Q: In a divorce if husband has an annuity and I say you keep that and in “trade” I want the house. Why is there a 31% tax
A: I have no idea where you came up with that tax rate. What you really need to do is to retain an experienced matrimonial attorney to represent you in this matter. There are numerous facts and circumstances that are not mentioned in your question, nor is any public forum the right place to mention them. With modern technology, you can be represented by any high-quality attorney in New Jersey irrespective of geography. Pick the best attorney you can find and remember one rule: a good attorney is generally never cheap, and a cheap attorney is generally never good so don't choose based on price.
Politely, you need to sit down with an experienced divorce lawyer since it appears that "someone" is doing some fast talking and you have no idea whether the claim is true or not - which means you need someone to represent you who knows how to call B...shit when such claims are made.
For asset division in a divorce, hypothetically, your home has a current fair market value of 500,000; against which is a 200,000 mortgage. As such, for divorce purposes, the net equity value is 300,000 and presumably, each of you are entitled to 1/2 or 150,000 for equitable distribution. If you want to keep the home, then your spouse is entitled to another asset with a value of 300,000 as well plus presumably, you would need to refinance the existing mortgage to remove your spouse's name from the obligation.
As to the annuity, presumably, it pays your spouse a monthly benefit for the balance of his life plus it may also have other benefits attached to it as well. Presuming the payments are for the balance of his life, the easiest way to calculate its value is to take his age (hypothetically 55 years old) and his presumed actuarial date of death (presumably around 87 years old and presuming the monthly benefit is 3000 or 36,000 per year. 32 years of payments at 36,000 per year equals 1,152,000 in total, which sum then needs to be discounted to present value to determine its current value.
As such, any suggestion that his annuity is discounted by 31% is a meaningless remark.
Hopefully, this information will help you better understand the valuation process.
A: Thank you for your question. There is no "tax" on the annuity. What I believe you are referencing is that the "present value" of an annuity is worth less than what the annuity will ultimately pay. If you are treating assets that both have a "present value" such as bank accounts, real estate etc. then there is a 50-50 trade. If you are trading assets that both have a "future value" such as annuities, pensions, 401(k)s etc., then those also treated 50-50. However, if one person is keeping the "present value" item in trade for the person keeping the "future value" item, the future value item is customarily valued at one third of the value of the asset as opposed to one half. I say "customarily" because there is no court rule or statute that says this. It is simply a ”rule of thumb" used by both attorneys and the courts. To more fully understand the concept, to make sure that the "trade" is a fair one, I strongly suggest that you consult with a Family Law attorney of your choosing.
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