What's A Fair Divorce Settlement?

Even in an amicable split, it's tough to judge what's fair, unless you can project future living standards.



Economics can't say what's fair, but it can help with divorce settlements by showing who is really getting what and how to make the best out of a bad situation.


Take Frank and Stacy Loveless. Frank's 45, Stacy's 38. He's a dentist; she's a dietitian. They live in Saint Louis with their two girls, ages 7 and 3. The couple met in Frank's dentist chair a decade ago.


Stacy asked him out and, boy, what a wedding and what a great marriage until, well, things changed. Their main goal now is settling their affairs without declaring war or wasting their assets or an extended legal battle.


Not easy. Stacy's never been great with numbers. But she's nobody's lunch meat and isn't sure Frank's offer is all that generous. Frank is the big earner, netting $150K a year. Stacy earns $30K. The dental practice, were Frank to sell, is worth $300K. The couple has $700K in regular assets, which they invest conservatively and expect to earn 3% after inflation. They also own a $300K house with a $200K mortgage, which they are paying off in 15 years. Frank has $300K in his 401(k).



More: http://www.forbes.com/2010/07/07/divorce-settlement-alimony-child-support-personal-finance-kotlikoff.html?boxes=Homepagetoprated

Fair is cut straight down the middle with some extra money in support of the children if one parent has them more than the other.

50/50 is not always appropriate.

To make this case you need to look at an extremes.


e.g. 20 year old trashy bimbo/toyboy marries rich successful aging business man/woman. Divorces after a year.


Yes this is an extreme case, but it shows that it is never black and white.