Keeping Hold of the Big Ticket

The house is usually the “big ticket” item in a divorce. In many cases, women often trade their community property interest in their husband’s pensions or 401(k) plans for the house. But, holding onto the house may not be the best choice. First, you must consider whether you can afford to keep the house. Even if you are receiving child support and spousal support, you must consider what would happen if your ex-husband got laid off or sick and your support ended or was significantly reduced. Could you afford the house under those circumstances? Second, consider the cost of upkeep, such things as insurance, repairs, property taxes, and so on. Before considering whether you are going to trade your interest in a pension for the house, take stock of all the expenses each month. Will you have enough income to cover all expenses and more importantly, will you be able to save money for emergencies?

A better strategy may be to sell the house, divide the money and purchase a less expensive residence. That way you still keep your community property interest in your ex-spouse’s pension, which means that you’ll have that income for retirement. Additionally, you can start your own IRA after the divorce. I generally caution my women clients not to trade their interest in their husband’s pension, especially government pensions, for the house. Government pensions are generous, backed by the government, and often come with cost of living increases. Before trading the pension for the house, you must consider not just where you are financially today, but where you will be at the age of retirement and beyond.

One of the biggest mistakes women make in divorce is not having a clear picture of their finances. If your husband has been the one handling all the money, it is time to get financially educated. Your divorce attorney is not a financial advisor, but should be able to point you in the right direction and suggest resources to help you become financially educated. Make sure you have a clear picture of your finances before giving up your interest in that pension or 401(k) for the house.