401K loan & WI Mac Davis Calculator

[Bali Hai]

Bali...we have a long term marriage with a huge difference in income. He is already paying temporary alimony, or at least knows the numbers that are going to be used. He is going to be paying alimony. The question is how much. I suspect he knows already what the judge will order if it goes in front of the judge. Therefore coming to an agreement is his better bet if he can make the numbers work in such a way that they both benefit.

I don't believe the ex will settle for anything less than what a judge might order. Why should she? And that expectation is usually MORE than what a judge would actually order. Been there, done that.

There is no negotiating room under those conditions.

Until the lower wage earner takes personal responsibility for being an under-achiever in comparison to their spouse, or the law changes, alimony will continue to be alive and well with all the unfairness it causes.

 

[LdiJ]

I don't believe the ex will settle for anything less than what a judge might order. Why should she? And that expectation is usually MORE than what a judge would actually order. Been there, done that.

There is no negotiating room under those conditions.

Until the lower wage earner takes personal responsibility for being an under-achiever in comparison to their spouse, or the law changes, alimony will continue to be alive and well with all the unfairness it causes.

Bali, you have to stop saying things that are untrue just because you are bitter about the fact that you are paying alimony.

 

[Bali Hai]

Bali, you have to stop saying things that are untrue just because you are bitter about the fact that you are paying alimony.

What have I said that is untrue?

I say the emperor has no clothes and everyone knows this is true but some just won't admit it.

 

[621kl]

How to equalize earnings?

My wife earned less than me before I met her, earned less than me throughout our marriage and will always earn less. To have equal earnings she would need to go back to school to get a degree. What about offering an escrow account to cover of college, say $30,000 instead of maintenance? Board is not an issue, she has the house. Wisc state colleges are reasonably priced. $30,000 should cover tuition, fees, books and transportation. Is it reasonable to put qualifications on the escrow account, such as being administered by a third party, can only be used for school related expenses, good for 5 years. If the degree is not completed in 5 years, the account reverts back to me (or can be split - use this as a bargaining point). I don't think she has ambition enough to go to school. Does that figure into the negotiation?

I seriously think the local attorneys are feeding her a line about being entitled to maintenance. Don't forget she makes $40,000 a year already (before child support) from a good company (worked there around 10 years), has no car payment and no house payment.

 

[LdiJ]

My wife earned less than me before I met her, earned less than me throughout our marriage and will always earn less. To have equal earnings she would need to go back to school to get a degree. What about offering an escrow account to cover of college, say $30,000 instead of maintenance? Board is not an issue, she has the house. Wisc state colleges are reasonably priced. $30,000 should cover tuition, fees, books and transportation. Is it reasonable to put qualifications on the escrow account, such as being administered by a third party, can only be used for school related expenses, good for 5 years. If the degree is not completed in 5 years, the account reverts back to me (or can be split - use this as a bargaining point). I don't think she has ambition enough to go to school. Does that figure into the negotiation?

I seriously think the local attorneys are feeding her a line about being entitled to maintenance. Don't forget she makes $40,000 a year already (before child support) from a good company (worked there around 10 years), has no car payment and no house payment.

Wait a minute? How can you say that she is going to have no house payment? The house and the mortgage are ones of the things we have been talking about since the beginning of this thread? Plus, what about the 50k in debt she has that we have been talking about? Yeah, if she was debt free with no mortgage or car payment you could probably convince a judge that she didn't need any alimony. However that is not what the case is going to be after the divorce is final.

You had a 17 year marriage with a huge discrepancy in income. Yeah, you are going to be paying some alimony.

And no, the whole idea of a 30k escrow, use it or lose it account for education is NOT going to fly.

 

[Bali Hai]

My wife earned less than me before I met her, earned less than me throughout our marriage and will always earn less.

Why did you marry her? Give that some profound thought before making the same mistake again.

To have equal earnings she would need to go back to school to get a degree. What about offering an escrow account to cover of college, say $30,000 instead of maintenance? Board is not an issue, she has the house. Wisc state colleges are reasonably priced. $30,000 should cover tuition, fees, books and transportation. Is it reasonable to put qualifications on the escrow account, such as being administered by a third party, can only be used for school related expenses, good for 5 years. If the degree is not completed in 5 years, the account reverts back to me (or can be split - use this as a bargaining point).

I haven't had such a good laugh in a long time. She will take that $30k and probably alot more of your money, and, as far as telling her how to use it, forget it.

I don't think she has ambition enough to go to school. Does that figure into the negotiation?

Yes it does. Her lack of ambition is going to be your fault.

I seriously think the local attorneys are feeding her a line about being entitled to maintenance.

Nobody is entitled to alimony. Alimony is awarded at the discretion of the judge. Local attorneys are apt to have knowledge of what a local judge is likely to do.

Don't forget she makes $40,000 a year already (before child support) from a good company (worked there around 10 years), has no car payment and no house payment.

What does YOUR attorney say?

This divorce is going to be about her, not you.

 

[621kl]

Got Carried away, back to Mac Davis Calculator

My mistake. One possibility was to for me to pay off the house along with giving her my part of the equity. This thread she would have the mortgage & home equ loan (?) along with the house. I got carried away.

If we can't agree and it comes to selling the house, the equity would cover the majority of the debt. How does this effect the MacDavis calculations? I have looked at a MacDavis spreadsheet, but couldn't really follow how it was set up. It is difficult to tell what the major factors are that contributed to the final calculation.

Approximately 22% of my total years earnings are from bonuses. The bonuses are not set in stone and are based on the entire company performance. It's very possible the bonuses will disappear when the economy changes. I had suggested dealing with the bonus as a separate issue, say split 50% after taxes. How would this effect the MacDavis calcs?


My attorney hasn't said too much, other than "there are some creative things that can be done."

 

[Bali Hai]

My mistake. One possibility was to for me to pay off the house along with giving her my part of the equity. This thread she would have the mortgage & home equ loan (?) along with the house. I got carried away.

If we can't agree and it comes to selling the house, the equity would cover the majority of the debt. How does this effect the MacDavis calculations? I have looked at a MacDavis spreadsheet, but couldn't really follow how it was set up. It is difficult to tell what the major factors are that contributed to the final calculation.

Approximately 22% of my total years earnings are from bonuses. The bonuses are not set in stone and are based on the entire company performance. It's very possible the bonuses will disappear when the economy changes. I had suggested dealing with the bonus as a separate issue, say split 50% after taxes. How would this effect the MacDavis calcs?


My attorney hasn't said too much, other than "there are some creative things that can be done."

Your recent three year bonus history will most likely be used. If and when your bonuses disappear, pay a lawyer and go back to court.

http://wisconsinfamilylaw.info/tag/maintenance-calculator-in-wisconsin/

 

[LdiJ]

My mistake. One possibility was to for me to pay off the house along with giving her my part of the equity. This thread she would have the mortgage & home equ loan (?) along with the house. I got carried away.

If we can't agree and it comes to selling the house, the equity would cover the majority of the debt. How does this effect the MacDavis calculations? I have looked at a MacDavis spreadsheet, but couldn't really follow how it was set up. It is difficult to tell what the major factors are that contributed to the final calculation.

Approximately 22% of my total years earnings are from bonuses. The bonuses are not set in stone and are based on the entire company performance. It's very possible the bonuses will disappear when the economy changes. I had suggested dealing with the bonus as a separate issue, say split 50% after taxes. How would this effect the MacDavis calcs?


My attorney hasn't said too much, other than "there are some creative things that can be done."

How is the bonus paid? One lump sum one time a year? Or quarterly, monthly?

Also, you should be aware that alimony is tax deductible to you, and taxable income to her. Therefore you need to view it pre-tax rather than after tax. Also child support is NOT tax deductible to you nor tax deductible to her. Therefore you need to keep that in mind as well.

 

[Bali Hai]

How is the bonus paid? One lump sum one time a year? Or quarterly, monthly?

Also, you should be aware that alimony is tax deductible to you, and taxable income to her. Therefore you need to view it pre-tax rather than after tax. Also child support is NOT tax deductible to you nor tax deductible to her. Therefore you need to keep that in mind as well.

Typical alimony selling point. Make him feel like alimony isn't so bad after all.

 

[LdiJ]

Typical alimony selling point. Make him feel like alimony isn't so bad after all.

No, but if his income is higher related to mom's he is going to be paying more child support, because that is how the calculations work.

 

[tuffbrk]

OP- Just my thoughts-

This is a long-term marriage so expect to pay long term spousal maintenance.

Although you believe that you may have some negotiating options, that will be largely dependent upon her attorney. Her attorney knows that you will be paying long term maintenance as a matter of law. They also can approximate the amount. Thus, you are not on an equal playing field - any type of "negotiating" must be in her benefit or they won't play. So it is probably best to decide what you believe will motivate her to negotiate and then work around that. For example, does she love the house and want to keep it? Or is she intimidated by the amount of property upkeep that is currently required? Does she sleep better at night knowing that her bills are paid in full and would prefer to not have debt to deal with? Or is she happy to make the minimum payment until she dies? You need to be strategic in your thinking to determine what will motivate her to negotiate in order to accomplish your goal-and I'm not sure I know what that goal is.

I have found two separate possibilities for potential calculation of the final spousal amount:
1) calculate the joint married standard of living by adding up all costs for a year and then splitting it in half. So say that amount is 65,000. You then deduct her salary ($40k) from that number and the difference (in this example, $25k) is generally speaking what your maintenance payment may be. Child support is then calculated after the maintenance amount has been considered. So - using this example, her salary for child support would be calculated at $65,000 and yours would be calculated at $67,000.

2) the courts may rule that the dependent spouse is entitled to 50% of her earnings and yours. Using that standard would mean that she is "entitled" to $66,000 to maintain her standard of living. Deducting her salary from that number gives you maintenance exposure of $26,000.

I know it's stressful waiting for your attorney appointment to get these details ironed out, but it truly is your best bet. Your attorney knows the "typical" calculations for your area of the state which will also be influenced by the presiding judge. Good luck to you. Come back again if you have more questions or want to bounce some options that your attorney has suggested.

 

[LdiJ]

I still think that the house is going to be a primary factor in this whole thing. Assuming that the OP is correct and she really wants to keep the house.

On her salary plus maximum alimony she would have a very difficult time refinancing the home into just her name for enough to cover the existing mortgage, the home equity loan and to buy out his share of the equity. On top of that she would have to service 1/2 of the marital debt.

So I really do think that he has some negotiating room to keep all or most of his 401k plus reduce alimony some if he leaves her debt free and only having to refinance for enough to cover the existing mortgage and the home equity loan.

My only concern is that a reduction in alimony is almost automatically going to result in an increase in child support, because the incomes will be further apart. Since alimony is tax deductible and child support is not, it would be critical to calculate out how much the child support would change before assuming that a reduction in alimony is better.

 

[tuffbrk]

True, if she is retirement conscious. Otherwise, she may choose to take a hit to her 401k and use those funds. The age of the child(ren) also comes into play with evaluating the CS and the maintenance. I'd rather pay more in CS which has an end date, than in maintenance which doesn't. CS generally has review dates for COLA and income changes, and thus is generally easier to have increased/reduced than maintenance so legal fees need to be factored in as well. The OP doesn't seem to be concerned about childcare/aftercare/summer camp, or extracurricular activities which may cost above and beyond CS, in addition to college costs. I find that unusual.

 

[Bali Hai]

I still think that the house is going to be a primary factor in this whole thing. Assuming that the OP is correct and she really wants to keep the house.

On her salary plus maximum alimony she would have a very difficult time refinancing the home into just her name for enough to cover the existing mortgage, the home equity loan and to buy out his share of the equity. On top of that she would have to service 1/2 of the marital debt.

So I really do think that he has some negotiating room to keep all or most of his 401k plus reduce alimony some if he leaves her debt free and only having to refinance for enough to cover the existing mortgage and the home equity loan.

My only concern is that a reduction in alimony is almost automatically going to result in an increase in child support, because the incomes will be further apart. Since alimony is tax deductible and child support is not, it would be critical to calculate out how much the child support would change before assuming that a reduction in alimony is better.

Simple solution to all this. They sell the house, pay down the marital debt with the equity and she downsizes. Happens all the time.