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Dividing Assets During Divorce?

Struggling to divide assets during a divorce? Learn equitable division, valuing assets, tax considerations, and get professional assistance.

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Struggling to divide assets and property during a divorce?

Going through a divorce can be an extremely difficult and emotional time. One of the most challenging parts of the process for many couples is figuring out how to divide up assets and property fairly. This issue can become complex and contentious if proper planning and communication does not take place. Below is an overview of some of the key things to know when it comes to dividing assets and property during a divorce:

Types of Property

There are generally considered to be two broad categories of property in a divorce – marital property and separate property.

Marital Property

Marital property includes any assets or property acquired during the marriage. This is true even if the asset or property is only under one spouse’s name. Marital property is divided equitably during a divorce. Some examples include:

  • Primary home
  • Secondary homes/vacation properties
  • Cash and savings accounts
  • Retirement accounts
  • Investments and stock portfolios
  • Businesses started during the marriage
  • Vehicles
  • Other valuable personal property like jewelry, art, etc.

Separate Property

Separate property refers to any assets or property brought into the marriage or acquired by one spouse through inheritance or personal gift during the marriage. Separate property is not divided in a divorce but stays with the acquiring spouse. Some examples are:

  • Assets or property owned before marriage
  • Inheritances
  • Gifts to one spouse
  • Compensation from personal injury lawsuits
  • Payments from a life insurance policy

It’s important to note that separate property can become marital property if that separate property becomes co-mingled during the marriage. For example, if one spouse puts an inheritance into a joint bank account.

Equitable vs. Equal Division

When it comes to dividing marital property during divorce, the standard approach seeks an equitable division – not necessarily an equal one. The goal is for the property division to be fair, just, and reasonable for both spouses given their circumstances and contributions to acquiring assets and property during marriage.

An equal, 50/50 split is not always equitable. For example, one spouse may have contributed more in acquiring certain assets or given up career opportunities to care for children. State divorce laws allow for unequal but equitable divisions in these cases.

Factors Impacting Division

There are several common factors looked at when determining what constitutes an equitable division of marital property. They include:

  • Length of marriage: The longer the marriage, the more likely an equal division. Shorter marriages may warrant unequal divisions.
  • Age and health of spouses: If one spouse is close to retirement age, assets may be divided to provide future security.
  • Income disparity and future earnings: The disparity between spouses’ income and future earnings capacity impacts division.
  • Child custody arrangements: Primary custody could warrant greater property allocation.
  • Contributions to acquiring marital property: Contributions and concessions like becoming a stay-at-home parent are considered.

The weight given to each factor depends on state law and the specific circumstances of the couple. But the overall goal remains achieving fairness and equity between the spouses as property is divided.

Valuing Assets and Property

To determine an equitable division, assets and property must first be identified and then valued accurately. Tangible things like real estate, cars, furniture, businesses etc. will likely need to be appraised professionally to determine current market value.

Other assets like investments, stock portfolios, retirement accounts statements should be gathered to assess value. Full financial disclosure is required from both spouses here to avoid hiding assets. Intangible things with sentimental but little market value can be trickier to handle during division.

Primary Residence

For many divorcing couples, the marital home constitutes their most significant asset. When equitable distribution allows for it, the primary residence is often sold, and proceeds split in some fashion. This gives both spouses a clean break and chance to start fresh in new housing.

However, if unique circumstances like young children, health issues etc. are present, the court may order the home to be retained and transferred into one spouse’s name. The spouse keeping the home may be required to buy out the other’s equity share over an extended time period.

Retirement Assets

Retirement accounts like 401(k)s are usually considered marital property too. Total balances may be divided by QDRO – qualified domestic relations orders. QDROs allow retirement plan administrators to distribute a portion of one spouse’s retirement account into the other spouse’s new account free of tax penalties.

This is often done to ensure the non-working or lower-income spouse retains assets for retirement security of their own. It’s critical to have QDRO paperwork properly filed and approved here.

Business Valuation

Divorcing spouses who own businesses together face further complexity in asset division. Not only must the total value of the business itself be determined, but decisions must also be made regarding who retains full or partial ownership going forward.

If one spouse is awarded the business, the other may get alimony payments or an offsetting transfer of other assets to balance the scales. Sometimes business partners remain joint owners, but operational control and management get transferred to just one spouse after the divorce. Professional business valuations from accountants and consultants provide analysis on fair market value, growth projections, etc. This guides divorce negotiations here.

Tax Considerations

It’s essential to consider taxes when dividing property too. While transfers due to divorce decree are not taxable events per IRS rules, future taxes on things like investment/retirement account withdrawals, home sales and business income will occur eventually.

Who assumes what future tax liabilities should be built into negotiations. For example, retaining retirement accounts means accepting taxation upon withdrawal. Gaining increased equity share in a home means more capital gains taxes later upon selling. Transfers to minor children can have gift/estate tax consequences as well depending on amounts. Paying careful attention to taxes now and projecting obligations down the road leads to better outcomes.

Get Professional Assistance

Navigating property division requires soul searching about what’s equitable and meaningful documentation of every asset’s details. Furthermore, you must understand complex rules regarding marital vs. separate property and how state laws will be applied by local judges.

That’s why getting professional assistance from divorce lawyers, financial advisors, accountants, appraisers, etc. pays dividends vs trying to go it alone. Sure, their services cost money but avoiding expensive mistakes or unfavorable outcomes is worth it.

The right professionals help facilitate negotiations, ensure no stone is left unturned tracking down assets and give you sage advice on the tax implications around various division proposals. Leaning on the experience of others here reduces stress and anxiety during an already turbulent period.

Take Emotions Out of Negotiations

No matter how amicable a split may be, some level of anger, resentment, or disagreement over the division of property is common. One spouse may feel entitled to certain assets while the other disagrees, for example.

It’s important to separate emotions from financial and legal considerations whenever possible. Making demands out of spite or refusing to negotiate leads nowhere fast. Talk specifics grounded in fairness and facts vs vague declarations of what you deserve.

Also be sure to disclose hidden assets early and fully. Trickle truthing or admissions of previously undisclosed accounts/property drag out the pain. Don’t underestimate the power of coming to the table willing to compromise within reason either.

Get it in Writing

Reaching verbal agreement on dividing assets is not enough – the details must get memorialized formally in the divorce decree paperwork itself. The decree constitutes a legally binding contract between you and your former partner on who gets what going forward.

Specific wording around percentages, values and timelines avoids future conflict over asset splits that can drag you back to court. For example, don’t just state the house will go to one spouse – spell exact dollar buyout amounts and by what date they must get paid.

Account for Ongoing Shared Expenses

In addition to physical assets, divorcing couples need to determine how they’ll handle ongoing living expenses or outstanding debts still in both names as the divorce proceeds. Will mortgage payments, car loans and credit card bills continue to be shared 50/50 temporarily? If one moves out, will they contribute towards household and child-related costs?

If a couple is struggling already, the added costs of maintaining two separate homes can overwhelm. Get clear on transitional financial support expectations, determine who moves out when and build a detailed monthly budget. Delinquent shared debts or expenses spell trouble for both individual credit ratings.

Change Beneficiaries

Once divorced, your former spouse should get removed as beneficiary from various accounts like retirement plans and life insurance policies. Both spouses need to file proper claimant changes and confirm updates happened correctly.

This avoids situations where divorce decrees give one spouse a retirement account for example but death triggers funds going to the deceased’s prior listed beneficiary by default. Don’t overlook items like online banking login credentials here either – change passwords.

A Phased Approach May Work Best

Due to various complexities, a phased approach to property division avoiding tackling everything upfront works well for some couples. One option is completing home, investment, and bank account splits first since values are clear. Trickier assets like disputed businesses get split later down the road.

If a couple owns multiple homes, one may be transferred immediately while others sell slowly over time as the market allows. The key is recognizing what issues must get handled now vs what may take longer to unwind fairly. Some assets like certain stocks prove easier to divide evenly too.

Aim for Win-Win Outcomes

Divorcing spouses each walk away with assets valued fairly equal to their share. But “winning” negotiations requires a zero-sum mindset vs positive sum thinking. With compromise and creativity, solutions benefiting both parties can happen.

Maybe each spouse keeps retirement accounts named already under their social security number, but assets get balanced elsewhere. If selling the home now disadvantages children, allow one buyer to purchase the other’s share over time. Getting fixated on a certain asset rarely ends well.

What gets divided, who assumes what liabilities and when things happen all offer chances for give/take. If one must keep the house now, the other may get the vacation property and stored value collectibles. Shared goals around protecting children’s best interests helps too.

The Bottom Line

Figuring out the division of assets and property during a divorce proves complicated but surmountable. Seeking professional guidance tailored to your state laws sets the tone for success. Open communication, willingness to compromise within reason and keeping the negotiations fact/data-based matter enormously.

Aim for equitable vs equal and recognize divorce decrees dictate legal obligations around asset splits going forward. Adjusting the timing and phasing parts of property division allows room to navigate challenges too. Most importantly, both parties should feel the ultimate resolution reached constitutes a fair deal meeting their essential needs.

Selling the Marital Home to We Buy Any House As Is

During a divorce, selling your marital home can be stressful, especially if you need to sell quickly. One option more couples should consider is contacting us at We Buy Any House As Is. We buy houses for cash Rochester.

We provide a fast, hassle-free way for divorcing couples to liquidate their marital home without repairs or renovations. Within as little as 7 days, we can buy your Rochester house for cash at a fair price, so you and your former spouse can split proceeds and move on. Selling to us helps avoid bank approvals or buyers backing out too. We provide a simpler and less stressful way to divide and monetize your marital home assets during the divorce process.

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