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Question: How do I handle the reimbursement for the payment of wife's separate debt by the husband (or vice versa)?
Answer: Just specify that the debt is a separate debt of the wife, and that the husband will pay it, and then reach a 50/50 division in the Property Division worksheet as you normally would.
Let's explore how this works.
To clarify, this is a situation where the husband is paying the wife's separate debt from his share of the marital assets. We want to get his share of the marital assets to be the right share to make this fair.
Let us assume for this example that the husband is paying the wife's separate credit card debt. (This could just as easily be wife assuming husband's credit card debt.)
Let us further suppose that we want the assets to be divided 50/50, after accounting for husband's assumption of wife's credit card debt.
Handling this case is fairly straightforward in the software.
First, when you enter the debt, specify that it is the wife's separate debt, but then override the payment percent to indicate that the husband is paying it, as shown below. (This image is from the Lawyer tab > "more info" screen for a debt.)
To keep things simple for our illustration, assume that there is only one other asset, an Investment, which has a value of $20,000.
Now go to the Property Division screen.
Stay with the default that you want the marital property to be divided 50/50.
Allocate all the assets between the parties. It does not matter how the assets are divided, as long as you go through all the assets and allocate them between the parties.
Once all assets are allocated between the parties, the equalization amount will show how far the parties are from 50/50, based on the allocation of all assets.
Let's allocate our $20,000 Investment asset 50% to each party (which we know is not where we should end up) and see what happens.
Note that in this case, the program will show that we need to give James $10,000 more of marital equity.
Let's do that. Since he had $10,000 in our initial allocation, when we give him $10,000 more, he will end up with $20,000. By coincidence (sort of), this is the full value of the asset. But the important thing is that it is $10,000 additional -- that is, the value of the debt.
Now we are at 50/50. The husband has $20,000 more of the marital equity than the wife does.
As we think about it, that makes sense, for the following reason:
After the husband pays the wife's debt, he will have $10,000 left of the $20,000.
The wife, having been relieved of the obligation to pay the separate debt, is in a situation as if she had received $10,000 from marital funds and used it to pay the debt, ending up with $0.
So after the dust settles, the parties will be in the same situation as if the husband did not pay the wife's debt, the parties divided the assets 50/50, and the wife paid her separate debt with the proceeds.
And that is what you want.
In summary, just specify on the data entry screen that the debt is a separate debt of the wife, and that the husband will pay it. Then reach a 50/50 division in the Property Division worksheet as you normally would.
The husband will end up with marital property equal to 2x the amount of the debt on top of property otherwise divided by 50%.