What is a SAHM entitled to in divorce?

[catmama]

What is the name of your state?Pennsylvania

My husband announced about three years ago that he wanted to separate. He purchased a house about 2 years ago and has reportedly been fixing it up, and he separated our finances about that time. He has continued to live in our house, and I have not pushed things to minimize impact on our son (he knows nothing about it).

Our conversations have always involved long term legal separation, but he heard about some change in the new tax law that has made him think divorcing by the end of the year would be in "our" interests. This was a surprise that I wasn't prepared for.

He is part owner of a family business that provides a good income. His ownership of the business was gifted to him during our marriage, and is held within a trust that his father set up when he was a child. I don't know much about the trust, but I have no doubt that his father set it up to protect assets from spouses as much as possible. The trust also contains quite a bit of money from his father's savings and life insurance payouts after his death (which occurred during our marriage). We have relatively little savings outside the trust. He also has a couple small pensions.

I worked FT for about a year of our marriage, and have worked PT or stayed home and homeschooled our son for much of the rest of the time. I also have a medical condition that would make it very challenging for me to work a FT job. I'm 43. We have been married for 19 years this year.

I'm wondering if anyone can give me an idea of what I am entitled to in a divorce, particularly long term assets. I met with three attorneys when this first came up three years ago, and they were all very vague, saying the court had to calculate things based on a billion different factors, so I didn't get much more information than I already had, and was out several hundred dollars. We are hoping to do this amicably for our son's sake, but I have been placed in a difficult financial position and don't want to get screwed.

Many thanks.

 

[HRZ]

You might focus on long term alimony if you have a disability that inhibits gainful employment .

Trusts may or may not have been careful written to exclude sharing family business with outsiders ...but details matter and sometimes folks miss a detail .

You might be entitled to equitable distribution of increases in value of trust / his share of business. (Solomon v Solomon) as well as property acquired during marriage .

PA does NOT require that parents in divorce provide for child's college

 

[not2cleverRed]

Pennsylvania is an equitable distribution state. The gray area I see is that second house, as I don't know that you husband's announcement that he wants to separate in necessarily an agreement to separate... It sounds rather unilateral. And he's still in the marital home.

I believe that the change in the tax law that your husband is thinking of might be the property tax deduction...

But that doesn't matter. What does matter is that you have to look out for yourself and get a spine. Your medical condition may make that difficult, in which case you need to find an advocate who can help you along.

Even if something is NOT required, it can still be part of a divorce decree, whether due to both parties agreeing to a condition, or there being a special circumstance. For example, just because it's not required that the parents pay for college does not mean that parents can't agree to provide for a child's college expenses. Also, child support does not have to end when a child graduates from high school or turns 18 (whichever is later) - if the child is disabled and is not capable of being emancipated, child support can continue longer.

 

[LdiJ]

Pennsylvania is an equitable distribution state. The gray area I see is that second house, as I don't know that you husband's announcement that he wants to separate in necessarily an agreement to separate... It sounds rather unilateral. And he's still in the marital home.

I believe that the change in the tax law that your husband is thinking of might be the property tax deduction...

But that doesn't matter. What does matter is that you have to look out for yourself and get a spine. Your medical condition may make that difficult, in which case you need to find an advocate who can help you along.

Even if something is NOT required, it can still be part of a divorce decree, whether due to both parties agreeing to a condition, or there being a special circumstance. For example, just because it's not required that the parents pay for college does not mean that parents can't agree to provide for a child's college expenses. Also, child support does not have to end when a child graduates from high school or turns 18 (whichever is later) - if the child is disabled and is not capable of being emancipated, child support can continue longer.

I think that the change in the tax law that he might be referring to is the new laws regarding alimony. As of now, alimony is tax deductible to the payer and taxable income to the payee. For any divorce agreement or order issued after 12/31/2018, alimony is NOT deductible to the payer and not taxable income to the payee.

 

[HRZ]

THe tax law change due on 12/2018 ...favors him to get it done now.....the law to drag it into 2019 favors you...and the math of different tax brackets can play an important role ...as a bargaining point he should pay more to get it done now .

Whether or not he meets the financial separation requirements in PA is dubious and for review with your lawyer . You probably should be seeking interim financial support . ( One of my friends is a lawyer doing trust administration in PA and DE and long ago alerted me to details that if not followed don't keep "family" trusts out of the marital division pot ...your attorney needs to review your fact pattern ...it not amateur hour! )

You want to gather copies of last several years tax returns and financial records and how the other home is titled etc.

You are going to need legal counsel on this one .

I'd be nervous for now about your medical disability and home schooling until facts are reviewed with counsel. Unwilling to work because you home school child may not serve your point of view well....it might be reasonable to expect extra support while you brush up your employability skills . LImited employment due to documented disability may be an easier point to address ...and a rational for longer alimony ..until your disability is abated . And health insurance may be a major concern ?

I don't know the family issues ...but it might be cheaper to keep you?

 

[HRZ]

College costs are a bit of an odd duck in PA and as far I know are excluded from divorce orders ...although parents can separately contract for such costs. Some of the financial aid issues are " different ".. and at least on paper under current rules the aid is better if the counted income of the custodial parent is lower ...not that tail should wag the dog...just know the issues are there...if College is a likely need .

 

[catmama]

Re college: my son has about $125k in 529s set up my his father and me and both sets of grandparents. I can't see his mom changing the beneficiary on hers because it would hurt my son. I would ask for child support to continue until he graduates college. The second house and mortgage are in his name but he used marital assets for the downpayment. The joint savings was divided soon after that.

If waiting til 2019 shifts the tax paying burden on alimony (and childs support?) to him, should I ask that those payments increase by the amount of tax I would owe on them?

How would I find out about whether I would be entitled to any trust assets? And am I entitled to either of his small pensions?

Part of the reason I don't want to make this a big fight (in addition to my son) is that he is (verbally) offering to continue to buy me an individual heath policy though for how long is tbd. He has also offered to sign over the family house to me (worth about $400-450K, ~$72K on mortgage, though I would need `$250K at this point to buy a much smaller house within walking or biking distance from his house, and I'd like to stay in the neighborhood so my son can get back and forth easily on his own). The attorneys I met with seemed to suggest that was more than I would get in court.

 

[HRZ]

THe 529 plans are out of the picture except for any one that you alone own ...do not get sidetracked...most unlikely they are marital assets . And PA is rather liberal about ownership changes of 529s
Inclusion of college costs as part of divorce order is unlikely in PA.
You seem to lack a handle on if the growth in trust value is in the marital pot or what . You seem to lack an understanding of what assets might be in the pot for division.
Absent an order to provide a specific level /plan of health coverage you may be holding an empty bag. And generally speaking most employer plans will not cover an EX .

GIviing you an asset encumbered by debt you unable to pay is not a good for you.

Pensions earned while marrried are subject to division

THe tax rule change is. BIG deal if the two parties are likely in different tax brackets ...generally speaking it is to your advantage to procrastinate and delay until,early in 2019'..UNLESS he significantly coughs up more now.

You do not seem to have a hard nosed paid advocate in your corner ...you need one!

 

[catmama]

I appreciate the advice.

My point with the 529s is that I'm not terribly worried about my son's college costs even without an agreement making him pay. I know they are separate from marital property. Also re: health insurance, we are currently on an ACA family plan. My understanding is that he would give me whatever costs I would incur for a similar individual plan. In addition, he is direct depositing money into my account every week through his employer, which has been enough to cover bills and food and some home maintenance (but not much more).

My reluctance to hire an attorney is twofold. First of all, when I spent nearly $1k a few years ago on attorney consults I was basically told that if we went to court the calculations regarding alimony, support, division of assets are largely dictated by some state divorce code that no one would explain or give to me, and that most likely I would end up sharing custody 50/50 and perhaps be entitled to 55% of assets under equitable distribution. And they were extremely vague beyond that, including about retirement assets, etc. What he has offered verbally over time is better than that, provided he follows through on what he promises. The second issue is that our marital assets aside from the house are fairly small. Expenditures on hefty legal fees, even if he is required to pay them, will have a much greater impact on my financial future than his, because he has assets that are gifts/inheritances and (presumably) protected by the trust. Not to mention the fact that it is in my son's interests if we can keep things amicable.

It seems I will probably need to consult with an attorney to make sure I'm not getting screwed even if we can come up with an agreement collaboratively. I would like to have as much information as possible about what questions to ask and what financial statements to bring to maximize bang for buck. My past experiences left a bad taste in my mouth with the attorneys basically giving me very little actionable info at a pretty high cost.

So, to recap what I've learned:

Finalizing a divorce in 2018 would be substantially in his interest because starting in 2019 he would be responsible for taxes on alimony and child support payments. In order to agree to such an arrangement I would need him to give me more, at the very least enough to cover taxes that I would incur under 2018 law.

Pensions earned during the marriage can be divided (equally?).

Additional questions:

1. His house that he bought two years ago is in his name, with a mortgage in his name. Down payment came from marital assets. Are there further subtleties regarding title that could have an impact on me? If so, how would I find those details? It was my impression that a house purchased while married counted as a marital asset even if it's in one person's name. Is that not true? (we have filed no official separation paperwork so far.)

2. What information would I need to determine whether the trust shields all of its assets from a spouse? I understand that gifts/inheritances held within the trust would be solely his and I would only be entitled to growth of those assets. What would I need to calculate the increase in value?

3. If we come up with an agreement (which I understand I should at the very least have reviewed by a lawyer before signing), can we file it with the court ourselves, or would we have to pay an attorney to do it? Is there a possibility that a judge could reject a mutually agreed upon agreement? What is the process around that?

Again, many thanks for the help. My head has been spinning and it's very helpful to have some facts under my belt.

 

[LdiJ]

I can tell you that child support has never been tax deductible to the payer so that won't change for 2019. Its only the alimony portion that will change.

The equity in the house he bought two years ago would be a marital asset.

 

[HRZ]

Child support as posted above is not a tax issue .

As far as I know PA has not changed its alimony rules ...so if let's say he is ordered to pay 6 years of alimony at $ 2000 a month ...it's 2000 a month be it a 2018 or 2019 order ... the 2019 rules are more favorable to you when it comes time to pay your Federal taxes.

You are setting yourself up to get short end of the divorce and you seem not to have a grasp of economic issues. And you are simply flying blind as to if some of the trust value is subject to marital division or his share value increase in family business . Pennywise pound foolish not to have skilled legal talent in your corner

What kind of business and how many employees?

Copies of the last three tax returns filed by trust and by family business might give major clues about asset growth ...then again there may be more to it .

 

[catmama]

Business is a store located out of state. Would guess maybe 30-40 employees?

What would I need to find out if I am entitled to any of the assets in the trust? Is that answer specific to how a trust is set up or would just knowing the type of trust answer the question?

 

[LdiJ]

Business is a store located out of state. Would guess maybe 30-40 employees?

What would I need to find out if I am entitled to any of the assets in the trust? Is that answer specific to how a trust is set up or would just knowing the type of trust answer the question?

Neither...its specific to the total details of the situation...which is why you really need an attorney.

 

[HRZ]

The trust language itself may not be enough ,,,you really need an attorney and one familiar with trust issues as well....some dynasty trusts created in some states, starting with DE are not necessarily bulletproof as to divorcing spouses (Garretson v Garretson) and the duty to provide for spouse as a matter of public policy might trump trust language ....and the details are beyond you or me !

 

[catmama]

Thank you very much.