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Title: | Welcome to the Non-Custodial Parents Conference |
Notice: | Please read 1.* before writing anything |
Moderator: | MIASYS::HETRICK |
|
Created: | Sun Feb 25 1990 |
Last Modified: | Fri Jun 06 1997 |
Last Successful Update: | Fri Jun 06 1997 |
Number of topics: | 420 |
Total number of notes: | 4370 |
175.0. "Trading Equity/Debits for lower support payments" by TROOA::AKERMANIS (ԥ�) Mon Nov 11 1991 17:18
In the divorce game, we are faced with certain decissions which will shape our
financial future. There are short term and long term considerations to think
of as you wheel and deal with your ex. One money matter which hits all NCP's
is, do you trade off some equity and take on debits to reduce the child
support amount payable each week/month/year to the CP? There is definite short
term pain in doing so, but there are long term benefits, or is there? By
trading off some of your equity and assuming debits, does this benefit the CP
and your children? Lawyers argue that by taking a hit now to reduce child
support amounts, you keep more money in you pocket each year but at a cost.
Who said divorce was cheap......
I hope the data below is complete enough to analyse and determine which has
the best long term benefit for the NCP.
Salary: Use your own/any as a reference point (stake in the ground), increases
are say about 3% per year.
Equity: $90,000.00 (your share is $45,000.00)
Debits: $37,000.00 (your share is $18,500.00 -- includes everything,
taxes, loans, credit cards, and what ever)
Inflation rate is 5% per year for support cost of living adjustment.
Interest rate is 10% annually used to grow amount (H) from (E)
Assume your support obligation will run 16 years to completion and does not
include education, medical and other expense which you are obligated to
contribute too over time.
You have two options to choose from.
1) Take half the debits and your half of the equity and pay $800.00 child
support per month, which increases by the annual inflation rate each year. Pay
your debits out of the equity (45000 - 18500 = 26500) and spend or invest the
remainder as you see fit.
2) Trade off your equity and assume the debits and pay $450.00 child support
per month, which increases by the annual inflation rate each year. Interest
costs have already been factored into the debit and is payed out at $355.77
per pay for 4 years (1992 - 1995).
Below is a spread sheet summary of what happens over time.
a) What option would you take and why?
b) Is the best financial option, the best choice?
c) Would taking the hit now, make life easier in 1996, 2000, 2006 ?
(A) Debit : $37,000.00 (c) � Debit : $18,500.00
(b) Equity : $45,000.00 (D) �Deb+Equ : $63,500.00
Infl. Rate : 5% (E) Equ -�Deb : $26,500.00
Int. Rate : 10%
YEAR Option Number 2 Option Number 1
1992 $450.00 $5,400.00 $800.00 $9,600.00
1993 $472.50 $5,670.00 $840.00 $10,080.00
1994 $496.13 $5,953.50 $882.00 $10,584.00
1995 $520.93 $6,251.18 $926.10 $11,113.20
1996 $546.98 $6,563.73 $972.41 $11,668.86
1997 $574.33 $6,891.92 $1,021.03 $12,252.30
1998 $603.04 $7,236.52 $1,072.08 $12,864.92
1999 $633.20 $7,598.34 $1,125.68 $13,508.16
2000 $664.85 $7,978.26 $1,181.96 $14,183.57
2001 $698.10 $8,377.17 $1,241.06 $14,892.75
2002 $733.00 $8,796.03 $1,303.12 $15,637.39
2003 $769.65 $9,235.83 $1,368.27 $16,419.26
2004 $808.14 $9,697.62 $1,436.69 $17,240.22
2005 $848.54 $10,182.51 $1,508.52 $18,102.23
2006 $890.97 $10,691.63 $1,583.95 $19,007.34
2007 $935.52 $11,226.21 $1,663.14 $19,957.71
--------------- ---------------
Total : $127,750.46 Total: $227,111.92
(F) (G)
Option 2 Cost Option 1 Cost
(F) + (D) : $191,250.46 (G) - (H) : $105,345.14
Investing
Only (E)
1992 $29,150.00
1993 $32,065.00
1994 $35,271.50
1995 $38,798.65
1996 $42,678.52
1997 $46,946.37
1998 $51,641.00
1999 $56,805.10
2000 $62,485.61
2001 $68,734.18
2002 $75,607.59
2003 $83,168.35
2004 $91,485.19
2005 $100,633.71
2006 $110,697.08
2007 $121,766.78
-------------
$121,766.78 Total Equity + Interest
(h)
T.R | Title | User | Personal Name | Date | Lines |
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175.1 | | RTPSWS::HERR | These ARE the good ole days | Mon Nov 11 1991 19:52 | 12 |
|
What makes you think the support payment scheduled you have agreed to
is fixed. While it's safe to assume whatever equity/debt arrangement
will remain executed my understanding is that the same is never true
for support payments.
A "change in circumstance" is all that is usually required to modify a
support decree. The court is well within it's purview to modify
regardless of prior agreement.
-Bob
|
175.2 | | TROOA::AKERMANIS | ԥ� | Tue Nov 12 1991 08:40 | 27 |
| re: .1,
> What makes you think the support payment scheduled you have agreed to
> is fixed. While it's safe to assume whatever equity/debt arrangement
> will remain executed my understanding is that the same is never true
> for support payments.
Not saying it is fixed, odds are it is more likely to go up than down. In two
legal opinions from two different legal firms, it is much harder for the CP to
increase the child support amount if the CP was given a lump sum as part of the
child support obligation. The court will take a very dim view of the CP if in
the short term the CP tries to get more. This is at least applicable in Ontario,
and in the U.S., maybe it's looked at differently.
I have no decision to make here my self, mine was made over a year ago with one
legal wording glitch. This scenario was created for discussion purposes as we are
doing now.
IMHO, selecting one of the two options has to be based upon more than the
long term financial cost of supporting your child(ren). You too have a life you
must lead, your future SO, future child(ren) and the child(ren) from your past
life. The data is just a starting place, we realize that interest rates,
inflation rate, and child support amount could and will vary.
I hope this may clarify the intent of this discussion.
John
|
175.3 | Be Cautious With Compromises | MCIS5::MATTHEWS | Lynn Matthews...UPO1-4/C5 | Tue Nov 12 1991 12:12 | 51 |
| NEVER assume the settlement is permanent. My hubby paid his ex child
support from day one - almost 12 years ago (more than the court would
have made him pay), agreed to continue to pay that amount while his ex
finished school (4+ years), (she's an electrician and was working
during her schooling) gave her house, car, etc. with the understanding
that once she graduated, got her license and was receiving her full
pay, the payment would be cut in half.
That was fine for a few years. Then she met someone, sold her house,
moved out of state, bought a business, lost most of her equity.
She ended up with $125,000.00+ in equity from the sale, invested in a
business which failed within 9 months, lost or blew most of the equity
and then wanted more $ for child support. She got remarried,
bought another house (of which the down payment came entirely from
her), bought all new furniture, etc. Not only more $ but also she
wants him to pay for their college education. Of course, she got what
she was looking for which really pissed my husband off because he had
no recourse. Since she has moved out of state, she has literally cut
the kids off from him. A quote from her "As far as I'm concerned the
kids don't have a father". Sad to say he has kind of given up trying
to contact them partially due to the fact the last few times he had
them he couldn't take the nasty remarks they kept making to him. All
of them being things his ex had stated and they were repeating. I
can't believe she would stoop so low but she has MANY times. After
their visits he was so depressed and I think he has just given up.
My husbands feelings are had she reinvested her full equity, her
current mortgage would have been $25,000.00 (not bad considering her
and her current husbands salaries combined are over $120,000.00 a
year!) instead of $125,000.00 and would not need the additional child
support based on the intial agreement. He said his biggest mistake was
being the Good Guy at the beginning because so far it has blown up in
his face! He feels the agreement they had made in the initial decree
was literally useless! WHAT A CROCK OF SHIT having a decree is if you
are paying child support. The additional money is not going towards
the kids; it's to pay for all her trips to the islands, built in pool,
the large master suite/bath that she just added to her house complete
with steamroom/jacuzzi, etc.
No one is trying to deny her happiness but now we are having to pay for
all her mistakes and stupidity. I'm not saying she is a bad person but
enough is enough!
Sorry for the lengthy note - I guess this is the first time I've really
put all this in writing.
My advise - Watch out for compromises!! They are always reversible!!!
|
175.4 | c.y.a. | CSC32::HADDOCK | the final nightmare | Tue Nov 12 1991 14:06 | 11 |
| I have to agree taht compromises are a bad idea. If you voluntarily
take on *all* the debt, there isn't much you can do to renegotiate,
but there is *absolutely nothing* to prevent "theex" from going back into
court six months later and sticking it to you for more child support.
Change of curcumstance--he has paid off all the bills so therefore
he has more disposable income to pay support with. And how can
the court *possibly* deny the darling little *children* the support
they *deserve*.
fred();
|
175.5 | So as I read it...... | TROOA::AKERMANIS | ԥ� | Wed Nov 13 1991 09:13 | 17 |
| re: .3, .4,
So, the the message I get here is, take your equity and your half of the debits
and run, being mister nice guy only sets you up to be sh*t upon later.
I also read from your points that, when it comes to the CP and children, the
separation agreement or what ever, has it's uses for the CP. When it comes to
the NCP, it is a useless piece of paper. By this, as NCP's, we know that child
support can never be agreed upon or put in writing because the court has the
right to change it as they see fit, a fact of life. But the issue of trading
equity/debits is a bad move because, once again the court can choose to ignore
the comprimise and force you to shell out more child support.
So, no matter how generous the NCP is and has shown to be reasonable upfront,
when it comes to child support, it really is like taking your equity and tossing
it into the river in the long run.
|
175.6 | That's a BIG 10-4 | CSC32::HADDOCK | the final nightmare | Thu Nov 14 1991 11:56 | 14 |
|
re .5
That's about the size of it.
The courts are interested in "what's best for the children", not
"what's fair because you made an agreement with your ex".
If a year or two down the road "theex" goes back to court all hang
dog and says "gee Your Honor I know I made this agreement, but I
reeeealy got shafted by the agreeement ane the *children* reeeeely
neeeeed more money", you're going to get shafted *again* and probably
*still* be stuck with the bills.
fred();
|