Property Division in Divorce
Property includes houses, pensions, businesses, stocks, household goods—almost anything.
This is one of the very foundations of divorce work. It all starts with identifying what are your assets and debts. The first thing to do is to write down a list of all of your assets. Next, you must determine whether the particular piece of property is separate property and remains with the person who owned it. Separate property is usually acquired before the marriage, by gift, by inheritance, or from a personal injury award. Marital property is usually acquired during the marriage and will be divided equitably. Most often that means relatively equally. This includes debts as well. However, debts that are attached to certain assets like mortgages or car lien are generally ordered to be paid by the party that is awarded the asset.
If you and your spouse can agree on how things will be divided and if your agreement is reasonable, it will be approved by the court. If you cannot agree, the court will divide the property. Some courts look to offset assets (call it horse trading) while others order the assets sold (call it splitting the baby). It is best to agree but sometime it just is not possible.
Sometimes there are important tax issues to consider. Transfer of property such as a bank account from spouse to spouse during a divorce is usually not taxable, but some assets such as 401ks are pre-tax assets and the tax impact of liquidating the account should be considered.
If you are heading towards a divorce, you should be concerned about protecting the value of investment property during the division of marital assets. This applies to any investment property such as stocks, bonds, mutual funds, savings accounts, vacation properties and other real estate.
In order to determine the appropriate valuation and division of an asset, it may be necessary to involve the services of an expert such as a Certified Public Accountant (CPA), a certified business appraiser, or a real estate appraiser.
As with many financial issues affecting a divorce, tax planning and coordinating asset division along with child support and spousal support can assist in maximizing your savings in the long run.
Usually, the marital home is one of the major assets parties acquire during a marriage. Generally, if a home is purchased by both parties during the marriage each spouse will have an equal share in its ownership. However, the down payment, or other financial contributions from one of the spouse’s premarital assets may have been have been used to help purchase the home. As such an instant, it is important to properly identify what portion of the marital home is marital (joint property) and what is not (separate property).
Retirement accounts are also major assets in many marriages. You need to consider your eventual retirement even if it may be ten to twenty years away.
The issues that arise during division of retirement assets include the valuation, tax issues and accurate calculation of the marital share. The type of retirement asset, a defined benefit asset (pension) versus a defined contribution asset (401(k), 403(b), etc.), will determine whether any spousal portion can be immediately withdrawn or transferred to a separate account. These must be addressed in the divorce decree.
Concerned about who gets what assets after a divorce?
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