Yeah, I really don't understand WHY it's "typical and legal" - except for the fact that even most lawyers seems to be mathematically challenged. It seems like such a simple and obvious concept to me, but I'm always amazed at the extent of mathematical illiteracy.
This is an example, though, of why LBSs should be extra careful about trying to save the family home. It may be a good decision in a down market - but can be a financially disastrous one in an up market.
The worst case scenario - imagine the house mentioned above. Wife buys H out to the tune of $50k by giving up her half of a 100k 401k. A year later, the house has dropped in value and she's lost her job, losing the house to foreclosure. So, instead of the 100k in equity that was her share of marital assets, she's got nothing.
Be very very sure, if you keep the house, that you WILL be able to afford it, even if H dies or stops paying support. Don't make the mistake of having all your savings tied up in a house which is very illiquid as an asset.
