In 2004, Parade Magazine reported that a typical American divorce costs $20,000-$50,000 in attorney fees! You can be sure that the cost is much higher today! Another, more recent article, reported that the average cost of a litigated divorce in California averages $45,000 for each party. Most of these costs are attorney fees, and in litigated divorces, attorney costs rise rapidly, and continue for a long time.
Originally, Alimony (sometimes called “maintenance” or “spousal support”) was designed for a system where the husband’s role was to support his wife. If a couple divorced, the husband continued to be responsible for supporting his ex-wife financially until she remarried.
In modern times, the purpose of alimony is to allow the recipient (usually the wife) to maintain financial independence and, if possible, to maintain a lifestyle similar to the lifestyle that she enjoyed during the marriage.
There are a number of types of alimony, designed for particular circumstances.
Virtually all property that has been accumulated during the marriage (“marital property”) is subject to be divided between the divorcing husband and wife. Almost everything of value is considered property, including retirement plans and accounts.
The term “Capital Gain” means the profit on an asset. If you own a house, that is an asset. When selling a house, the profit is determined by subtracting the following, from the selling price:
- Costs of Sale: i.e. brokers commission, attorneys fees, expenses to fix up for the sale;
- Costs of major improvements such as adding new rooms, major renoveation of a bathroom or kitchen, adding a deck, etc. It does not include repairs.
- Cost of Purchase;
- Original purchase price (or in certain cases adjusted basis from a previous rollover)
“What to do with the house” is often the most difficult issue for separating or divorcing families to resolve. There is no simple answer or formula. The problem is a complicated mixture of financial and emotional issues.
Generally speaking, the following are the four options to consider:
- Sell now
- Sell later, and one occupies with the children until sale
- Transfer ownership from one spouse to the other, with a refinance buy- out, cash payment or trade
- Rent it to a third party and share the income until sale