“In terms of allocating assets, what’s more valuable: my marital property, spousal support, or part of my spouse’s pension?”
There’s no single answer to this critically important question, because it really all depends on how much each is valued today, and just as importantly, how much they’ll be worth in the future. Indeed, while the house may seem like the most valuable asset today, 10 or 20 years from now its value could plummet if the housing marketing softens – which could be financially catastrophic for you, and reduce your standard of living considerably at a time when you aren’t likely to be at the peak of your earning power.
Obviously, you need to talk with your divorce lawyer about this and probably some financial experts as well, such as Certified Divorce Financial Analyst. But for now, here are some general things to keep in mind:
Maximizing how much money or property you take now (such as in the form of a lump-sum cash payment or deed to the matrimonial house) may be beneficial for a few reasons:
• You don’t have to worry that the money won’t be there in the future if your spouse dies, is injured, or simply decides to stop paying – which would force you to take action
• You can invest your money and (hopefully) grow it at a faster rate than a pension plan that may or may not be indexed to inflation
• You don’t have to deal with your spouse on a regular basis
• Alimony is taxable income, as are pensions
• Some pensions aren’t divisible (i.e. they can’t be split between spouses)
All of that is beneficial, but there are some potential drawbacks of taking cash and assets today instead of support payments and/or pension payments over time, such as:
• The value of your house isn’t fixed – yes, it can go up, but it can also stagnate or fall
• If you take the house, remember that you’ll also be on the hook for maintenance and property taxes, which can run into the several thousands each year, depending on the condition of the property and where it’s located
• If your former spouse increases his income, you might be able to petition the courts to raise your support payments
• The actual value of a pension over several years may be much more lucrative than it seems
Again, these are general pros and cons, and by no means intended to give you direction on how to proceed. This is a crucial decision, and one that you shouldn’t take without carefully considering all of your options. Work with your divorce lawyer and other financial professionals to accurately calculate both the present and future value of all assets, including their possible tax implications.
By Josh D. Simon