Mortgage makes my Net Equalization negative?

[KidsDad60]

Can anyone work this out?
The mortgage is in my name only so it makes my NFP negative!

Assume the following scenario:
Value of the house at valuation date $360,000
Value of the house today $340,000

Mortgage 1 (my name) $200,000
Credit Cards (my name) 60,000
TOTAL Debt(my name) $260,000

Credit cards (her name) $20,000

I calculate her NFP as $180,000 -20,000 = $160,000
I calculate my NFP as $180,000-260,000 = -($80,000)

Apparently my NFP will be made $0 (even tho it is a neg amount)!
So the equalization payment would be:
$160,000 - 0 = $160,000/2 = $80,000.
She would have to give me $80,000 from her proceeds of the house sale.
So she ends up with :
$170,000- $80,000(to me) = $90,000.
I end up with:
170,000(from house sale) + $80,000(from her) - $260,000 = $10,000.

Is this correct? Doesn't seem fair but from what I read this is how it is!!
Can someone shed some light on this please? Thanks.

[dadtotheend]

The term NFP is a bit of a misnomer. For all assets and liabilities other than the matrimonial home, you have to consider the change in your respective equity positions between marriage date and valuation date with the exception to the rule regarding the marital home. You look at equity of the matrimonial home as of valuation date with no consideration to it's equity at marriage date.

So take all assets and liabilities other than the house and calculate the change in the equity position and then add in the equity of the house at valuation date. Do the same for her and then equalize.

[Mess]

The mortgage being in your name doesn't shift any additional equity over to her.

The calculation should be:
Matrimonial home v-date: 360,000 - 200,000 (presumably mortgage @ v-date, NOT current mortgage) = 160,000

Your equity in the house is what is being split, that equity is 160,000.

Your debt: -60,000
Your assets: 80,000(share of mat home; otherwise presumably nil)
Your net: 20,000

Her debt: -20,000
Her assets: 80,000(share of mat home; otherwise presumably nil)
Her net: 60,000

Total family asset on v-date: 80,000
Equalization payment (to you) 20,000

This is how I read it, but I am not a lawyer. You should double check this with a lawyer.

[dadtotheend]

The mortgage being in your name doesn't shift any additional equity over to her.

The calculation should be:
Matrimonial home v-date: 360,000 - 200,000 (presumably mortgage @ v-date, NOT current mortgage) = 160,000

Your equity in the house is what is being split, that equity is 160,000.

Your debt: -60,000
Your assets: 80,000(share of mat home; otherwise presumably nil)
Your net: 20,000

Her debt: -20,000
Her assets: 80,000(share of mat home; otherwise presumably nil)
Her net: 60,000

Total family asset on v-date: 80,000
Equalization payment (to you) 20,000

This is how I read it, but I am not a lawyer. You should double check this with a lawyer.

That's not it.

You have to consider the equity position at marriage date for all assets and liabilities and deduct it from the equity at valuation date. Your calculations are ignoring marriage date assets and liabilities.

See http://www.ottawadivorce.com/forum/f...-payment-3788/ a spreadsheet example.

[gumby]

Thank you for posting this again

Very useful. Form 13 does not give a clear picture. Ex wants to charge me rent - will he then owe me for his share of bills, property taxes, etc? Can he collect full rent or just half? House is paid for.

[NBDad]

Might need to start a new thread Gumby.

In any event, if your home is paid for, and the ex is not living there, then yes, he can charge you rent if YOU are living there. (at least until you are through with equalization).

He's responsible for 50% of the care and upkeep of the home expenses (ie. if it needed a new hot water tank, he'd have to pay 50% of the cost, or if the basement flooded, etc).

Property taxes...50% also. The HOUSEHOLD bills (ie. phone, cable, power) would be solely YOURS. (You would be paying them anyway if you were renting)

[Mess]

That's not it.

You have to consider the equity position at marriage date for all assets and liabilities and deduct it from the equity at valuation date. Your calculations are ignoring marriage date assets and liabilities.

See http://www.ottawadivorce.com/forum/f...-payment-3788/ a spreadsheet example.

True in principle, but in practice, for this guy it wouldn't change anything. Neither of them have asset other than the house at the time of separation. You can only equalize property, not net debt.

Let's say he had $100k in bonds just before he married. He somehow spends it all during marriage and finishes with his $60k debt. The asset at marriage is gone, it doesn't affect the final calculation. Same if he had debt at marriage, it doesn't alter the final because he has no asset at valuation.

The house is an entity to itself. If he had $300k when they married and he put it all toward the house, the $300k is "gone" and the house is still split 50/50.

[dadtotheend]

Let's say he had $100k in bonds just before he married. He somehow spends it all during marriage and finishes with his $60k debt. The asset at marriage is gone, it doesn't affect the final calculation. Same if he had debt at marriage, it doesn't alter the final because he has no asset at valuation.

Not so dude.

If the equity in the home is sufficient to cover the net (change in) in equity other than the marital home then your net debt is relevant. In your example above the other spouse would eat half of $160, or $80k K against the marital home as long as marital home had at least $80K in equity.

That's exactly what happned to me. I was already some $20K in debt other than the mortgage when we got together and was some $70K in debt at separation. She participated in half of that $50K increase in debt and it was applied to her share of the equity in the matrimonial home.

You're right that NFP can't be negative but the house was so positive as to absorb the increase in net debt. Therefore NFP was still postive.

I went through this with my $425/hr lawyer at the beginning and he had it wrong. It took me a long time to get my head around this concept, and I'm a very good accountant. The term net family property connotes a position at a point in time. What it really means in the law is equity of the marital home plus change in other equity.

[Mess]

and I'm a very good accountant.

This part I understand, the rest I'll take your word for.