When you decide to get a divorce in North Carolina, there is a right way and a wrong way to divide property. In this video, I want to show you the right way so that you won’t make the same mistake that too many North Carolinians during their separation and divorce.
Hello and welcome to another episode of the Ask a lawyer show. My name is Jim Hart, I’m back at you here with another exciting episode. Today I want to talk to you about how to divide up assets when it comes to equitable distribution for your divorce.
Now that may sound like a big bunch of mumbo jumbo, but what I’m really getting at here is that while you’re married you accumulate a lot of stuff, and when you decide to separate and divorce you have to divide up that stuff. What you need to know is what’s the best way to do that.
Let’s take an example … And by the way, before we go any further I just want to remind you to hit the button, I think it’s over here, make sure you subscribe to today’s episode and if also you could hit the little, I think there’s like a bell or an alarm box or something that’ll update you and let you know when I post new episodes, that would be great. If you could just go ahead and click that box too, I’d really appreciate it. If you have comments, question, anything that you would want me to answer in a future episode, please feel free to comment below. Also, we’ll include notes and everything I talk about here in the description below, as well as links to my websites with more information on this topic.
So basically what I want to talk to you about today is, again, dividing up assets or stuff or whatever you want to call it, that you’ve accumulated during your marriage. This question is courtesy of Derrick Parish, who is a financial advisor with Edward Jones. (These phones are great, but I hate when they go off in the middle of recording. Do not disturb, done). Today’s question is courtesy of Derrick Parish, he’s a financial advisor, a really nice guy, I met with him this past week for coffee and a little bit of breakfast. He invited me out because he has a client that’s going through a divorce and what they weren’t quite able to figure out is how to divide up their stuff.
Here is the big issue. Let’s say you’ve got, just in broad terms, in terms of assets, you’ve got a house that has, let’s say a 100,000 dollars of equity in it. On the other side you’ve got … One of you has, either you or your spouse has a retirement account that’s got a 100,000 dollars of equity. And let’s say you’ve got some cash, that’s got a 100,000 dollars in equity. How do you divide that up?
The Type of Asset You Are Dividing is Important
You got three separate types of assets. What a lot of people will do is they won’t think a whole lot about the assets, but they’ll say, “Okay, you know what, you’re going to be living in the house so you’re gonna keep the house with all its equity. It’s my retirement account so I’m gonna keep the retirement account and you keep the equity in the house, and then we’re going to split the cash.”
That might be a perfectly fine way to do it, but here is the big problem. Every single asset that we have is not treated the same and it’s not worth the same amount of money. So what we typically do, when I’m helping someone who’s going through this situation and they are trying to figure out how to divide all this stuff up … When somebody’s comes to me and they want to know, “Okay, house, retirement, cash, what do I do?”, then basically the way I work in that situation is we look at each asset and we say, “Okay, what’s the house going to be worth? What’s the equity truly worth right if you were to liquidate that property? What is the retirement account worth if you were to liquidate that?” Because that’s how you really want to look at all these things.
Dollar for dollar, what’s worth the most amount of money? Dollar for dollar, one dollar of cash is worth more than one dollar of real estate, which is worth more than one dollar of retirement assets. If one person’s getting the house, and one person is getting the retirement and one person is getting … and they’re splitting the cash, then the person who got the house and the cash is getting more money at the end of the day than the person who got the retirement and the cash. If somebody was getting all the cash and the house … Let’s say you had a 100,000 dollars in cash and a 100,000 dollars in equity and 200,000 dollars in retirement, and let’s say the person who had the retirement says they want to keep their retirement, and the person who got the 100,000 dollars in cash and 100,000 dollars in the house,
I’d take that deal all day, that is a great deal for the person getting those asset classes. Because if they were in a cash crunch and they needed money, they don’t have to liquidate anything, they’ve got a 100,000 dollars in cash they can use, they can sell the house if they needed to and they’re not going to incur any taxes.
The person who received the retirement assets, however, is going to have to pay interest, they’re gonna have to pay penalties and interest. They’re going to pay penalties, they’re going to pay taxes, they’re going to have to pay all sorts of things just to get the money. So if you have a dollar of retirement assets, to get access to that you’re probably only going to get 70 cents on the dollar. For the house, you’re probably going to get 90 cents on the dollar, because you have to pay closing costs and things like that to liquidate.
But actually you may not, because you could take out a loan on that equity in the house and you could have access to that immediately without any tax burden at all. That’s the idea I want to leave you with today is. All asset classes are not crated the same, and when you’re dividing them up in a divorce situation sometimes these cases can get really complicated, because when we’re trying to evaluate an offer from the attorney for another spouse we have to figure out how does this really play in. Who is really getting the best deal here? That’s one of the things that we hope people do, and that’s one of the things we help our clients do.
If you have questions about that please feel free to reach out. If you’d like to schedule time to come in and meet with me, that’s fine too. And we’ve got lots of information on the website.
That’s it for today. Not really one … We didn’t really do three questions today, we did kind of one question, a deep dive. Anyway, that’s it. I hope you have a great day folks, I hope you have a great week and we will talk to you again next week.
My kids are starting school this week, I’m super excited about that. We need them to get back to school. I’m sure you parents out there feel my pain. But that’s it for today. Have a great day folks, we’ll talk soon. Bye, bye.