I’m a custodial parent and I’d like to keep the house.
Well, it’s certainly a tough decision to make. There are two issues here: what’s right for your children, and what makes financial sense for your situation. Everybody wants to do what’s best for their children; if staying in the same home is what’s best for them, we would try to figure out a way to accommodate that. From a financial standpoint, however, you need to evaluate the pension and find out how much it’s really worth. A CDFA™ can help you by providing a net present value of a future benefit to get an actual fixed dollar amount of what a future benefit would be worth; then you could compare that to the value of the house.
If the house is worth $170,00 and the net present value of the future benefit is worth $165,000, is that really fair? The two amounts look similar, but you have to remember that there’s no income from the house and there will be expenses (repairs, maintenance, taxes, etc.). You need to figure out whether you can you afford to keep the children in their existing home. Perhaps child support and maintenance can cover your current home expenses, but what is your plan for when the payments end?
Everything’s negotiable in a divorce. A lot of people want to know what the law says, or what’s the code, but the code doesn’t matter unless you go to court and ask a judge to decide. You can figure out and negotiate the best thing for you. Different assets have different after-tax values and before-tax values, and some are cost items, like a house. Even though the house has value, unless you rent out a room, it’s not providing you with any income. But sometimes, the home you’re in is the cheapest place to live – especially if the mortgage payments are low, or if the house is paid off. You need to compare the cost of staying in the house to the cost of selling, moving, and buying or maybe even renting a new place: the rent may be just as high as the mortgage payment. A CDFA can help you do an apple-to-apples comparison.
You have to weigh the financial aspect against what’s best for the children. Parents often gloss over the financial part because they want what’s best for the children. It can be a hard decision because it’s not all just financial: there are the children’s wants and needs as well. I can put a number on a pension plan and a number on a house, but there may be circumstances associated with your children that makes staying in the house right for your family – even if it’s not the best financial decision for you.