Division of Assets in a Divorce
Unfortunately, since 50% of marriages in America end in divorce, we should all be prepared to handle the aftermath of a separation. One of the biggest issues in a relationship is finances, so knowing how to divide assets in a divorce is important.
How Do You Decide Who Gets What in a Divorce?
Depending on where you live, there may be laws in place that dictate how assets are divided. In some states, everything must be equitably divided between both parties. A prenuptial agreement can also determine who gets what in a divorce or when one spouse dies. Keep in mind that the equitable division of assets means everything is fairly divided; it’s not necessarily equal.
How Prenups Work
It’s common to believe that a prenup is only for those who are extremely wealthy, but they are actually available to anyone. And while it may be less than ideal to be planning the division of assets before you’ve tied the knot, it’s important to protect both parties, and any children, in the event of a breakup or death.
WHAT IS A PRENUPTIAL AGREEMENT?
When a couple decides to marry, they can get started on their prenup paperwork. It’s a legal contract that spells out what each partner is entitled to in the event of a separation. This includes individual assets held before marriage, as well as assets obtained during the marriage. A prenup also deals with debt, and who is responsible for assuming what debts after a divorce.
While some may see a prenup as a sign that a couple doesn’t believe they’re going to last, others see it as proof they care enough about one another to fairly consider their needs if the marriage ends. A prenup can help a couple understand each other’s relationship with finances.
Prenuptial agreements can also protect children that either spouse has from a previous relationship. It can outline what assets go to the children and avoid costly, lengthy legal battles in the future.
The complexity of the prenup determines its cost, but the peace of mind one offers is well worth the investment of your time and money.
Common Reasons for a Prenuptial Agreement
- One or both parties has previously been married
- One or both pirates already has children
- One or both parties owns a business
- One party has more wealth than the other
- One party has more debt than the other
- One or both parties have an inheritance
- One party will leave the workforce and be a stay-at-home parent during the marriage
Divide and Conquer
In a divorce, assets to divide can range from physical money to real estate property, personal property, and retirement accounts.
Anything owned by one partner before the marriage is called non-marital property, and it’s usually not equitably distributed in a divorce. Marital property is anything acquired during the relationship and is eligible to be fairly distributed, whether according to a prenup or a post-divorce (or annulment) decision. To divide property equitably, you may need to have your home appraised, take stock of your financial accounts, and retain individual divorce lawyers.
How property is divided is affected by a few factors:
- The length of the relationship
- Age of each party
- Health of each party
- Current employment status
- All sources of income
In the event you own houses or businesses together, equitable division may involve one party buying out the other’s share. It’s important to get an accurate valuation of not just the business itself, but the property that houses it.
WHO DETERMINES VALUE?
If you don’t have a prenup that has predetermined who receives what in a divorce or death, an appraiser can assist you.
Items in your household and relationship can be evaluated by an appraiser you both agree on. Here are some practical steps for splitting everything from silverware to gardening tools.
- List any item of value in the home
- Group items as sets if applicable
- Have the value of items appraised
- Take turns picking items from the list until each party has half of the total value (as ascertained by the appraiser)
You can save money by not hiring an appraiser and instead assign value to items yourselves. This will only work if you can agree on monetary value and sentimental value for the items in question. However, dividing up physical items into piles of equal value, and then flipping a coin to see who gets what may work for some couples.
Family law practice Rulon T. Burton & Associates has some additional tips for the division of assets during a divorce, which you can find HERE.
If you’ve made any improvements to your property such as remodeling a bathroom, adding square footage, or upgrading the landscaping, factor in all those values when equitably dividing assets.
Sometimes it’s best to vacate the family home after a divorce. You can sell it and split the proceeds, or turn the home into a rental. If one party buys out the other for the property, they can keep the rental income for themselves vs splitting it equitably.
Speaking of rentals, should you consider renting a property after your divorce, or purchasing a new home? It will depend entirely on your financial situation, as well as whether you need to stay geographically close to your ex, or your children’s school. If you’re wondering if now is a good time to rent, Rhino Property Management based in Utah, has some insight into the current rental market HERE.
WHAT TO DO WITH RETIREMENT AND PENSION PLANS
Usually, retirement and pension plans are split equitably between divorcing parties. This may be the actual division of the plan benefits, or it may be that one spouse gets plan benefits while the other gets something comparable in value. However, if each person has their own plans based on their employment, each is entitled to the benefits from their respective individual plans.
WHAT TO DO WITH CHILDREN’S BELONGINGS
Since some items belong to your children, they should stay with the parent who has primary custody. Things like bedroom furniture, bikes, and favorite toys, should be readily available to the children in the home where they spend the majority of their time.
When children’s belongings are left with one parent, usually law dictates that the other parent cannot charge for compensation related to the value of those items. For example, if Parent A is going to keep furnishing in their home for the kids because they’re the primary custodial parent, Parent B cannot request money from Parent A in the divorce to purchase new furnishings for their home.
As you can see, there are myriad factors that can affect how assets are divided in a divorce. Although it’s another expense to shoulder, seeking legal counsel and mediation can be one of the best ways to ensure property is divided fairly, and everyone walks away satisfied.