens of thousands of dollars and countless hours fighting over it.

 

[Bali Hai]

What is the name of your state (only U.S. law)? North Carolina
My soon to be x is saying she is going to contest the divorce if I don't agree to give her 75% of the equity in our home. She had the seperation papers done and the assets were agreed uopn in the seperation 50/50 and all other asset were divided. On what grounds can she contest the divorce we have been seperated for a year.What is the name of your state (only U.S. law)?

She agreed originally to 50:50 and now wants 75:25?

I wonder what changed her mind?

 

[LdiJ]

She won't actually be contesting the divorce, but she can contest the property division.

NC is an equitable division state. That means that the judge can divide the property in some manner other than 50:50 if he believes it would be more just to do so. Background (and factors the judge may consider) are here:
Divorce Support - North Carolina Property Division Factors

Basically, you would start with 50:50 division of ALL assets (not just home equity). It might be desirable for her to get more of the home equity and you get more of another asset, for example. From there, you consider the factors in the above web page and you'll have to decide (with the assistance of an attorney if necessary) whether the judge is likely to vary significantly from 50:50. Without knowing what other assets you have and what the circumstances are, it would be impossible to guess, but a local attorney would have a good idea.

The other factor to consider is the cost of a protracted battle. If the amount in question isn't that great, it may be better to go along rather than spending tens of thousands of dollars and countless hours fighting over it.

I agree with this response, and let me give you a couple of examples:

You have 100k in home equity and she wants 75k of that. You also have 50k in a 401k that accrued during the marriage. That is combined major assets of 150k. On a 50/50 basis you would each be entitled to 75k. If she is willing to give up her 25k in your 401k, then it would be a fair exchange for her to get 75k of the home equity.

Or, in the alternative, you have 100k of home equity and 25k of consumer debt. She might agree to take full responsibility for the 25k of consumer debt in exchange for 75% of the home equity.

Basically, each individual asset and debt does not have to be divided equally. The net bottom line results are what matter.

 

[Bali Hai]

I agree with this response, and let me give you a couple of examples:

You have 100k in home equity and she wants 75k of that. You also have 50k in a 401k that accrued during the marriage. That is combined major assets of 150k. On a 50/50 basis you would each be entitled to 75k. If she is willing to give up her 25k in your 401k, then it would be a fair exchange for her to get 75k of the home equity.

WRONG! She is getting 25k AFTER taxes and he is getting 25k BEFORE taxes.

Or, in the alternative, you have 100k of home equity and 25k of consumer debt. She might agree to take full responsibility for the 25k of consumer debt in exchange for 75% of the home equity.

That's reasonable as long as she pays that debt!

Basically, each individual asset and debt does not have to be divided equally. The net bottom line results are what matter.

The judge can divide the assets/debts anyway they choose to do it.

 

[mistoffolees]

I agree with this response, and let me give you a couple of examples:

You have 100k in home equity and she wants 75k of that. You also have 50k in a 401k that accrued during the marriage. That is combined major assets of 150k. On a 50/50 basis you would each be entitled to 75k. If she is willing to give up her 25k in your 401k, then it would be a fair exchange for her to get 75k of the home equity.

Or, in the alternative, you have 100k of home equity and 25k of consumer debt. She might agree to take full responsibility for the 25k of consumer debt in exchange for 75% of the home equity.

Basically, each individual asset and debt does not have to be divided equally. The net bottom line results are what matter.

We've been through that example before. One should NOT exchange pre-tax assets (401K) for after tax assets (home equity) without an adjustment for taxes.

The only time that your scenario is equal is if the effective tax rate at the time of exercising the 401K is zero. I would certainly not make my retirement plans based on that assumption.

I would strongly suggest equalizing pre-tax assets separately from after tax assets. If that is not possible for some reason, then the amounts MUST be adjusted for an estimated tax rate (which will only be an estimate but it will still be better than assuming zero).

Furthermore, there's the issue of 'what happens if I need the money'? A person can sell a home or take out a home equity line (within limits) at relatively low expense if they need the money for an emergency (or even for a whim, for that matter). The 401K does not offer that flexibility.

Essentially, $50 K in home equity is worth more than $50 K in a 401K. (Of course, if the parties choose to divide the property unevenly, that's their decision, but the need to be aware of the tax consequences).

 

[Bali Hai]

We've been through that example before. One should NOT exchange pre-tax assets (401K) for after tax assets (home equity) without an adjustment for taxes.

The only time that your scenario is equal is if the effective tax rate at the time of exercising the 401K is zero. I would certainly not make my retirement plans based on that assumption.

I would strongly suggest equalizing pre-tax assets separately from after tax assets. If that is not possible for some reason, then the amounts MUST be adjusted for an estimated tax rate (which will only be an estimate but it will still be better than assuming zero).

Furthermore, there's the issue of 'what happens if I need the money'? A person can sell a home or take out a home equity line (within limits) at relatively low expense if they need the money for an emergency (or even for a whim, for that matter). The 401K does not offer that flexibility.

Essentially, $50 K in home equity is worth more than $50 K in a 401K. (Of course, if the parties choose to divide the property unevenly, that's their decision, but the need to be aware of the tax consequences).

LD is fully aware of this.

She has two standards when giving advice and this was her standard to the husband.

 

[Golfball]

What is the name of your state (only U.S. law)? North Carolina
My soon to be x is saying she is going to contest the divorce if I don't agree to give her 75% of the equity in our home. She had the seperation papers done and the assets were agreed uopn in the seperation 50/50 and all other asset were divided. On what grounds can she contest the divorce we have been seperated for a year.What is the name of your state (only U.S. law)?

Other comments aside, what is actually going on here?

Are the separation papers/agreement already signed (and notarized) by both parties? If they are, then any changes to the agreement must either a) be covered by a mechanism already in the agreement, or b) agreed to by both parties.

If the equity division in the agreement was 50/50, and the agreement is signed, your STBX can do Jack & Squat (and Jack left the state) to contest the divorce, or force you to give her more equity.

ETA: I am also assuming in this post that the separation agreement you are referring to is in place of an Equitable Distribution proceeding, and there is appropriate language in the separation agreement to that effect. If there isn't language to that effect, all bets are off!