The news of Madonna and Guy Ritchie's split may not have been a big surprise, but the 76 million divorce settlement was mentioned several times in the media. This is a large settlement by any standard.
Madonna and Guy Ritchie's 76 Million Divorce
Madonna agreed to pay Guy Ritchie an estimated 76 million in cash and property in the divorce settlement. This development meant that the couple did not each have to present a case in open court to have a judge make a determination about how to divide their property.
Madonna and Ritchie had a combined net worth estimated at $525 million, and most of the money was earned by Madonna. (The singer made an estimated $40 million in 2008 alone.) This settlement may well have saved her money. It is speculated she was afraid of taking her chances before a judge who may have awarded Ritchie a larger portion of her fortune.
Divorce Settlement Issues
Each divorce settlement will be different. It will need to take into account the financial circumstances of the couple and amount and type of assets they owned during the marriage. Here are some examples of issues that should be addressed in the settlement:
There may be special rules that apply to retirement accounts when they are divided as part of a divorce settlement. A financial adviser should be consulted to ensure that tax consequences are minimized when investment fund is divided. Transferring the investments from one retirement plan directly to another one may be the best way to proceed, since the money being taken out of the plan would be considered income and subject to tax.
- Matrimonial Home
In Madonna and Guy Ritchie's 76 million divorce, the settlement included cash as well as a country mansion in England. For people of more modest means, deciding whether one of the parties should keep the matrimonial home is an important consideration. If there are children involved, the custodial parent may want to hang onto the house in an effort to minimize the disruption in their lives.
While this is an admirable idea, the cost of paying the mortgage, property taxes, utilities and keeping the property in good repair over several years need to be considered. It may not be financially feasible for the custodial parent to assume these costs.
- Health Insurance
Health insurance is another important consideration when it comes to negotiating a divorce settlement. When minor children are in the picture and one parent has access to coverage at a good premium rate, he or she will be required by law in most states to keep the children on the policy until they reach the age of majority.
When one person has healthcare coverage through an employer with more than 20 employees, the employer must allow the divorced spouse to remain covered under the policy for three years after the divorce. This is one of the provisions set out under COBRA (the Consolidated Omnibus Budget Reconciliation Act of 1986).
- College Tuition
Another provision that should be included in a negotiated divorce settlement is how the cost of college tuition and other expenses will be shared between parents. It may be tempting to plan to use a portion of your retirement plan to pay for your children's education, but that may not make the best financial sense over the long term. Withdrawing funds from a retirement account means that you lose the power of compound interest until they are replaced.
Child support may need to be paid after the minor child reaches the age of majority in certain cases, such as when the young person in question has a disability. To the extent that this individual is unable to support him or herself, the parents will need to provide some financial assistance.
Protecting Your Rights
You may not be involved trying to negotiate a 76 million divorce settlement, but that doesn't mean that you shouldn't examine each part of the agreement carefully. Retaining competent legal counsel is the first step to reaching a compromise you can live with.