Lesson 8: Assets

Choose the Best Assets

Introduction

Welcome to Lesson 8.  In this lesson you will create a plan for your Assets.  We teach you how to evaluate whether an asset is good or bad with our Asset Tier List.  We then give you a tool to list your Assets from Best to Worst.  Finally, we go into detail about the common types of assets you are likely to have.   These three parts will help you create a plan to keep the best assets.    

You Have to Keep the Best Assets:

In 1982 the country singer Jerry Reed released a song called “She Got the Gold Mine (I Got the Shaft)”.  One of his best lines in that song is  “they split it right down the middle, and then they give her the better half”.  Mr. Reed is not wrong when he says you can split it down the middle and get the better half.  Take my client for example.  

A client of mine got the better half from his wife.  He owned investments worth roughly $400,000.00.  He also owned a matrimonial home with his wife worth roughly $400,000.00.  His wife wanted the house because she believed the housing market was about to explode.  He gave her the house and he took his investments.  Two years later, the housing market actually crashed and his investments kept going up.  He ended up with about $480,000.00 and the house was now only worth $380,000.00.  Now that isn’t much of a loss for her, but if she kept the investments she’d have $100,000.00 more.  You can see why she was upset.  His wife wanted him to negotiate their separation but it was too late.  He got the better half. 

You have more control over which assets you keep than you think.  Remember, your lawyer is trained to help you get what you want, but they can’t tell you what you should want.  You have to tell them what you want and ask them if it is a good idea.  This lesson will help you create your plan for what to keep and what to sell or give to your ex-spouse.  

What Are the Best Assets?

As you saw in lesson 7, it is not easy to pick the best assets.   For this reason, we created a system to help you rank your assets from best to worst.  The system is called the 5 Tiers of Assets or the Asset Tier List.  

Before we go over the list, we must remember that family law considers anything you or your ex-spouse owns to be an Asset.  Make sure to consider all of your family’s assets when going through this lesson.  Also remember that some assets are not divided.  We will not go into detail about excluded assets because that is your lawyer’s job.  Just remember to list all of your family’s assets and then ask your lawyer about which ones are excluded.  Consider all assets at this stage so that you don’t miss out on anything important.  

Part 1:  5 Tiers of Assets

The Asset Tier List is designed to allow you to evaluate each asset you own.  Every asset should find a home in one of these tiers. The top tier is the most valuable.  In this case it is Cash.  We will explain why Cash is King later, but for now let us introduce the five tiers to you.  The 5 tiers look like this:

5 Tiers of Assets:

  1. Cash 
  2. Income Asset
  3. Neutral Asset 
  4. Costing Asset
  5. Debted Asset

Cash is King:

Cash is one of the most valuable types of assets.  It is so valuable because of the flexibility it gives you.  You can pay off high debt, you can buy investments or you can do whatever you would like.  One of the dangers of cash is that it can also be used to buy more bad assets. For example,  if you spend your huge payout of cash on a house or lottery ticket, then the cash has lost its value.  This is why you should only look to keep cash if you know that you are a prudent spender.  Another weakness of cash is that you can’t just keep it sitting in a savings account.  You need to do some form of investing for it to be as valuable. 

Income Asset:

An Income Asset is any asset that gives you a net income.  This can be any form of investment as long as you make an income at the end of the day.  This means you may have a debt attached to it, as long as you earn more money than the debt costs. The best example is an income property.  You may have a huge mortgage attached to the property but as long as you make more rental income than your expenses you can call it an income asset.  

For the most part these will be investments, pensions, income properties, businesses, royalties or anything that generates an income.  Houses do not fall in this category.  Many people believe thier house is an investment. It isn’t.  You are not guaranteed to have your house value grow every year.  Even if it does, you still have to pay so much money to maintain it that you often do not see much of a profit from your home.  You also don’t get the benefit of any increase in value until you sell your home.  Most people don’t sell their homes until very late in life. 

I helped an estate where the deceased was an elderly woman who passed away in her home.  She couldn’t afford her groceries every month, and she could barely pay to upkeep the house.  She had nothing to her name except one house and she died a millionaire.   Her house was worth 1.2 million dollars but she never sold it.  She lived in poverty.   The only people who benefitted from her home were her beneficiaries.  This is just an example of why your home is not considered an investment. You can’t generate an income off of your house.  No matter how valuable your house can be, you still need an income.  Houses do not give you an income and therefore they are not an income asset.  

She never sold it and the only people who benefited from her estate were her beneficiaries.   Even though her house was worth a million dollars she never got to see that money.  This is because you can’t take the money out of your home to spend it.  

Neutral Asset:

A Neutral Asset is any asset that doesn’t make you money, but doesn’t cost you money either.  For example, household furniture is considered a Neutral Asset as long as you didn’t get a loan to buy the furniture.  Neutral assets are not as valuable as cash or income assets, however, they can still be very valuable.  Household furniture is one of the more valuable assets you can take from your home.  As we stated in the Expenses Portfolio lessons, buying new furniture is one of the biggest expenses you will have right after separation.  Keeping a lot of household furniture can save you a lot of cash in the future.  

Costing Asset

A Costing Asset is any asset that does not have a debt attached to it but still costs you money to keep.   Good examples of costing assets are motorcycles, snowmobiles, ATV’s, camping trailers or even houses where you have already paid their debts off.  These do not have a debt attached to them but they still cost you money every month to keep.  Recreational vehicles have maintenance costs, insurance, fuel, storage fees to worry about.  Trailers have storage fees and maintenance fees.  These assets will not be as expensive to keep as debted assets but they still cost you money every month.  Remember that right after separation you want to limit your expenses as much as possible. 

There are three reasons why costing assets are not desirable.  Firstly, as stated, they cost you money every month to maintain.  Secondly, these assets often depreciate overtime.  ATV’s, trailers, motorcycles all lose their value overtime. YOu will spend money every year to keep them and they will be worth less money every year.  

The other negative about costing assets is you have to pay more for these types of assets than debted assets.  This is because debted assets have a debt attached to them that lowers their overall value.  A $20,000.00 car that has a $15,000.00 loan is only worth $5,000.00.  Where a $7,000.00 trailer that is fully paid off is worth $7,000.00.  There is no debt to deduct their value and so you will often have to pay more for them at separation.  

TO summarize, the reason these assets have so little value to you is because you have to pay your spouse top dollar for the right to keep that asset.  You will pay money every month to maintain it and in the end it will lose all of its value.  My advice here is sell as many of these assets as you are able. Keep the assets that mean a lot to you.  For example, if you are passionate about snowmobiling then you can keep the snowmobile and sell everything else.  Remember that you will likely be able to buy those items back a couple of years later.  You just need to lower your expenses and maximize your cash and income assets right after separation.  

Debted Assets

Debted assets are any asset that has a debt attached to them.  The two most common debted assets are houses and vehicles.  Remember, these assets cannot make you a net income.  If they make you a net income then they are an income asset even if they have a debt attached to them.  

Debted assets are typically the worst assets to have. They often cost you money to maintain, such as houses and vehicles.  They also have a monthly debt payment attached to them as well.  It is the debt payments that make these assets so difficult.  You will have spousal support, child support and doubled expenses.  You cannot afford to keep many debted assets once you separate.  

Your best strategy is to take an income asset or cash before taking a debted asset.  If you have a vehicle with a debt attached to it.  See if you can get a cheaper vehicle with a lower debt.  If you have a house with a mortgage, see if you can buy a rental property instead.  Ultimately, you may not be able to dispense every debted asset, but the more you reduce, the easier your life will become.  

Depreciating Assets

Any of these assets can be depreciating assets.  Even cash can depreciate overtime.  The most common depreciating items are vehicles.  This is why we recommend you trade in for a cheaper vehicle right after separation.  My father bought a new Lincoln MKT in 2011.  He paid over $70,000.00 for it.  Seven years later he traded it in for $14,000.00.  He lost $56,000.00 in seven years.    A 2001 Bentley Azure cost $335,400.00 in 2001 to purchase according to Autoblog.com.  You can now buy that same car for $20,000.00.  That is over 90% lost value.  

Most recreational vehicles, trailers, and retail items lose value overtime.  Since almost any category can depreciate overtime it is not helpful to place these in our tier list, however, you should consider depreciation when you are making your list.  You do not want to pay your ex-spouse full value today on an asset that will lose value overtime.  

Don’t pay your ex-spouse $60,000.00 for something that will only be worth $40,000.00 two years from now.  Sell it and buy something similar a couple of years later.  

Part 2:  List and Tier Your Assets

List your family assets in our Asset Tier List provided below.  Remember you include every asset that you and your ex-spouse own.  Try to look for any hidden assets that may exist.  You would be surprised how many secret accounts and hidden assets my clients find.  

For general items such as household contents, just list out the general items.  Appliances, living room set, bedroom set etc.  YOu do not need to itemize every item. This tool is meant to help you so be as specific as you would like, but not so specific that you procrastinate making the list.  This tool is meant to help you but be a burden. 

Whatever you do, you must reflect accurate values to everything.  It does not benefit you to pretend your house is worth a million dollars when it’s only worth $300,000.00.  You want to be accurate so that you can have an accurate plan.  I often have clients who put little effort in this list.  It does you no good to do a sloppy list.  Be as specific as you think you need and make sure your numbers are accurate.  If you need a family member (sister or brother) to help you fill this out then do it.  This list may be one of the most valuable ones in the course, next to the expenses lists.  

This list is very important.  If you don’t list out all of your assets with accurate values attached to them, you won’t be able to make a good plan.  If you have any questions, please email us.

INSERT PDF OF TIER LIST.

Examples:

To help you fillout the Asset Tier List I have provided you with a couple of examples.  

Example 1:  

You and your ex-partner own a matrimonial home worth $500,000.00 with a mortgage of $200,000.00, a pension with $150,000.00 and two vehicles.  Vehicle A is paid off fully and Vehicle B is worth $20,000.00 but has $15,000.00 owing.  Where would you place each of these assets?

5: Cash_________________________________________________________

4: Income Asset_________________________________________________________

3: Neutral Asset_________________________________________________________

2: Costing Asset_________________________________________________________

1: Debted Asset _________________________________________________________

In this example, the Matrimonial Home may be worth the most money but it is still a debted asset.  Vehicle B is also a debted asset.  The Pension is an Income Asset and Vehicle A is a costing asset because it has no debt attached to it.

 

Example 2:

You and your Ex-Partner rent a home but you own a new car worth $25,000.00 and are owing $22,000.00, you own a motorcycle, a four-wheeler with no debt, a 5 year old boat worth $30,000.00 that owes $20,000.00 and a retirement savings account of $20,000.00.  Where would you place each of these assets?

5: Cash_________________________________________________________

4: Income Asset_________________________________________________________

3: Neutral Asset_________________________________________________________

2: Costing Asset_________________________________________________________

1: Debted Asset _________________________________________________________

In this example, the retirement savings account is Cash, your motorcycle and four-wheeler are both costing assets and your five year old boat and your car are both debted assets.  

 

Example 3:

You own an investment account, your spouse owns a retirement account, you have a pension, your wife has shares in her employer’s business, You own two rental properties with huge mortgages, you both own a house with a mortgage, a cottage with no mortgage and a vacation property in florida with no mortgage. Where do you place each asset?

5: Cash_________________________________________________________

4: Income Asset_________________________________________________________

3: Neutral Asset_________________________________________________________

2: Costing Asset_________________________________________________________

1: Debted Asset _________________________________________________________

The investment account, retirement account, pension and shares in the employer’s corporation are all income assets.  The two rental properties are income assets as well.  The home is a debted asset and the cottage and florida property are both costing assets.

Hopefully these examples help you create your own list.    

Part 3: Types of Assets:

Now that you have listed all of your assets in your Asset Tier List, you need to decide which assets to keep and which ones to sell.  Your situation may not be as simple as the examples above so you may need more information to help you decide which assets to keep.  A rule of thumb is that you want to keep the cash and income assets over the others.  For this reason, I have gone over some general issues I have experienced with specific assets.

Types of Assets:

Now that you know how to tier and identify your best and worst assets, we should go over the main assets your family may have.  We will give you some tips and pointers for these assets to help you determine if you want to keep an asset or lose it.  

  1. Vehicles
  2. HOusehold Contents
  3. Matrimonial Home
  4. Second Homes
  5.  
  • Vehicles:

Everyone needs a vehicle.  You will likely need to determine whether you should keep your vehicle, sell it or give it to your ex-spouse.  These are some key factors to consider.  

Your first step is to determine if you can buy a cheaper vehicle.  Your finance payments, gas and insurance costs all increase with a more expensive vehicle.  You must lower your vehicle cost if you can.  Remember, your vehicle will depreciate overtime.  This means you will pay your ex-spouse $30,000.00 now for a vehicle that will be worth $10,000.00 in a few years.  You are better off to sell the vehicle and buy a cheaper one.  Trucks and luxury vehicles are the worst vehicles for a separation.  The second worst are new vehicles.  If your vehicle is new, consider selling it and buying a cheaper vehicle.  You need to save on your monthly fees.  After a year or two you can consider buying a more expensive vehicle again.

My clients who do the best often have cheaper vehicles.  This allows them to save their money and focus on the more difficult issues.

I own my Vehicle but my Ex-Spouse Drives it

This is a big problem for you.  I have seen spouses drive a vehicle for years without paying anything for it.  I had one client whose partner drove the van for a year and a half. She didn’t pay the insurance or the finance payments.  She didn’t pay anything for the vehicle.  She also got an order for child and spousal support against him.  In this case, my client had to pay for the insurance and finance payments and had to pay child support and spousal support on top of that.  He essentially paid twice as much as he should have.  My client hoped she would eventually take over the vehicle and so he did not get an order forcing her to return the vehicle.   He eventually gave up and brought a motion for her to return the vehicle.  She returned it to him voluntarily.  The vehicle was worth$22,000.00 after separation and was now worth $15,000.00.  He paid all of those expenses and also paid her supports.  

If your ex-spouse has a vehicle that is in your name, you must make all reasonable efforts to get that vehicle back.  You will be forced to pay the insurance and the finance payments for as long as your ex-spouse keeps it.  If you don’t get that vehicle back in your possession then you may be forced to pay more money every month and you will lose value in the vehicle overtime.  Sell that vehicle.  Remember, before you take any step you must ask your lawyer about how to have your vehicle returned.  If you take a step that the court determines to be too aggressive it may backfire on you.  

  • Household Contents:

Household content is also covered in the Expenses Portfolio and we will cover it quickly again here.  Once you separate you will have to determine what to do about your household goods.  Your plan should be to keep as many household goods as possible.  This is because it is much more expensive to replace your goods with newer retail goods.  

Many of my clients want to start fresh with all new items.  They are often required to spend $10,000 – $40,000 on new furniture and appliances.  They are forced to take this money from somewhere and they often withdraw their investment accounts or their retirement accounts to make this happen.  As you know, your investment accounts and your cash are the most valuable assets you can have, so depleting them to buy new furniture is one of the worst decisions you can make.  

Another reason is that in court your household furniture is likely to be greatly devalued.  A whole house of stuff can be valued at $5,000.00 where buying everything new would cost $20,000.00.  For this reason, you get your things cheap and you save your best assets for your retirement.

For this reason you want to keep as much household furniture as possible.

  • Matrimonial Home:

The Matrimonial Home is often defined as the last home your family lived in permanently at the date of separation.  For most couples it will be clear what home was your matrimonial home.  One of the spouses must own the property for it to be a Matrimonial Home.  The Matrimonial Home has several factors to consider.  

Should I keep My Home?

The first thing you should consider is whether you should keep your home.  The biggest problem with houses is they are liabilities, as Robert Kiosaki says in Rich Dad Poor Dad.  As Grant Cardone says, you should rent the property you live and own the property you rent.  

It is rare that I ever recommend a client keep their matrimonial home.  I only recommend they stay in their Matrimonial Home when there is no other way they could live somewhere for cheaper.  Based on my client’s experiences, I first recommend you buy a rental property and stay in one of the units.  My second recommendation is take the sale proceeds from your home and put them in an investment of somesort.  You may be better off renting than buying a new home that is too expensive to maintain.  

I often see clients move back in with family members or even take in one or two tenants in their properties.  All of these options have their positives and negatives so make sure to consult your lawyer before making any decision.  

When Do I Leave my Home?

This question is just as important as deciding what to do with your Home.  If you are on title, leaving your home may be one of the worst things you can do.  I have seen several clients destroy their credit ratings because they leave their home.  

Factor one:  Who is Living in the Home?

Picture this, you leave your home.  Your ex-spouse stays in the home. Your ex-spouse refuses to pay for any of the expenses and you have to continue to pay them.  You also have to pay money to live somewhere else.  You are in effect, paying double what you should be.  Then consider that your ex-spouse can still ask for child and spousal support.  You then would be paying triple what you should.  This is the danger of leaving your home.

If you stay in the home, you at least only have to pay for your one home.  If you and your ex-spouse cannot live together but you are still on title, then it is recommended that you bring a motion to sell the home.  You cannot afford to leave the home unless you and your ex-spouse have complete trust that they will pay all of the expenses and they will not default on those expenses.  

Here is the rule of thumb, If you ex-spouse is staying in the home, then you cannot leave the home.  Let them leave the home.  If you are forced to leave the home then move to sell it as soon as possible.  Do not let your ex-spouse stay in the home for long if you are forced to leave.  Remember, you are adults and you have children who will be exposed to any conflict, only use reasonable measures to get your ex-spouse out of the home.  You can bring a motion for them to leave, do not use aggressive or coercive measures.  It will only backfire on you.  

Factor 2: Who is Paying the Expenses for the Home? 

As stated earlier, there is one exception to letting your ex-spouse stay in the home.  This is where you trust that he or she will actually pay all of the expenses of the home and will not default on those expenses.  

The expenses of the home are not just the mortgage and insurance.  They must be willing to pay the taxes, insurance, utilities, internet and cable bills, Repairs and maintenance etc.  If they are not willing to pay all of the expenses, you risk having to pay those expenses and pay your ex-spouse supports on top of that.  THe supports are meant to cover these expenses, but when a spouse refuses to pay a bill that is in your name, you are the one who suffers, not them.  So make sure you absolutely trust them to pay ALL of the expenses.  

If you do not trust that your ex-spouse will pay all of the expenses, or you believe they may not actually be able to afford the expenses, ask your lawyer to have the home sold.  

Example:

I have had many clients leave their home.  Most voluntarily leave and many are improperly forced out by police.  I had one client who agreed to leave the home.  He left because he did not want his children disturbed.  He knew his wife could not afford the home because she earned a minimum wage income. He thought she would agree to transfer the home to him eventually.

I advised him to sell the home right away.  He refused this advice and told me his plan is to move into the home eventually.  

He paid all of the home’s expenses and he was forced to move back in with his parents.  His parents didn’t have any room for his children so he was not allowed to keep them overnight.  This meant his child support was higher since he couldn’t care for them as much.  His wife also brought a motion for child and spousal support.  He fought the motion saying that he has been paying all of the home’s expenses for her.  He lost the motion.  The court said that there no requirement for supports to be deducted by the house payments he was making.  

He ended up having to pay for her to live for free and to pay the child support.  He asked his wife to start paying for the house and she refused.  He kept paying the home expenses and had no money left over to pay the supports.  This went on for a couple of years.  The court kept trying to get him to pay the support and not the expenses.  My client kept saying that he couldn’t stop paying them because she wouldn’t pay the expenses and he will lose his credit rating.  

Eventually the courts grew so frustrated that they ordered that the home sell and that he lose all of his equity in the home as compensation for his failure to pay child support.

So let’s recap.  She got to live in the home for free (because he did not sell the home).  He then had to pay her child support on top of paying for her living expenses.  When he couldn’t afford to pay for both, the court ordered him to stop paying and have his credit deplete.  When he refused to let his credit take a hit, he lost all of the equity in his house.

He lost roughly $40,000.00 from this fiasco.  He was obviously furious with his ex-wife for how she was able to play the system.  But, the reality was, his decision to let her stay in the home when he was the person paying the expenses was his fatal decision.  He should have listed the home for sale immediately and he would have received the equity in the home and would have cut his expenses in half.  

This example perfectly illustrates why you should not let your partner stay in the Matrimonial Home unless you completely trust them to pay all of the home’s expenses.  

  • Second Properties (Vacation properties and Cottages) 

Second properties are any type of property you own that is not your main family home but also does not make you money.  These properties are typically cottages and vacation properties.  They can also be timeshares.  These properties are not necessary to survive and so they are good options to sell or transfer to your ex-spouse.  

They often cost you money to maintain and you have to pay your ex-spouse for the right to keep these properties.  In the reverse, your ex-spouse has to pay you for the right to keep the property.  This means that you can transfer these rental properties to your ex-spouse for the right to keep Cash or Income Assets.  

You would be better off to have your ex-spouse pay for the extra monthly maintenance and to have to pay you for the right to keep the property.  Alternatively, these properties can be good for selling and paying off debt.

  1. Recreational Vehicles 

Recreational Vehicles such as ATV’s, motorcycles, snowmobiles and boats are some of the worst assets you can keep.  They cost you money to maintain, they usually have a debt attached to them and you have to pay your ex-spouse for the right to keep them.  

The first things I recommend losing after a separation are your recreational vehicles.  I recommend this for two reasons.  Firstly, they are a lot easier to buy back a few years later.  I have never had a client complain that they were not able to find similar vehicles to the ones they sold.   The second reason is that they are rarely a necessity and so you can sell them without having to sacrifice too much.  If you wish you can sacrifice for a year or two and buy them back once your finances are better organized.  

Selling recreational vehicles allows you to free up some cash to pay off debt and they lower your monthly expenses. Both of these factors make recreational vehicles ideal assets to sell.

Make sure you meet with your lawyer to make sure that you will not get into trouble by selling any of these vehicles.  

  • Joint Accounts:

Joint bank accounts are an interesting asset to deal with.  You often will have a certain amount of money stored with your ex-spouse.  Typically you will pool all of your money or will have some joint account to share the bills.  Either way you need to figure out what to do with that money.  The law generally prefers you to split joint accounts equally.  However, you typically have no trust between your spouse and you after a separation.  

The main problem with a joint account after separation is that your ex-spouse has the ability to take more money than they should.  I have seen wives take trips to the carribean on their joint account, knowing there is little my client can do.  I have seen them buy expensive computers and vehicles.  The worst I saw was one husband withdrew all of his family’s money and tried to leave my client with nothing.  We were never able to get that money back because it disappeared.  We were able to secure other property in compensation.  My client was lucky they owned multiple properties otherwise she may have been fighting a legal battle for several years.  

My advice for joint accounts is try to close them as soon as possible.  If they are large accounts, ask your lawyer if you are safe to take half of the money.  You should never take money without speaking with your lawyer first.  

If you cannot close your joint account, only put as much money in the account as necessary.  Open up another account and start using it as soon as possible.  You may have a good agreement with your ex-spouse now but I have rarely seen a joint accounts last in the longterm without there being problems.  

  • Investment and Retirement Accounts:

Investments fall under income assets or cash depending on what type of investment it is.  These accounts are some of the most valuable assets for you, however, they are often the first things that clients start withdrawing after a separation.  I cannot tell you the amount of times I see people withdraw their retirement savings to buy new furniture or to keep a costing asset.  

Make sure to visit a lawyer as soon as possible after your separation.  You want to create a plan to keep these investment accounts before you start withdrawing them.  They are easier to keep than you think.  If you find yourself feeling pressure to withdraw them, then consider why.  Your expenses may be too high or you are trying to keep a costing or debted asset that you should sell or transfer to your ex-spouse.  Consider selling an expensive vehicle, or taking in a renter before depleting an investment account.  

Remember, you would be better off keeping  an asset that grows overtime than an asset that costs your money overtime.  Even an investment account that is not generating you a lot of money immediately is still not costing you any money to keep.  

  • Pensions:

Pensions are not as clear as investment and retirement accounts.  Firstly, Pensions have a current or present value, however, you may never actually get all of that money.  For example, you may have a pension worth $500,000.00, but if you pass away one year after retirement, you may only get $50,000.00 out of that $500,000.00.  

Pensions are great since they do not cost you money to maintain and they pay you an income every month.  This makes them great income assets.  

You also don’t get access to your pension for several years. Your pension rarely grows as much as an investment account has potential to.  It is also quite a lot of work to get your pension divided in half.  For these reasons, you tend to have a lot more time to decide what to do about your pension.

Your first consideration should be is it your pension or your spouse’s pension.  If it is your spouse’s pension, you may be able to receive the present day value immediately as long as your ex-spouse has not already retired.  This means if the pension is worth $500,000.00 today, you are entitled to $250,000.00 immediately.  You are in effect guaranteed that money even if your ex-spouse passes away.  

If the pension is yours you have more to consider.  You may pass away earlier in life than intended.  This means the pension may not be as valuable to you as it is to your ex-spouse.  For you there are two extra considerations.  How close are you to retirement and are you responsible with your money.

How close you are to retirement determines whether you are better off keeping your entire pension.  The closer you are to retirement, the more likely you should keep your entire pension.  I have seen far too many clients try to live the rest of their lives on half a pension.  It is just too difficult.  

Remember that pensions are income assets and they are generally more valuable than costing or debted assets.  You will likely be better off keeping the full income from your pension and renting than losing half of your pension and keeping the house.  This is not always the case, so consult your lawyer before deciding.  

If you are several years away from retirement.  Let’s say 20 years or more, then you may benefit from giving up half of your pension if it allows you to get other income assets or cash.  The reason for this is because your pension will likely grow so much over the next twenty years that you will not see much of a loss from your pension.  I will not go too much into detail about this but your pension will likely grow so much over the next twenty years that you will see little loss from dividing your pension in half now.  However, this is not a good enough reason to trade in your pension for a bad asset.  Only trade in your pension if it will help you get a worthwhile asset.  Don’t trade in your pension so you can keep an expensive vehicle and a boat.  

The other factor to consider is how reputable your employer is.  If you work for an employer who may go bankrupt in the future, then your pension may not be as valuable as if you worked for the government.  

The final consideration is how good you are with your money.  If you are poor at managing your money then you will benefit most from a pension.  They are a guaranteed payment of income every month.  If you spend too much of your money and go bankrupt, you will still get to keep your pension.  If you lose your pension then going bankrupt will lose you everything.  You will not be able to retire and you will be forced to work late into your seventies and eighties.  I have seen many clients get into this trouble.  

So if you are close to retirement then you should probably keep as much of your pension as possible.  If you are several years away from retirement then you can divide your pension if it helps you get other income assets.  

If you are poor at managing your money then you may benefit from keeping your pension.  If your partner has a pension and has not retired then you may benefit from taking half of their pension.  If your partner has a pension and you are poor at managing your money, you would benefit from taking some of your partner’s pension. 

  • Rental Properties:

Rental Properties are income assets.  They can be some of the best assets to keep.  I have represented a couple of clients who either bought a rental property or moved into one that was already owned after separation.  These clients were all able to separate successfully.  

I personally have multiple rental properties, although I am not an expert in managing them.  After seeing the success of my clients, I decided to buy a rental property as my first house.  I bought a triplex and stayed in it for two years.  My second home was a duplex and I now live in another duplex.  This places me at seven units.  I live in my biggest unit and my other units pay for 90% of my expenses.  I almost live for free.  This took roughly four years to achieve.  It wasn’t quick, but it wasn’t too long either.  

The main benefit of a rental property is that you get  to take advantage of the property market growth, while also owning a property that generates you an income.  This way if the real estate market is poor, you are still earning a monthly income and if the real estate market is good, you can sell your property for a profit or raise your rents.  

The only negative of rental properties is dealing with tenants, however, I found that dealing with tenants in the same building as you is much easier than managing properties you do not live in.  This is my personal experience so look for a way of owning a rental property that works best for you. 

If you have a choice between keeping the matrimonial home, buying a new single family home or buying a rental property to live in, I would recommend taking the rental property.  

  • Businesses

Businesses are one of the harder parts of Family Law.  They are often difficult to place a value.  Even business evaluators argue over how much a business is worth.  Most of you will already know whether you intend to keep or sell your business.  Whether you decide to keep your business or not, there are a couple of factors to consider when dealing with a separation and your business.  

The first consideration is whether you should pay to get the business valued.  Typically a forensic accountant will investigate the business and give a report on its estimated value.  Remember that business valuations can cost tens of thousands of dollars.  You must determine if the business is worth enough to spend a few thousand dollars on getting it valued.

From my experience, business owners tend to undervalue their businesses and their ex-spouses tend to overvalue the businesses.  You are best to get a value if your ex-spouse is giving a value you believe is not accurate.  I have seen business owners save hundreds of thousands of dollars by their business being valued a well below what the court would have assumed.  I have also seen business owners insist their business is only worth fifty thousand dollars when it was valued at over three-hundred thousand dollars.  

The second part of a business is that it is easier for business owners to hide their personal expenses through their businesses.  For example, as a business owner you can write off your vehicle expenses, your phone expenses, travel expenses and sometimes meals.  You may be able to pay yourself less money since a lot of your expenses are being paid by your employer.  

This can lower your child and spousal support payments if you are lucky. The law has rules to protect support recipients from these advantages, however, in practice it can be very difficult to catch them.  Even when I have caught business owners hiding personal expenses in their businesses, it was hard for the judges to quantify how much money should be added to their income.  

Although you are required to be honest and forthright in your financial reporting.  I would be misleading you if I did not say that it is hard for the courts to catch small personal expenses in a business.  

Tax considerations

Tax considerations are another important factor to consider.  I talked about one client who lost tens of thousands of dollars because he did not want to pay for a lawyer to represent him.  Where he lost his money was in tax considerations. He sold his business and gave his ex-spouse half of the value of the business.  What he did not anticipate was the taxes he would have to pay for selling his business.  

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