Brad (53) and Gwen (52) have been married for 32 years and decided to divorce due to irreconcilable differences. They have one grown child, Emilee, who lives away from home. Brad started his own insurance wholesale business 12 years ago. Gwen is a 50% partner in the business and helps with some clerical and administrative work. The business was valued at $485,000 by an independent appraiser. Gwen is currently in school to become a certified home health care provider. She will earn her certificate in two years and is expecting to get a job right away making $45,000 per year. Brad pays himself an average of $185,000 per year. Brad and Gwen's budget indicate that they each expect to spend $42,000 a year excluding housing. The family home is valued at $360,000 with a current mortgage balance of $120,000 and a monthly mortgage payment of $1,047. Gwen loves the house but understands that she might have to move into a smaller place. Five years ago, the couple inherited a brokerage account from Gwen's uncle valued at $315,000, including $115,000 in cash and the balance in ABC stock. The value of the stock was pretty flat in the first year. The current value of the account is $276,862 in stock and $27,280 in cash. The couple did not execute any trades in the account but used some of the cash and dividend in Brad's business. The portfolio has averaged $5,538 in dividends annually. Gwen has an IRA worth $52,000, and Brad's 401(k) is worth $225,000. Brad has an inflation protected pension from his old job (where he began working after he was married to Gwen). It will pay him a monthly benefit of $3,000 per month starting at age 65. Brad has a life expectancy of 26.29 additional years. The pension administrator indicated that the plan uses a discount rate of 3.53% and an inflation rate of 2%. The couple also has credit card debt of $15,800 which Brad offered to pay off himself. Brad offers Gwen the equity in the home, half of the brokerage account, and her IRA. 12. In order to offset the value of the business, the couple has several options. Which of these is the least likely to be agreed upon? a. Brad offers Gwen another asset of equal value. b. Brad offers Gwen to settle up when the business is sold when he retires. c. Brad offers to pay Gwen off with a property settlement note. d. Sell the business right now and split the proceeds. 13. If the couple agrees on the settlement note, which of the following is true? a. The note should be subject to current market interest rates. b. Since it is a property settlement note, Gwen has to claim the payments as income. c. Brad gets to deduct the payments to Gwen on his income tax return. d. The note has to be paid within a timeframe dictated by guidelines issued by the World Bank. 14. What is the tax impact of the payments on the payor and payee? a. Since the payments are due to a property settlement, they have no tax impact on the parties. b. The payments are deductible to Brad and taxable to Gwen. c. Brad gets to deduct the interest portion of each payment on his tax return. d. Gwen does not have to pay income taxes on the interest that is received. 15. Gwen asks her financial professional for some advice on the property settlement note. The professional should recommend: a. Gwen should take anything that Brad offers her in relation to the business. b. She should ask that the property settlement note payments should be treated as spousal support. c. She should let Brad have the business to show good faith. d. She should securitize the property settlement note in order to protect herself.