Divorce Mediation Offer: $450K House vs. $450K 401(k) vs. a $120K Private Investment — Which 'Equal' Split Is Actually Equal After Tax?

Your mediator slides an offer across the table. It's a 16-year marriage. The estate is a $900,000 house with a $450,000 mortgage, a $450,000 401(k), and a $120,000 stake in a private investment fund. The total is $1,020,000, and the proposal is $510,000 each.

That sounds equal. After taxes, liquidity, and what the house costs to hold, the two spouses can end up $26,700 apart, $3,600 apart, or exactly even. The only thing that changes is which assets go to which spouse.

This post walks through that math so you can run the same test on your own numbers. Your attorney handles the legal questions. The numbers are the part you can check yourself.

This week's personal-finance headlines look unrelated to divorce: a $350 hotel credit card, children's Trump Accounts, a subscription-cancellation rule, renamed Social Security claiming ages, and a new SEC investor exam. Each one asks a question every settlement offer also asks: is this worth it for my inputs?

The Setup: Assumptions to Replace With Your Own

The facts

• Marriage length: 16 years. Spouse A earns $240,000. Spouse B earns $70,000.
• House: worth $900,000, mortgage $450,000 at 3.5%. Tax basis (what was paid plus improvements) is $450,000.
• 401(k) in Spouse A's name: $450,000, all pre-tax.
• Private fund stake in Spouse A's name: $120,000.

The valuation rules

• Pre-tax retirement dollars are worth 78 cents each. This assumes a 22% blended federal rate on withdrawal and ignores state tax. A court order called a QDRO (qualified domestic relations order) lets a plan pay part of the account to a former spouse. Under IRC §72(t)(2)(C), that payment avoids the 10% early-withdrawal penalty, but it is still taxed as income. Rolling it into an IRA defers the tax.
• The house is valued on a "sell it" basis. That means equity, minus 6% selling costs ($54,000), minus 15% federal capital gains tax on any gain above the IRC §121 exclusion.
• The private stake gets a 25% illiquidity haircut, so $120,000 becomes $90,000. This is a placeholder. A valuation professional sets the real number.

The house value depends on who owns it when it's sold. A transfer between spouses incident to divorce is not taxed under IRC §1041, but the receiving spouse inherits the original basis. If Spouse B takes the house and later sells at $900,000:

• Amount realized: $900,000 − $54,000 = $846,000
• Gain: $846,000 − $450,000 basis = $396,000
• One $250,000 single-filer exclusion leaves $146,000 taxable
• Tax at 15%: $21,900
• Sell-it value: $450,000 − $54,000 − $21,900 = $374,100

If the house is sold jointly while both spouses are still owners, each reports $198,000 of gain. That is under each spouse's $250,000 exclusion, so the tax is $0. This assumes both spouses meet the ownership-and-use tests, and the decree's wording can matter. For more on that timing question, see how IRC §121, filing status, and a 401(k) split interact on a $1M settlement.

Three Versions of "Equal"

Offer	B holds (nominal)	A holds (nominal)	B after-tax	A after-tax	After-tax gap
1. B keeps house plus $60K of 401(k). A keeps $390K of 401(k) plus the stake.	$510.0K	$510.0K	$420.9K	$394.2K	B ahead $26.7K
2. Sell house, split proceeds. B takes $285K of 401(k). A keeps $165K plus the stake.	$483.0K	$483.0K	$420.3K	$416.7K	B ahead $3.6K
3. B keeps house plus about $42.9K of 401(k). A keeps about $407.1K plus the stake.	$492.9K	$527.1K	$407.6K	$407.6K	$0

The arithmetic behind the rows

• Offer 1, Spouse B: $374,100 (house) + $60,000 × 0.78 ($46,800) = $420,900
• Offer 1, Spouse A: $390,000 × 0.78 ($304,200) + $90,000 = $394,200
• Offer 2: The house nets $900,000 − $54,000 − $450,000 = $396,000, or $198,000 each, tax-free. Spouse B gets $198,000 + $285,000 × 0.78 ($222,300) = $420,300. Spouse A gets $198,000 + $128,700 + $90,000 = $416,700.
• Offer 3: Solve 374,100 + 0.78t = 0.78 × (450,000 − t) + 90,000 for t. That gives t ≈ $42,900, and both sides land at about $407,550.

What the table shows

1. The same $1,020,000 estate produces three different outcomes. The headline split barely moves, but the after-tax result does.
2. Offer 2 creates $21,900 more combined value ($837.0K vs. $815.1K). The extra value is the capital gains tax that Offers 1 and 3 leave with the spouse who keeps the house.
3. The offer that is equal after tax looks unequal on paper. In Offer 3, Spouse B's nominal share is $492,900 and Spouse A's is $527,100. A spouse who reads only the headline numbers might reject the fairest version.
4. The direction of the gap isn't fixed. If the stake takes no haircut, Offer 1 flips to Spouse A ahead by $3,300. Changing the 401(k) tax assumption from 22% to 24% moves Offer 1's gap by another $6,600. Small input changes move the result, which is why one assumption shouldn't decide your answer.

This is the kind of analysis Sevaryn runs for you, so you don't have to build the spreadsheet yourself. For more on why mediated "equal" splits drift apart, see the $400K-each mediation example.

The $350 Fee Question Applies to a House

NerdWallet's "Is the New IHG Premium Card Worth Its $350 Fee?" makes a point that reaches well beyond travel. The card is worth it if you'll actually use what it buys, and that depends on your own usage. A house also has an annual fee.

Here is what Spouse B's cost of holding the house looks like:

• Property tax, insurance, and maintenance at about 2.5% of $900,000: $22,500 a year
• Principal and interest on $450,000 at 3.5%: about $2,021 a month, or $24,252 a year
• Total: about $46,750 a year, or roughly $3,900 a month

If Spouse B's $70,000 salary leaves about $56,000 of take-home pay (an assumption), the house takes about 83% of it before any support is paid. Spouse B may also not be able to keep the 3.5% loan. If the lender requires a refinance into one name at 6.5%, the payment on $450,000 rises to about $2,844 a month. That is roughly $9,900 more per year.

None of this means keeping the house is wrong. It means a house that looks equal on a balance sheet can fail a cash-flow test. Run the support number and the house decision together, because a support figure built around a rental may not carry a $46,750 annual housing cost.

The $120,000 Private Stake and the SEC's Proposed Exam

CNBC reports that the SEC proposed expanding accredited investor eligibility beyond income and net worth thresholds, including through a new exam. That matters here because private fund interests are often limited to accredited investors.

Under today's Regulation D Rule 501(a) tests, an individual qualifies with income over $200,000 (or $300,000 jointly with a spouse) in each of the last two years. The other route is net worth over $1 million excluding the primary residence.

In our example, the couple's combined $310,000 cleared the joint test. After the divorce:

• Spouse A at $240,000 qualifies on income alone.
• Spouse B at $70,000, with most wealth in a house, does not.

If the fund's documents restrict transfers to accredited investors, the stake may be effectively unavailable to Spouse B. A general partner may also have to approve any transfer. A proposed exam is not a rule, so don't sign anything that assumes an exam path exists.

Ask these questions about any private stake before it goes into a settlement:

• Can the interest be transferred to a former spouse at all?
• Who values it, and as of what date?
• Are there unfunded capital calls? A $120,000 stake with a $40,000 future commitment is a different asset.
• Is the $120,000 a statement balance or an appraisal?

Social Security: Renamed Ages, Same Math

CNBC reports that the Claiming Age Clarity Act could change the way Social Security retirement ages are described. As CNBC describes it, the bill changes labels. Nothing in that description suggests the benefit formulas change, but confirm against the final text.

The divorced-spouse benefit is a variable in your retirement model that most offers ignore. In general, you can claim on an ex-spouse's record if:

• The marriage lasted at least 10 years.
• You are unmarried and at least 62.
• Your ex qualifies for benefits. If you've been divorced two or more years, your ex doesn't need to have filed.

The benefit can be up to 50% of your ex's full-retirement-age benefit. It is paid in addition to your own record, not instead of it, and it doesn't reduce your ex's benefit.

Worked example: Spouse A's full-retirement-age benefit is $3,800 a month, and Spouse B's own is $1,350.

• Divorced-spouse benefit: 50% × $3,800 = $1,900
• Excess over B's own benefit: $1,900 − $1,350 = $550 a month, or $6,600 a year
• Present value over 20 years at a 3% real discount rate: $6,600 × (1 − 1.03⁻²⁰) ÷ 0.03 ≈ $98,200

Early claiming reduces the benefit permanently, and it generally ends if you remarry. It is paid outside the decree, so it is not a bargaining chip. It is still a real input to how much 401(k) money each spouse needs. See how the divorced-spouse benefit changes a QDRO split after a 21-year marriage.

Marriage length is a cliff. A marriage that ends a few months short of 10 years loses that roughly $98,200 stream entirely in this example. Ask your attorney whether decree timing is within your control. You can model this for your specific situation at Sevaryn.

Financial Disclosure: The Small Items That Change the Baseline

Mediation depends on both spouses disclosing everything. Beyond the big accounts, three items from this week's news belong on your checklist.

Recurring charges. CNBC reports that New York City's "click to cancel" rule has taken effect, joining other jurisdictions while a federal standard remains unsettled. Whether the rule covers your subscriptions depends on where you live. The practical point is that your expense statement should reflect what you actually pay. Suppose 14 subscriptions average $17 a month, or $238 a month. If stale charges like those carry into a 7-year support calculation where documented need drives the number, they are worth about $17,100 in present value at 4% ($238 × 12 × 6.00). That is an illustration, since many states use formulas. Audit the charges before you file.

Children's accounts. CNBC reports Treasury says more than 60 million children have been automatically enrolled in Trump Accounts. Your child may already have one you never opened. It belongs to the child, so it isn't a marital asset to split like a 401(k). It should still appear in disclosure. The agreement should also say who may contribute and who controls the account. Don't assume contributions offset a support or college obligation unless the agreement says so in writing.

Reward balances. Hotel points and airline miles, like those the IHG card earns, are sometimes listed in disclosure. Whether they are divisible depends on the program terms and your state, so ask your attorney.

How Your Variables Change the Answer

Your variable	What it changes	Where it showed up above
State (community property vs. equitable distribution)	Community property states mostly start from equal division of community assets. Texas, for one, uses a "just and right" standard. Equitable distribution states ask for a "fair" division, which may not be 50/50.	Whether $510K each is the anchor or just one opening position
Asset mix	The conversion factor: 78 cents per pre-tax dollar, about 83 cents per house-equity dollar, 75 cents per stake dollar	The whole table
Income disparity	Tax rate on withdrawals, ability to carry the house, accredited status, size of the divorced-spouse benefit	Cash-flow test, stake access, the $550 a month
Marriage length	The Social Security 10-year threshold, alimony duration, exclusion eligibility	The roughly $98,200 cliff

For how state rules alone reshape a split, see community property vs. equitable distribution on a $1M settlement.

Before You Sign: A Six-Step Check

1. Convert every asset to after-tax, after-liquidity dollars using your own rates.
2. Run at least three versions, including one that sells the house.
3. Stress-test the inputs: tax rate plus or minus 2 points, and the private stake haircut from 0% to 40%.
4. Cash-flow test every asset you would keep, including the refinance scenario.
5. Confirm disclosure is complete: dated statements, fund documents, children's accounts, and recurring charges.
6. Take the legal questions to your attorney: QDRO drafting, transfer consents, and decree language.

The numbers above are examples. Yours will differ with your state, your tax bracket, your loan terms, and your marriage length. For a longer list of variables to check in any first offer, see how to evaluate your spouse's first settlement offer.

If an offer is on your table, model your own version of these three scenarios before you respond. You can do that at Sevaryn. This is general education, not legal or tax advice. Consult your attorney for legal questions and a tax professional for your return.

Sources

• Is the New IHG Premium Card Worth Its $350 Fee? — NerdWallet
• Trump Accounts have auto-enrolled more than 60 million children, Treasury says — CNBC Personal Finance
• New York City's 'click to cancel' subscription rule takes effect, joining states with similar laws — CNBC Personal Finance
• Social Security claiming ages may soon get new names. What retirees need to know — CNBC Personal Finance
• SEC proposes investor exam to expand private market access — here's how it could work — CNBC Personal Finance