What’s Fair is Fair…Right?

September 15th, 2016 Posted by  Dwayne and Caroline

What’s Fair is Fair…Right? by Dwayne Grady & Caroline Girgis {3:42 minutes to read} Recently, I had a consultation with a woman who was separated from her husband, but for several reasons, she had not been able to communicate with him regarding property divisions. She was ready to move forward, but he simply wasn’t.

In our meeting, she kept referring to wanting an “equal division” of their property. She surmised that our meeting was to gain my help in identifying the assets and figuring out the best “equal” split. Simple enough. Just take and add all of the:

  • Investments;
  • Property;
  • Business value;
  • Pensions; and
  • Real estate.

Subtract all the liabilities, and split the result 50/50. Right?

Umm no, not really. It reminded me of that commercial where the little old lady says, “That’s not how this works. That’s not how any of this works.

Our conversation got me thinking about how many people do not realize how property division really happens. How it works. Long ago, people bartered for goods and services. It was a time when people traded something they had for something they wanted. Well, that’s pretty much like it is during a divorce. You trade assets back and forth until you both agree on the division. In an equitable property division state, it means splitting the property equitably. But let’s be clear, equitable does not mean equal, it means fair.

Let’s face it, an equal 50/50 division may not be fair at all. Why not?

Family Home:

An equal division may mean the family home is sold to capture the equity in the home. After all, 50% of the equity belongs to both spouses, right? Problem is, this could result in an abrupt relocation of minor children, which may not be fair.

Household Income:

What if the two spouses do not have equal ways to earn a living? One spouse has spent his life as the marital homemaker and the other the breadwinner. It is likely that the homemaker spouse does not have the skills necessary to earn an income that comes close to maintaining their marital lifestyle. A 50/50 “equal” split is not equitable and again, certainly not fair.

Separate Property:

Separate property is property brought into the marriage or received through gift or inheritance. If one spouse has $1 million separate property and the marital estate is $500,000, a 50/50 split is also inequitable and not fair.

A 50/50 split is a starting point but by no means the final way to determine your property division. In our practice, we use special software that looks at the long-term results of any given settlement. It graphically and numerically illustrates where each party is financially. It then shows various scenarios based on different assumptions. That way, if the analysis shows the husband runs out of assets within 10 years while the wife is becoming wealthy, it may indicate an adjustment in the property division is needed.

anew-group

ANEW Divorce Planning
Dwayne Grady (CFP®, CLU®, ChFC®, CDFA™, MBA)
Caroline Girgis (JD, ChFC®, CDFA™)
1750 Tysons Boulevard Suite 1500, McLean, VA 22102
(703) 289–5041

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This entry was posted on Thursday, September 15th, 2016 at 7:07 pm and is filed under Divorce.