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Financial Asset/Debt Division - What's Fair?

Posted by Elizabeth Steen | Jul 30, 2020 | 0 Comments

Most people want to feel like their divorce process was fair, with both partners comfortable and protected for the future. 

But what is fair? And how do the court forms help you get there? 

Washington is a community property state. Regardless of who worked during the marriage, or who stayed home with the children, each spouse technically owns 50% of the marital property. Marital property includes your house, your retirement accounts, your other property such as cars or stock options from your job, and also your credit card debts (as negative assets), your car loans, and so on. The family law commissioners who review your paperwork usually just add up all your debts and assets, divide by 2, and call it good. For child support, the state sets a minimum amount for the higher income parent to pay the lower-income parent (that amount tops out at $1400 a month per child). Technically, this is legally fair. Both of you have half your property. And the lower-income parent is receiving some money so that both parents can provide for the children. That situation is one a judge would consider "fair." 

Almost no one is going to feel comfortable with that situation, however. A parent whose only income is a state-scheduled child support won't be able to live in Seattle on $1400 a month. Splitting retirement funds often lowers the returns for both parties in a way that makes it impractical for parents who are already in their 30s or 40s (it takes exponentially longer to build up a decent retirement on $25,000 a year lump sum, as opposed to $50,000). And, most of the time, at least one spouse wants to stay in the house that the family bought together. There may not be enough equity in the family home for both parents to walk away with enough money to make a down payment on a new home if each parent only has 50% of the equity that's left over after fees and costs. 

These are all situations that lawyers in Washington State can fix with a Settlement Agreement. Some options that can be worked out include: One parent refinances the house and buys out the other parent's equity; the parent with a higher amount saved for retirement takes less in equity from the house to avoid splitting the retirement accounts in a way that would lower future returns; one parent takes less in equity from the house in return for a higher monthly child support payment that will allow that parent to stay in the house comfortably. And of course the math has to balance out here - you wouldn't want one parent to trade $250,000 in home equity for five years of child support payments that are $6000 higher each year - totaling only $30,000 more. The situations have to make sense. 

The Settlement Agreement helps parents in Washington State find real-life solutions that are more than just technically "fair," where both partners feel ready to move on in a comfortable way. The Settlement Agreement process also gives you more time and more control over things like timing your tax deductions to maximize the amounts available to both parents. 

The end result, ideally, is one where both parents feel good about their transition and their post-divorce life. 

About the Author

Elizabeth Steen

Elizabeth Steen is licensed in Washington State as well as Washington D.C. After work, Elizabeth enjoys making her West Seattle renowned flan recipe with her daughter, which she’s willing to share with favorite clients. She also enjoys hiking, yoga and chasing her family’s fantasy football league title every fall.

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