Attorney At Law Magazine Vol 5 Issue 10 - Page 18

Divorce Finance Y our client, Dan, has provided you with an affidavit of financial information (AFI) and you’ve received the AFI from the opposing party, Sue, and both seem pretty straight forward. Here is a list of their assets. 1. Principal Residence Market Value $750,000 Mortgage Balance $150,000 HELOC $200,000 Equity $400,000 2. Vacation Home Market Value 3. Dan’s 401(k) Property Settlements - When Equal Is Not Equal $300,000 $150,000 4. Checking and Savings $30,000 TOTAL ASSETS = $880,000 Dan says that he wants to keep the primary home and he will let Sue keep the vacation home. Sue is in agreement with this plan and therefore, to provide a 50/50 split, Sue will get half of the checking and savings, $15,000 and $125,000 of the 401(k) for a total of $440,000 each. Ah, a perfect 50/50 split. No problem!! TM By Nancy Hetrick CDFA Dan 1. Principal Residence Sue $400,000 2. Vacation Home $300,000 3. 401(k) $150,000 $25,000 $125,000 4. Checking and Savings $30,000 $15,000 $15,000 TOTAL ASSETS = $880,000 $440,000 $440,000 Dan plans to live in the primary home for two to three more years and then sell it and downsize. Sue plans to sell the vacation home and buy a new residence for herself. Since she’s only 50 years old, she is also going to take advantage of her one-time opportunity to withdraw $100,000 from the 401(k) Nancy Hetrick  is the owner of Divorce Financial Strategies, LLC and a financial advi- subsequent to divorce with no penalty, although she will have to pay income tax on the money. Hmm, could these plans impact this settlement? Let’s take a new look at each party. sor with Clarity Financial LLC. As a certified divorce financial analyst [CDFA™], she assists clients and their attorneys to understand how the financial decisions he/she makes today will impact their financial future.  She has over 13 years of experience in both About six months after the divorce, Dan realizes that the upkeep on the home is more than he can afford on his own and decides to go ahead and sell. He’s able to sell it for $775,000. He pays off the $350k mortgage and HELOC and has to pay 6 percent for sales fees or $46,500 leaving him with $378,500 in equity. The original price of the home, bought with his wife 25 years ago, was $150,000. investment management and financial plan- That means he now has a capital gain of $228,500. As a single person, he can exempt $250,000 of gain ning. Nancy is also an accredited wealth on a principal residence, avoiding any capital gains tax. management advisor (AWMA), an accredited asset management specialist (AAMS), a chartered mutual fund counselor (CMFC) and a trained mediator.  For more information, see her website at www.nancyhetrick.com Let’s look at Sue. She moved into the vacation home for six months before putting it on the market. She was able to sell it for $325,000 with selling expenses of $19,500 leaving her with $305,500. The property had been in her family for generations and the basis was $60,000 so she assumed that her gain or contact her at 602-349-0164 or of $245,500 was well under her personal exemption and she sold the property and used the money to nancy@nancyhetrick.com. buy a new condominium. When tax time came around, her accountant looked at her with big eyes and