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  • Period allowed for Equalization payment

    I'm just wondering, how much time can be allowed to come up with the owed equalization payment after settlement?




    My X to be and I are working on a separation agreement, and we are now looking at net property equalization. In the end, I will owe her a large equalization payment that I cannot come up with due to lack of liquid assets or/and cash. We both like to know how much time is usually allowed in situation like ours to pay equalization. Any feedback will be greatly appreciated.

  • #2
    Originally posted by menchia View Post
    I'm just wondering, how much time can be allowed to come up with the owed equalization payment after settlement?




    My X to be and I are working on a separation agreement, and we are now looking at net property equalization. In the end, I will owe her a large equalization payment that I cannot come up with due to lack of liquid assets or/and cash. We both like to know how much time is usually allowed in situation like ours to pay equalization. Any feedback will be greatly appreciated.
    I am no lawyer but I am thinking as long as you and the ex agree on a payment plan then you are good.

    Comment


    • #3
      I know it is a maximum of ten years but I have been unable to find the relevant Rule. But that is ten years of payments, not delaying the entire payment. And interest accuse from the date it is agreed. As with everything, the reasonableness test prevails - it will most likely need to be faster than you want but slower than the other party wants.

      Comment


      • #4
        I personally believe that sooner, rather than later, is the optimum way to handle this. Banks are in the business of lending. If someone can't scratch together available money then perhaps a personal loan or second mortgage is in order? I don't think it is fair for one party to put their plans on hold. Actually, I think it is unreasonable to expect one party to finance the other.

        3 months to arrange financing seems more than reasonable to me. In some instances courts would rule a shorter term. While going through separation process it is not like both parties didn't know the time would come when large money would have to be paid... they have had lots of time to get things organized.

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        • #5
          If there is no cash, other ways it can be done is by the value in a home, selling the home and the value in a pension

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          • #6
            Thank you all for your replies.
            I do agree with Arabian that it will not be fair for the other party to wait for too long to get the equalization payment. That being said, My x to be and I are in very good terms, and she's very understanding of our situation. She's willing to give me sometime to come up with the money, in consideration of the fact that it was me who worked very hard (while she was going to grad school for her Ph.D.) to pay off the entire mortgage and put in a significant amount of money in our kids RESP. She will be getting the house, and I will still owe her a significant amount of money. I will be giving her a lump sum payments spread over a period of time; I just do not know over what period of time we should agree to pay off the entire equalization. I do not have equity to borrow against (she has the house); I do not have any other significant savings/investment (other than the off limit RESP) to pay her from nor any significant amount in my current bank account. All the money I made went to paying off the mortgage and saving for my kids education.

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            • #7
              What asset do you have that is causing you to owe this equalization payment?

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              • #8
                Originally posted by Janus View Post
                What asset do you have that is causing you to owe this equalization payment?
                The culprit is my huge pension. I've been working for long time now, and my salary is high. My STBX did not have pension nor any significant assets; she was kind of a professional student. The result is I have tremendous asset (both pension and half of house value) and she has insignificant assets.

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                • #9
                  Why not offer to split the pension at source, or at least part of the pension so that you do not have to come up with the cash?

                  For example, if you owe $30k, you can get 30k paid out from your pension. It doesn't have to be half or nothing.

                  Comment


                  • #10
                    Originally posted by Janus View Post
                    Why not offer to split the pension at source, or at least part of the pension so that you do not have to come up with the cash?

                    For example, if you owe $30k, you can get 30k paid out from your pension. It doesn't have to be half or nothing.
                    I would've done that if it was not for the fact that I'm only few years away from retirement (less than 3years). Therefore, I would rather endure the hardship for short time period and preserve the full value of my pension for when I retire.

                    Comment


                    • #11
                      If you have no assets beyond your pension then you will have to get a loan. Since you say you have no assets at all it sounds like you don’t even have a car you can sell/use as security. I believe you can get a loan against your pension, but it won’t be a very good rate. You would probably benefit from talking to a financial advisor and seeing if paying out from the pension or getting a loan is more feasible. You could also see about taking out the $30,000 from “your half” of the RESP and paying more at the time your children are going to school (she pays out her portion of education expenses from the remaining RESP, you effectively pay out more from your salary/pension at the time).

                      I’m a little confused though, if you are walking away from this marriage with no assets, a CS (and probably SS) obligation, and children still to complete post-secondary education - it doesn’t sound like you CAN afford to retire in three years (exactly how late did you have these kids that you are retirement age, AND they are yong enough for RESPs?)

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                      • #12
                        Originally posted by tilt View Post
                        If you have no assets beyond your pension then you will have to get a loan. Since you say you have no assets at all it sounds like you don’t even have a car you can sell/use as security. I believe you can get a loan against your pension, but it won’t be a very good rate. You would probably benefit from talking to a financial advisor and seeing if paying out from the pension or getting a loan is more feasible. You could also see about taking out the $30,000 from “your half” of the RESP and paying more at the time your children are going to school (she pays out her portion of education expenses from the remaining RESP, you effectively pay out more from your salary/pension at the time).

                        I’m a little confused though, if you are walking away from this marriage with no assets, a CS (and probably SS) obligation, and children still to complete post-secondary education - it doesn’t sound like you CAN afford to retire in three years (exactly how late did you have these kids that you are retirement age, AND they are yong enough for RESPs?)
                        I'll be seeking the advice of a certified divorce financial advisor. In my case, it's not that I don't have the ability to pay off what I owe, it's just I cannot pay the full amount at once. My salary is high enough to allow me to pay a good sum of what I owe over a short period of time (~3 years), I will have to do some consulting jobs after retirement to pay off the balance. All that may take between 4 to 5 years to payoff the debt. Therefore, I was wondering if that's reasonable time frame to suggest to my STBX.

                        Comment


                        • #13
                          Even though you are amicable it seems unfair to the ex to expect her to wait for her money because you want to retire. When you are married you work as a team and one partner may decide to “take one for the team” with the attitude that what is good for one is good for the team. But you aren’t a team anymore; asking her to delay ownership of her money (and the lost opportunity costs that can’t be captured by 3% interest) isn’t really fair. Once you get old like us weird health things happen and the agreed five year term may get pushed back to seven or eight years as you prioritize your health over her payment. A loan sounds the best option to give her the lump sum, cut the financial ties ASAP so you can have a healthy co-parenting relationship without resentment. YMMV, if she is down for it, then go for it - and treat her fairly and well to preserve that great post-marriage relationship.

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                          • #14
                            Originally posted by tilt View Post
                            A loan sounds the best option
                            I agree, and I'm shocked that she would agree to anything other than an immediate payment for equalization. She must not have a lawyer.

                            Warning: If she doesn't have a lawyer then your agreement can always be revisited and overturned at a later date.

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                            • #15
                              Take the money out of your pension and pay her off. You can spend the next few years putting what you propose to be giving her back into your pension.

                              Comment

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