Getting divorced is not a laughing matter. It is a highly emotional time involving many heavy decisions that will affect a couple’s life as they move forward with their separate lives. Every once in a while, however, something happens that gives you pause and despite the seriousness of the situation makes you chuckle. They say laughter is the best medicine, so in that vein, I would like to occasionally share a lighter moment like the one below.
The couple arrived at the mediation session with the husband carrying a suitcase of documents. They had already decided how they wanted everything settled, so this was going to be the “easiest case ever.” The husband had a master index of all the financials which were labeled, color coded, and tabbed. When I said I was very impressed with how prepared “they were”, the husband beamed with pride and the wife looked away. Their body language indicated this was the way things ran during their marriage; the husband in charge of the finances and the wife trusting he would do the right thing.
During the mediation, I began reviewing the financial statements for their home, assets and debts. As we started to assemble their financial overview it became clear they were in a lot of trouble:
- The house was listed for sale at $700,000.
- They had a first mortgage of $600,000.
- A home equity loan of $75,000.
- A tax lien of $40,000.
- A student loan of $60,000.
- Credit card debt of $30,000.
- Taxes on the house were due and paid separately at $30,000 per year.
I asked them how they were able to get mortgages totaling more than the house was worth. They said three years ago the banks allowed them to mortgage 80% of the value of the house, but now with the depressed value of real estate, they had negative equity in their home. Their comment after reviewing this grim scenario? – “ But it’s a beautiful house.”
Moving on, I asked how old they were. Both were in their mid-fifties. I asked about retirement savings. What kind of plans did you make for retirement and how much is in the accounts since we have to calculate the marital portion to be included in your Separation Agreement. The answer? We have no retirement savings.
So far, while I had a husband and wife agreeing to the terms of their divorce agreement, but there was no equity in the home, they were a hundred thousand in personal debt, no retirement savings, and a tax lien against the house.
My next question had to do with employment. So what kind of jobs do you have? The wife answered she worked part time as a librarian.
The husband? He answered proudly: “I’m a financial planner”.