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Equalization and Spousal Buyout

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  • Equalization and Spousal Buyout

    What happens if a spouse wants to buyout the house and is given the chance to do so, but ends up using all of the available funds to buy it. When its time for the equalization payment they do not have enough funds to deal with it. How does one deal with such situation? We are going through arb/med to resolve all pending issues but matrimonial house is being dealt with first.

  • #2
    Title wouldn't change until payment is made. Once buyout amount is determined, ex would pay that amount to a lawyer in trust who will ensure you have full payment before you sign over the house.

    Rest of the assets and debt will be divided and equalized as normal, owed whether the parties have money or not. If entitled to spousal, it can be negotiated as lump sum or monthly.

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    • #3
      I wouldnít bet on an equalization amount set in stone. Your legal fees and disbursements will come off it as well. Not to mention if you are planning to offer all of your estimated equalization then you will have limited funds to pay lawyers, transfer fees etc.

      If you are the one wanting to buy out the other, do some serious number crunching especially if your ex wants full value of what it would go for on the open market. What you think the value is and what it could sell for are two different numbers.

      You should also look at what your finances will be after. If there is no money left or you have debts once everything is settled, youíre sunk.

      If you canít afford it now or with a mortgage, there is no sense trying to hold onto it. Donít let the desire to hold onto a home you canít afford single weigh you down, itís not worth it.

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      • #4
        Thanks for the responses above, some additional details to this

        Ex wants to buy me out. Has child support arrears and held all the family savings during the marriage (equalization will come out of their account). While I paid for all the mortgage during the marriage. Continued to live in the property after separation in hopes to buying it and also took all of the rental income from basement apartment (carried all the cost of the house as well). Now couple of years down the road they keep pushing onto the buyout of the property but do not respond to equalization and or post separation deductions.

        My idea is once the house is dealt with I can not get the money out of them if they use all the funds available to them to buy my interest.

        Question is if they do actually spend every single dollar to buy the property, and owe lets say 50k to me how will I get it out from them?

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        • #5
          You are thinking that this happens in sequential steps. It does not, it happens all at once.

          Eg.

          You have a pension worth $200k
          He has a pension worth $100k
          Together you have a house worth $400k (value of house minus mortgage)

          If he keeps the house, then his net worth is 500k, and yours is 200k, so he owes you $150k.

          If you keep the house, then his net worth is 100k, and yours is 600k, so you owe him $250k.

          If he cannot come up with $150k to pay you, then he cannot keep the house. If you cannot come up with $250k to pay him, then you cannot keep the house.

          Assuming that neither of you can come up with the appropriate payment, then the house is sold.

          In the event that the house is entirely in his name, or you sign it over to him, you are probably still roughly fine. He still owes you the $150k, and he has a large fixed asset. There are legal steps to ensure that he cannot sell the house without paying you first. That said, easier to make sure that your ex does not get title to the house until equalization is decided.

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