Ask Jonathan Breeden Anything: Navigating Divorce and Financial Preparedness

Raena Burch: [00:00:00] What should people do to prepare financially for a divorce?

Jonathan Breeden: The first thing I would do if I thought my marriage was in trouble or it was not going well is, I would find out what I’ve got. So many people come in here, and they do not know what their assets are. They don’t know what their debts are. I am stunned, Raena, at the number of people who come in here and cannot tell me what their spouse earns.

Raena Burch: Really?

Jonathan Breeden: It is surprising to me. And maybe, that’s why their marriages are not working out because they’re not communicating. So I think, the first thing I would do is, if I did not know what my house was worth, or what I owed on my house, I would find out. I would get the mortgage statement. I would go to Zillow, put my address in, and get a broad idea of what my house is worth.

Narrator: Welcome to another episode of Best of Johnston County, brought to you by Breeden Law Office. Our host, Jonathan Breeden, an experienced family lawyer with a deep [00:01:00] connection to the community, is ready to take you on a journey through the area that he has called home for over 20 years. Whether it’s a deep dive into the love locals have for the county or unraveling the complexities of family law, Best of Johnston County presents an authentic slice of this unique community.

Jonathan Breeden: Hello, and welcome to another episode of The Best of Johnson County podcast. I’m your host, Jonathan Breeden. And today, we’re going to have a special edition episode of The Best Johnson County podcast, that we call Ask Jonathan Breeden Anything.

Normally, our podcasts are me, Jonathan Breeden, interviewing interesting community members, small business owners, community leaders, and other people that we find just fascinating and interesting that are doing great things here in Johnston County. And every once in a while, we do one of these episodes, where we call it Ask Jonathan Breeden Anything, where our social media coordinator, Raena Burch, asks me a series of questions as it usually relates to family law.

I don’t know what the questions are in [00:02:00] advance, but I probably know the answers. Since I’ve been practicing family law here in Johnson County for the last 24 years. If this is your first time listening or seeing The Best of Johnson County podcast, please do us a favor of liking, following, or subscribing to this podcast, wherever you’re seeing it on Apple, podcast, Spotify, YouTube, LinkedIn, Tiktok, or any of our other social media channels.

And also, going down to wherever you’re receiving this podcast, and leaving us a five star review, as that will help with our visibility so more people will know about The Best of Johnson County podcasts. So anyway, you ready, Raena?

Raena Burch: I’m ready. Are you ready?

Jonathan Breeden: I’m ready.

Raena Burch: Okay. So first question, what is all included in the marital estate?

Jonathan Breeden: What is all included in the marital estate? It is everything that the marriage amassed, both assets and debts. And I think a lot of people, they come in they’re like, I got a house or whatever, and they don’t really realize that it’s the [00:03:00] debts too. And unfortunately, a lot of people come in and the debts are more than the assets.

And when the court goes in to start trying to divide the marital assets, whatever the marital of, you know, the estates are when you die. right. But you said We use that term, but the marital assets, people are often shocked when I, we’re like, we got to divide the debt too. Because particularly, if you’re a lesser earning spouse, or in the relationship, oftentimes, you may not be aware of how much debt there is. And you benefited from the debt almost always. And now we’re like, okay, well you have $50,000 in credit card debt. And as part of this income distribution, this property distribution, you’re you’re going to have to absorb $25,000 of credit card debt, and they might not make $25,000. And they’re stunned, but it is both assets and debts that were amassed during the marriage.

Now, [00:04:00] not included in marital assets are things that were inherited, good to know. or unless you’ve made a gift to the marriage. Mm-Hmm. , And that probably a whole another podcast. Or could be, I mean, because what, basically, if you inherit it and you put it in a joint account, or you pledge whatever you inherited for a joint debt, then the inheritance can become marital because you’ve co-mingled it with the marital assets.

But other than that, its inheritances are not marital. Things you came into the marriage with are not marital. So, you came in with $100,000 and a 401k, and when you’re divorcing, there’s $200,000 a 401k. Well, The first 100,000 and whatever that growth is, from the 100,000 you had when you got married, remains a separate property, the person who brought it into the marriage.

As do the debts, you come into the debt marriage of a bunch of debt, people do that too. you know, Now, the question is, has it been paid off? A new debt been put on top of it with his revolving credit card debt, it gets to be a little more confusing, but it’s [00:05:00] essentially. whatever this marriage And the marriage is a social contract, created by the government. Okay. You know, To contract people together. And when you get divorced, it’s basically, this small business, I’m, married. I’m happily married, but I’m saying, legally, it becomes right,

right. It becomes a contract. And what did this contracted unit develop? What products did it get? What assets did it amass? And how can we equitably divide it between the two of them?

Raena Burch: Okay, two, how is credit card debt split, and what about other bills such as loans?

Jonathan Breeden: Well, Once again, we talked about credit cards a minute ago. That is part of the marital estate, the marital assets, I’m going to use the word estate. That’s what we call it.

Because everything counts. So, when you think about what most marriages have, most marriages have a house. And often, if you live in Johnson County, the equity in the house, you know, given that houses have gone up a couple hundred thousand dollars in the last three years and just passive increases, because there’s not enough houses in Johnston County because we have a [00:06:00] supply and demand problem.

We have way more demand than we do supply, which is driving the price of houses up. Then, you end up, you know, so that is often the number one asset in a marriage. Other assets that you see in the marriage that are actually to the positive 401k, retirement accounts, 529 college savings accounts for the children, stocks bonds, mutual funds that you may earn. All of these are assets of the marriage. As well as, vehicles, if they’re paid for.

you know, The question is most of the time, if your vehicle is not paid for, the vast majority of people owe more on their vehicle than it’s worth. But if you have a paid for vehicle, or vehicles almost paid for, you know, the difference in what you owe and what it’s worth can be an asset. That would be considered to be divided.

And then, of course there are the debts, which is often credit card debt, short term consumer debts, car loans, the mortgage. you know, Back in the day, we used to have houses that were worth, where you owed more than what they were worth. That is an extremely [00:07:00] rare occurrence now in Johnston County. Almost all houses, are, unless you just bought it in the last six months, you’re not going to owe, more than it’s worth.

know what I’m saying? So, but you know, And then, you have these credit card debts. And so, they get put in the pot and it’s not that we’re going to divide everything exactly 50/50, but we’re going to put things in your column, and it’s going to be deficit credits accounting 101.

We’re going to put some things in your column, Raena. We’re going to put some things in my column. you know, We’re going to add up what I have in my column. And maybe I’m getting the house, that’s $100,100. And maybe, I got a 401k and that’s $50,000. And maybe, I got to pay for a car, and that’s $20,000. So I’m at 170 to the good there, and I’m going to take you know, a $25,000 credit card bill and a $10,000 car loan. you know?

And so now, I’m going to be, take 35 off of by 175, and I’m going to be at 135. So at this point, there’s 135, to the good in Jonathan’s column. Then, we got to figure out, what would [00:08:00] make Raena have 135 to the good in her column. So, the first thing you have to do in this is, and the hard part for attorneys is trying to figure out what the assets are? And what do they work? What does the house work? What does the 401k work? What does the car work?

You know, And that’s where Kelly Brew book come in, and house appraisers, and all of those things. you know to figure out you know And then the debts, like what other credit card debts, you know have people pay down those debts after they separate it. Because if you pay down the credit card debt after you separate it, you get credit for that into the divorce.

And so, if your goal is, if you’re You know, an attorney like us, trying to figure out what a fair deal would be is, you got to figure out what the total assets and the total debts are to get the net worth of the marriage. Which is after everything’s paid and sold off, what would the marriage have?

Sometimes, that’s to the positive. Oftentimes, that’s to the negative. And then, you have to divide that positive or that negative in half, and determine, how is each person going to get their half of the net. And that net may be positive, that [00:09:00] net may be negative. And that’s sort of how it goes. So, the credit cards are just one of the things in the marital assets that have to be divided.

Raena Burch: So would you say, they’re generally split equally or equitably?

Jonathan Breeden: The law says equitably, and equitably is not always equally. There are 16 or 17 different things under the law that would allow the court to divide the assets.

on equally In my experience, the court does everything in its power to divide it as equally, as possible. You know what I mean? And it really does try to make it equal, if it can.

So, we approach every case of trying to figure out, how to make it. equal. And you know, every once in a while, it can’t be, because of the nature of the assets. Maybe, one of the things in the statute applies. Particularly, if one side laid waste to a lot of the assets, you know, spent a touch of money on drugs or alcohol or other women. I mean it, does [00:10:00] happen.

And well, really, you know, artificially lowered the net assets, because the money was not spent for the good of the marriage, it was feeding an addiction, and stuff like that. But in the vast majority of cases, we’re just trying to figure out, what are the assets? What are the debts? What is the net worth of this marital unit? And how can we divide it equally?

Raena Burch: Okay, so you said, I know you touched on this, the IRA, and the 401k can be split as part of the marital assets. What about health savings accounts?

Jonathan Breeden: Health savings accounts, really, we don’t normally split those.

Oftentimes, there’s not that much money in them. Most people are putting a few hundred dollars in them, and it’s not serious enough asset to count. Normally, what we’ll say is, while this amount of money, whatever it is, I’ve never seen an HSA with more than about $1,500. I’m sure, people have them, but you know, that’s just not what seen a lot of.

We’ll say, okay, the marriage is going to use the HSA, [00:11:00] until it’s gone. And so, we’re going to say, okay, there’s $1,500-2,000, and the wife and the children, if it’s in the husband’s name, we’ll be able to continue to use it as they have used it, until it has gone to zero. And then any future contributions after the set date of separation, if it belongs to the husband, that will be the husband’s money to do with, as he sees fit. Because if it’s earned after the date of separation, it’s not part of the marital assets. So, that’s what we normally do with HSAs. is okay, Most of them don’t have a ton of money. We’ll say, we’re going to continue to use it. And when this amount of money is gone, then it’s gone.

And then, and it may still have money, because the husband may continue to contribute to it after the date of separation with each paycheck. Yeah. Like you contribute to a 401k.

Raena Burch: Yeah.

Jonathan Breeden: But the wife would not be entitled to that.

Raena Burch: Got it. So, And just to be clear, the date of separation, not the date of divorce, or do you mean, the act.

of

Jonathan Breeden: Right. The assets in North Carolina divided per the date of separation, not the date of [00:12:00] divorce. But certain assets are divided on the date they are divided. So if a house or 401k or whatever, continues to go up in value, you look at what the value is when you’re actually dividing it, because your interest was set in the marriage. And until you’re paid on, your interest, is still accruing.

And back during 2008, 2009, 2010, when all this stuff was going in the wrong direction, during that financial crisis, you know, we had some pretty bad conversations with people.

Yeah. We’re very fortunate now. Particularly with this year increase in house values in this area, it’s really changed the game as to what we’re doing here. And you know, if you own a house, it’s now rare that we’re looking at a negative estate, when we used to be looking at that all the time.

Raena Burch: Got it. Okay. What should people do to prepare financially for a divorce?

Jonathan Breeden: The first thing I would do if I thought my marriage was in trouble or it was not going [00:13:00] well is, I would find out what I’ve got. So many people come in here, and they do not know what their assets are. They don’t know what their debts are. I am stunned, Raena, at the number of people who come in here and cannot tell me what their spouse earns.

Raena Burch: Really?

Jonathan Breeden: It is surprising to me. And maybe, that’s why their marriages are not working out because they’re not communicating. So I think, the first thing I would do is, if I did not know what my house was worth, or what I owed on my house, I would find out. I would get the mortgage statement. I would go to Zillow, put my address in, and get a broad idea of what my house is worth.

And I would subtract what I owe my house from what Zillow says I might be able to get, throw in a 6% realtor fee. And that’ll give you an idea of what the net value of the house is. I would do the same thing for my cars. I would find as many 401k, IRA, Edward Jones, Scottrade [00:14:00] statements, as I could find in my house to start. And I would make a spreadsheet of all of the assets, if you don’t know what they are. And how they are structured, I would start putting together the account numbers. And I would look at the debts, including the mortgage statement. I would look at the car, what’s left on the car loans. I would look at the credit cards, what’s left on the credit cards. How many credit cards are they? Are they primarily in my spouse’s name? Are they in my name? What’s being auto-charged these credit cards. Are these credit cards being paid every month?

The first thing you need to do, financially, if you think your marriage is in trouble and you’re about to separate is, figure out, what do you have or don’t you have. That’s the first thing.

The second thing you’ve got to do is, you got to make a budget. You have to make a budget, as to where you’re staying. So you look at, say, okay, I’m going to stay in this house, and my spouse is going to leave. Okay, the mortgage doesn’t change because the spouse leaves. The water bill doesn’t change because the spouse leaves. Okay. [00:15:00] The property taxes don’t change because the spouse leave. The power bill doesn’t change because the spouse leaves. The yard needing to be mowed, whether you mow it or pay for it, does it change if the spouse leaves. The trash bill, does it change? Really, none of the bills, other than possibly, the food really changes when a spouse leaves.

Raena Burch: And car insurance.

Jonathan Breeden: And car insurance, which is, we’re talking $100 a month.

Raena Burch: Yeah.

Jonathan Breeden: so, If you don’t know what your household budget is, and what you’re trying to live on right now, you need to figure that out. And the easiest way is, you know, all these websites and apps out there, Dave Ramsey has an app. Your bank account, all your bank statements will show you what you’re spending money on. If you’re mainly using a debit card, not a credit card. And it’ll characterize it for you. And it’ll go back 12 months for you. And so, you can get some averages, because you know, power goes up and down, and water goes up and down, and that kind of stuff.

The second thing I would do is, I would figure out what the budget is, [00:16:00] if I stay where I am. What is it going to cost? What do I make, and what would it take contributions from the spouse who’s left to, for me to stay where I’m at the current budget. Or you need to look, if you think you’re leaving, you need to make a budget where you’re going, which includes rent, power, water, cell phone, food, car insurance, health insurance, haircuts, whatever.

Right. And so, that you need a budget there. I can assure you, that in 95% of the separations that we deal with in Johnson County, there is not enough money to go around.

Raena Burch: There never is.

Jonathan Breeden: Whether it’s way, Johnson or hard, it doesn’t matter. There just isn’t, right? Most people live, up to their means or above their means.

you know, The vice president, Kamala Harris, a couple of months ago stated, she cited a study and I think she misspoke, but the point she was trying to make was right, which is 54% of Americans could not pay for a $400 unexpected car repair bill without going to a credit [00:17:00] card.

So, I’ve been there. I’m not passing judgment, but I’ve been there at some point in the past. early. Right. Early in my career, I have been there. So, I’m saying, that means that when you separate, the odds are, there’s not enough money to go around. It costs at least 40% more. And with inflation, more like 50 or 60% more to live apart than together.

And so, if this unit together has $6,000 a month net, that’s what it’s bringing home after taxes. And it’s spending $6,000 a month to live in a single house. And now, one of those spouses has to go live somewhere else, then there’s not going to be any money coming back to the spouse that stays, other than child support.

In that scenario, I doubt there’s going to be a lot of alimony, because the spouse who leaves has to go live. Well, It’s going to cost him at least 3 or $4,000 to go live somewhere else. A one bedroom [00:18:00] apartment in Johnson County now 15, 16 $1,700. mean, It’s crazy. I mean, And you can’t find a house to rent. And if you can, they’re a couple thousand dollars. And even mobile homes, if you can find one of those to rent or 1,200 now.

So, you know, that’s the thing. that,

Raena Burch: If you have kids, you don’t necessarily want to live with roommates. You don’t know these people.

Jonathan Breeden: right? No, could be dangerous. So So What do you have in uh,

and Figure out, okay, maybe I can’t stay in this house. Because I cannot take the $100,000 in equity that’s in this house, and go to food line with it, and buy groceries, or make my car payment. you know, And so maybe, you need to go find something to rent. Maybe, you need to sell the house ,and take that cash, put it in your pocket.

mean, That’s up for each individual decision. But, you know, I also think, it would probably be good. And I don’t care how much money you have. Go talk to a financial planner, go talk to somebody. We had Chris Key on Aspect Financial. the other, you know, A few podcasts ago, go talk to somebody, Edward Jones. There’s an Edward Jones [00:19:00] agent in every corner Johnston County. Go talk to somebody who’s a professional at budgeting, and finance, and say, this is what I got, can you help me? And they will be glad to help you.

Raena Burch: Yeah. All right. And so, what should you do if you suspect your soon to be ex-spouse is hiding money or assets? How do you handle that?

Jonathan Breeden: I think, you should look at all of your finances, particularly where the paycheck is going. I think, you need to study the bank accounts. If you have joint bank accounts, if you have access to the credit cards, you know, mainly, where is that spouse’s paycheck going? How much does that spouse making? you know, Is this money coming in to this Wells Fargo account, but it’s being transferred to an account somewhere else? And I don’t have access to that. you know, So, just try to figure out, where you think it might be going, and how it might be structured. If you only have separate bank accounts, which a lot of marriages have, then you’re not gonna be able to get access to [00:20:00] that. And what I would do is, I would go and contact local attorney, come call us at the Breeden Law Office.

And we can start to try to figure out, where this money might be. you know, Once you start a lawsuit, you can start sending subpoenas, you can get restraining orders, you know, there’s a lot of things to try to get higher private eyes, we can hire forensic accountants. you know, We have a lot of assets. You know, We have a lot of community resources at our fingertips and our phones to help sort of try to figure this out, if you don’t have access to the stuff to be able to see. But if it’s a joint account, you know, you can often just go read the bank statements, and you can start to see stuff that just doesn’t add up. And ask questions, ask the spouse, say, why is this money being transferred? Where did it go? What’s in that account? Why did you spend this money on whatever? Yeah, you know, And try to start, to get some answers.

Raena Burch: Yeah. And I know, you can also set up rules for paychecks for you. Like Some goes into this account, some goes into that account. Maybe, if you know how much your spouse makes, but the paycheck that’s coming into the joint account isn’t [00:21:00] as much as it should be. rest of that money going?

Right. Well,

Jonathan Breeden: And what I also tell spouses that come in and say, I don’t know what he makes. I’m like, did you file a joint tax return? Most married couples do. It’s very advantageous for married couples to file tax returns.

And I’m like, do you know where your tax return is? Contact your CPA or whoever did the tax return, H&R Block, whoever.

Get a copy of the tax return. It will have the W-2 with it. And that’ll tell you how much you made, or she made.

Raena Burch: Yeah. And if I know I use H&R Block and I can look all that up online. I can look all like for the last four, five years.

Jonathan Breeden: Right.

Right. So, I mean, that’s, the other thing, you know, is you can write the IRS and ask for a copy of your tax return. And maybe, ask for the last few years of your tax return. so that

you can see, at least what they’re reporting to the government that they made. Now, if they’re self employed or they have cash, or you know, there’s some stuff like that, that might be a little more complicated. But most people, it’s all in the tax return.

Have family law questions? Need guidance to [00:22:00] navigate legal challenges? The compassionate team at Breeden Law Office is here to help. Visit us at www. breedenfirm. com for practical advice, resources, or to book a consultation. Remember, when life gets messy, you don’t have to face it alone.

Raena Burch: All right. Last question. And you kind of touched on this earlier. But so, if your spouse used marital funds and or accounts to fund an extramarital affair, do you get some of that money back in the divorce? How does that work?

Jonathan Breeden: You should. You may not get it back. It should go as a credit right in the column. Right. So, if this spouse spent $5,000 on a credit card on the affair, and you can show that it was for hotel rooms, and flowers, and stuff like that. Flights that didn’t have anything to do with work, and they’re funding an affair, and it’s often on a credit card that you don’t have access to.

But we send a subpoena. We get the access. And now, that spouse is [00:23:00] saying, well, this credit card that I owe $10,000 on is a marital credit card, and you go back and you study the bank, these credit card statements, and you see these charges that clearly were for an affair. Like The flowers didn’t come to you, Raena. You didn’t stay in that hotel in Tahoe.

You didn’t go to Aruba, right? And you know, he didn’t have work in Aruba. And it’s on a personal credit card. He didn’t get reimbursed. Right. So, I mean,

These things happen. What we then say is, instead of $10,000, that credit card in this distribution is only going to be five. Because only five of it was for the marriage. The other five was for somewhere, somebody else.

I had one a few years ago, where they had a home equity line of credit. And it had about $15,000 on it. And the wife was planning on leaving the husband. And the husband had absolutely no idea he was about to get left. And so, the wife maxed out that home equity line of credit, by buying a $5,000 necklace for her mother, a diamond necklace for her mother, and [00:24:00] two $5,000 CDs for their daughters. And it was done the week before she served him separation papers. And he was completely stunned. He came here, he was completely upset. He had no idea, his marriage was about to be over.

And we were able to go back and say, okay, that $15,000 that is on that line of credit is not marital.

Raena Burch: It’s not his

Jonathan Breeden: Right. Right.

Raena Burch: responsibility.

We’re not. Right.

Jonathan Breeden: It’s not his responsibility. She could sell the diamond ring, she could cash in the CDs, but we took that $15,000 off. ‘Cause I think, at that point, the home equity line of credit was 50. And they owed a hundred on the house. So, they were trying to keep the house, saying, okay, well it’s 150. We’re like, no, the house is only 135, when you put the two debts together. Because that 15 was not

correct.

Correct. was not his doing. she clearly did it planning to separate because she did it the week before she gave him the paper.

She’d already hired the lawyer. He had no idea, [00:25:00] his marriage was coming to an end. So you do see that, right? Like you see people. Like, Cause a lot of times, one side has been planning for the divorce for a long time and the other side gets blindsided. And that’s unfortunate. And that person that’s planning, that’s when money starts getting moved around.

They create this separate account. you know, But look, even if they move the money to a separate account, and that money exists on the date of separation, it’s still marital. It still gets divided in the assets. I don’t care how it’s titled. you know, I mean, If you’ve got a hundred thousand dollars in a CD, and it’s only in your name, on the day of separation, and I didn’t know anything about it. You know, You have to disclose it in the divorce. I still get half of it, even though it’s only in your name. I think, a lot of people say, Oh, it’s in my name. That’s my car’s in my name. The house is only in my name. Well. Not exactly. you know, in a marriage situation, North Carolina, this is not a title state.

This is a, was it gotten during the marriage. After you divorce its title, or if you divorce and you didn’t divide the property, then it’s just who it’s titled to at that [00:26:00] point. And there’s no longer a marital interest in it because you’re divorced. So you’ve got to deal with the property, before you get divorced. You got to wait a whole year of being separated. So, we got plenty of time to try to deal with it.

So call an attorney, get involved, try to work something out. But you got to deal with this property before you get divorced or it will become the title. and, at least once a month, right? now somebody comes into this office and says, I’m divorced, what about the house?

And I’m like, well, how’s the house title? Well, If it’s titled in both names, you’re now joint tenants. And if you’re not living there, you could try to have it auctioned, you know, to get your money out of it or try to force a sale. But if you would have dealt with it before you got divorced, then it would have been part of the total marital assets, and the equity in it could be offset by some of the debts, and stuff like that.

It is rare. Back to your original question about credit cards. It is rare that we actually make one side pay the other side’s credit card. Normally, that entire credit card debt, if the credit card is in your name, gets put in whoever’s name is his column, and it’s offset by some other debt or asset in the other [00:27:00] column.

you know, Every once in a while, you’ll need to pay me $500 a month, so the credit card is paid off. But normally, there are enough other assets, enough other debts that it’s just an offset in this debits and credits worksheet that we make to try to make sure everybody gets hacked.

Raena Burch: That’s all I have.

Jonathan Breeden: All right.

Well, anyway,

that was, that was a lot. We can probably do a separate podcast on each one of those questions. And we might do that as this podcast continues to roll along. So anyway, like we said earlier, if this is your first time seeing or hearing The Best of Johnson County podcast, we ask you to like, follow, subscribe wherever you are.

Check back every Monday for new episodes of The Best of Johnson County podcast. I’d like to thank Raena, for coming on and helping us with this special edition episode of Ask Jonathan Breeden Anything. And so until next time, I’m your host, Jonathan Breeden.

That’s the end of today’s episode of Best of Johnston County, a show brought to you by the trusted team at Breeden Law Office. We thank you for joining us today and we look forward to sharing more interesting facets of this community next week. [00:28:00] Every story, every viewpoint adds another thread to the rich tapestry of Johnston County.

If the legal aspects highlighted raised some questions, help is just around the corner at www. breedenfirm. com.