Real estate after Divorce

[bucky100771]

Hi all,

I am in a real conundrum, I am going through a divorce and my family law lawyer has told me that I can no longer hold rental property because of my obligations to my 2 daughters. According to my attorney, the government looks at GROSS income and as a consequence the positive cash flowing property I have of $200.00 a month net to me looks great but in reality he is saying that the government doesn`t care about my $1300.00 in expenses, they only look at the $1500.00 GROSS income of the rental payments and as a consequence my payments to my kids should be about $500 - $600.00 dollars a month more just from this alone. This turns the business model upside down.

I wrote to Don and he didn`t know if this was true or not. I think I need to consult another lawyer as this would mean any business is calculated on gross. I wondered if there is anyone with child support payments to make who is holding rental property here to tell me how they are doing it and how they are structuring their assets to allow them this. I could really like some help.

Otherwise....if anyone wants to take over my payments to earn some cash flow with a tenant who is interested in renting to own...let me know. I really do hope I can keep the property. Its management free and rent goes up each year.

HELP!

Peter

 

[UTCVenturesLtd]

QUOTE (bucky100771 @ Feb 12 2008, 08:36 AM) Hi all,

I am in a real conundrum, I am going through a divorce and my family law lawyer has told me that I can no longer hold rental property because of my obligations to my 2 daughters. According to my attorney, the government looks at GROSS income and as a consequence the positive cash flowing property I have of $200.00 a month net to me looks great but in reality he is saying that the government doesn`t care about my $1300.00 in expenses, they only look at the $1500.00 GROSS income of the rental payments and as a consequence my payments to my kids should be about $500 - $600.00 dollars a month more just from this alone. This turns the business model upside down.

I wrote to Don and he didn`t know if this was true or not. I think I need to consult another lawyer as this would mean any business is calculated on gross. I wondered if there is anyone with child support payments to make who is holding rental property here to tell me how they are doing it and how they are structuring their assets to allow them this. I could really like some help.

Otherwise....if anyone wants to take over my payments to earn some cash flow with a tenant who is interested in renting to own...let me know. I really do hope I can keep the property. Its management free and rent goes up each year.

HELP!

Peter

Hi Peter,
Assuming that your 50 50 divorce settlement has gone okay with the exception of leaving you with a higher obligation for child support payments with the rental property income.... it might be worth your while to "roll" the property into a corporation. Talk to an accountant about that strategy. Lawyers look at your total income, then the chart that says how much you pay based on what you earn - no deductions. Another strategy which is what i used for my divorce was to have joint custody which reduced my child support financial obligations by a LOT! My older daughter was 18 and on her own at the time and was not planning on going to school for a higher education. The younger one was 13 and wanted the joint custody arrangement. It worked really well til the last year as she turned 17 and went beserk. They took the gross wages of each of our salaries and i had to pay the difference since i earned more than my ex. Within 3 yrs i had replaced the 50% that i lost through the stock market and by paying down the "new" mortgage. Sure wished that i had moved into real estate at the time as well.
Dean
[email protected]

 

[RebeccaBryan]

Peter,

I think you need another lawyer. That doesn`t make any sense.

 

[bucky100771]

QUOTE (UTCVenturesLtd @ Feb 12 2008, 12:37 PM) Hi Peter,
Assuming that your 50 50 divorce settlement has gone okay with the exception of leaving you with a higher obligation for child support payments with the rental property income.... it might be worth your while to "roll" the property into a corporation. Talk to an accountant about that strategy. Lawyers look at your total income, then the chart that says how much you pay based on what you earn - no deductions. Another strategy which is what i used for my divorce was to have joint custody which reduced my child support financial obligations by a LOT! My older daughter was 18 and on her own at the time and was not planning on going to school for a higher education. The younger one was 13 and wanted the joint custody arrangement. It worked really well til the last year as she turned 17 and went beserk. They took the gross wages of each of our salaries and i had to pay the difference since i earned more than my ex. Within 3 yrs i had replaced the 50% that i lost through the stock market and by paying down the "new" mortgage. Sure wished that i had moved into real estate at the time as well.
Dean
[email protected]

Dean,

How will rolling the property into a corporation change the registered income? Are you suggesting that as long as I don`t declare any personal income from the corporation, I`m protecting this asset from the calculation?

 

[UTCVenturesLtd]

QUOTE (bucky100771 @ Feb 13 2008, 08:48 AM) Dean,

How will rolling the property into a corporation change the registered income? Are you suggesting that as long as I don`t declare any personal income from the corporation, I`m protecting this asset from the calculation?


The way i understand it, is that you create a new "entity" called the corporation which declares its` own income and pay its` own taxes so the corporation`s income now is not taxed in your hands nor added to your personal income pile. You own the shares of the corporation and control it, but you do not take any income or dividends from it so it can grow. The two biggest problems are that it costs extra for the accountant`s fees and you would have to refinance the rental because it will no longer be in your name, or at best use the financing in your own name to lend to the corporation at likely a better rate. (Also, there is the cost of setting up the corporation as well.) Basically you then guarantee the debt which makes you liable for it. It is best to talk with an accountant about your situation and the best route for you to go. I do know of a guy who was making a triple digit wage and quit his job, set up a corporation and didn`t pay a dime after that for child support. I think reducing your amount payable is one thing but to avoid it entirely is another!

 

[bucky100771]

QUOTE (UTCVenturesLtd @ Feb 13 2008, 11:22 AM) The way i understand it, is that you create a new "entity" called the corporation which declares its` own income and pay its` own taxes so the corporation`s income now is not taxed in your hands nor added to your personal income pile. You own the shares of the corporation and control it, but you do not take any income or dividends from it so it can grow. The two biggest problems are that it costs extra for the accountant`s fees and you would have to refinance the rental because it will no longer be in your name, or at best use the financing in your own name to lend to the corporation at likely a better rate. (Also, there is the cost of setting up the corporation as well.) Basically you then guarantee the debt which makes you liable for it. It is best to talk with an accountant about your situation and the best route for you to go. I do know of a guy who was making a triple digit wage and quit his job, set up a corporation and didn`t pay a dime after that for child support. I think reducing your amount payable is one thing but to avoid it entirely is another!

I agree Dean not paying anything is not my goal. Losing all my hopes and business dreams is not my goal either. It doesn`t make sense to me that I would not be able to do it this way. Anyway, I do have an accountant, I will get the details from him....

thanks again!

Peter

 

[RebeccaBryan]

Peter,

I am in a situation whereby my income is calculated for child support purposes. I am self-employed. They calculate the payments by my income tax for that year and I have rental properties. After expenses my calculation that I pay my X is $0. He pays me because he has a regular J-0-B. He has 1 child and I have 1 child. No one has suggested to me that I cannot hold my property because I have to pay child support, nor does it eliminate what he has to pay me.

There are lots of other factors that play into the above scenario however I do know that something isn`t right with your situation.


That`s why it doesn`t make sense to me.

 

[KrustyKrabs]

QUOTE (UTCVenturesLtd @ Feb 13 2008, 01:22 PM) I do know of a guy who was making a triple digit wage and quit his job, set up a corporation and didn`t pay a dime after that for child support. I think reducing your amount payable is one thing but to avoid it entirely is another!


I am separated with 2 children who`s main residence is with their Mother. I see them quite often however.

Not to get off topic, but I find it appalling that any parent would attempt to rid themselves of their commitment to support their own children. However, I do find that the laws are nothing more than a blanket, and in a lot of cases the child support calculations are way out of touch with reality. I firmly believe that support calculations should be based on income at the time of separation, and should also consider the other spouses "ability" to be gainfully employed enough to also provide the financial support for their children.

There is absolutely no incentive to the spouse receiving the support payments on behalf of the children to maintain gainful employment. It can however be argued in court (by way of hefty legal bills), that the receiving spouse is intentionally milking the other spouse.

To summarize, I feel that there is a definite amount of financial support that IS required to raise children......however the spouse that decides to get up off the couch and become a go-getter should not be penalized additionally for their success. And when I say penalized, I mean being required to pay additional support than IS required, essentially just providing a more cushy lifestyle for the non-productive spouse.

So, if for the term of support payments, you can create an entity that grows....then do it, but not at the sacrifice of your children.

Glen

 

[Janice]

QUOTE (UTCVenturesLtd @ Feb 13 2008, 10:22 AM) The way i understand it, is that you create a new "entity" called the corporation which declares its` own income and pay its` own taxes so the corporation`s income now is not taxed in your hands nor added to your personal income pile. You own the shares of the corporation and control it, but you do not take any income or dividends from it so it can grow. The two biggest problems are that it costs extra for the accountant`s fees and you would have to refinance the rental because it will no longer be in your name, or at best use the financing in your own name to lend to the corporation at likely a better rate. (Also, there is the cost of setting up the corporation as well.) Basically you then guarantee the debt which makes you liable for it. It is best to talk with an accountant about your situation and the best route for you to go. I do know of a guy who was making a triple digit wage and quit his job, set up a corporation and didn`t pay a dime after that for child support. I think reducing your amount payable is one thing but to avoid it entirely is another!

Just a note on the above, I just bought a rental property and took out a mortgage on it in my personal name. One month after the deal closed I moved the property into a numbered company name( legally of course )to protect this asset in case of any lawsuits ( my husbands a contractor). So I dont think you will need to refinance, just set up an incorporated company with direction from a lawyer (of course and accountant) and transfer the ownership of the property to the company name. I`m still personally responsible for the payments on the mortgage so the bank doesn`t care. Initially a bit more costly but should be worth it in the long run as long as you don`t take out any personal income , just make sure to record all your expenses( to minimize taxes) cause this new company will now be paying corporate taxes. Any feedback ?