One of the main components of any divorce settlement is a property division agreement. If you and your spouse are able to agree upfront about what to do with your property, you can save thousands of dollars in legal fees. If not, the only answer may be to battle it out through attorneys. Either way, it pays to know what you’re dealing with. The following information isn’t meant as legal advice, it’s just some common ways people divide (or keep) marital assets during a divorce.
Marital home
Deciding what to do with the marital home is one of the biggest decision is any divorce. We have dedicated an entire page to the discussion of what to do with the marital home.
Personal finances
Retirement plans could possibly be the most valuable asset you own. Your retirement portfolio, in addition to the typical 401(k), pension, profit-sharing, or IRA, might also include other employment benefits such as bonuses, vacation days, and stock options. The portion of your retirement plan that’s considered Marital Assets might be subject to division.
What your state considers as Marital Assets, and how it divides Marital Assets, will be determined by your state’s laws. When dealing with such a large asset, it’s very important to get expert help. You can speak to your plan advisor, an attorney, and/or a tax expert like an accountant. Before you decide that each spouse will simply keep their own pension, and before you make any decision relating to how much each spouse will get or how it will be divided, you’ll want to know exactly what you’re dealing with and exactly what you might be giving up.
To get an accurate estimate of the plan’s worth, you should have the plan valued by an expert. You should find out what, if any, penalties and tax consequences there will be if you divide and distribute the plan. Also keep in mind that different methods may be available to you for dividing the plan. You should, at a minimum, find out the answers to the following questions, and decide what makes the most economical sense. You may need an attorney and/or accountant to help you figure this out.
- Can you roll the funds over into your own account?
- Can you just take a lump sum at the time of the divorce; and if so, what will that sum be based on – the value of the plan at the time of the divorce or what the value would be at retirement age?
- Can the spouse take a lump sum at retirement age or receive payments when they are ready to retire?
- Does it make more sense to divide other assets instead, if you have assets equivalent to what your spouse’s share of the plan would be worth? What will the value of these marital assets be – what it would be worth at the divorce or at retirement age?
- Will the share be a certain percentage of the benefits or a certain dollar amount?
If you do end up dividing the plan, you may need to have a QDRO (Qualified Domestic Relations Order) drawn up. You’ll need the help of an attorney to do this.
Business
A business is another complicated asset that you’ll probably need help trying to value and divide. There are many factors that determine how much each spouse is entitled to. Your state’s laws are the best resource to find these specific factors, but generally a court might look at the following: how much each spouse contributed to the business, who started the business, whether the other spouse helped in the business (for example by working for free or entertaining clients at the marital residence), and numerous other factors.
To value the business, you’ll need to get an appraisal. When determining the business’s worth, an appraiser might take into account the reputation of the business; how much that reputation is dependent upon each spouse’s contributions to the business; the value of the equipment, land, and building; the accounts receivable; if there are partners or other owners involved; and many other issues.
Securities
Securities such as stocks, bonds, mutual funds, money market accounts, or CD’s. You will have to set a date on which these will be valued. This could be the date of separation, the date you write up the agreement, or any other date you wish. Ask your broker or check your account for the current value. Just keep in mind any capital gains taxes and any brokerage fees you’ll have to pay when you sell the security.
A higher profit usually means paying higher taxes, so keep that in mind. Also think about whether or not you can transfer the account into your own name if you plan to keep the account, and whether you think the security will substantially go up in value or whether you should simply sell and split the profits.
Vehicles
Vehicles include not just cars and automobiles, but also motorcycles, boats, RV’s, and motor homes. For automobiles, the easiest way to get the current value is by checking Kelley Blue Book. You can also check the newspaper or online ads to see what other vehicles similar to yours have sold for. Compare vehicles that have the same features as yours and similar mileage. Leased cars don’t usually have much of a value, if any at all.
Many times both spouses will just keep their own cars, but this may or may not be fair in your situation. To determine the balance of the loan, contact your lender or check your most recent statement. Boats, motor homes, and the like will be harder to determine the value. Check advertisements to see what similar vehicles are selling for, or ask around at dealers to see what they would give you. You would probably get more selling it yourself than you would from a dealer, so keep that in mind.
Insurance marital assets
Term life insurance has no market value, but whole or universal life insurance might if it has a cash surrender value. You should ask your agent to determine the current value of your policy. You also might want to change the beneficiaries on your policy once the divorce is final, if the current beneficiary is your spouse.
Cash
Any checking or savings accounts, or cash on hand will simply be worth what the balance is. You can decide what percentage should go to each spouse. You should find out if your bank will allow you to take your spouse’s name off the account if you want to keep it open, or else close the account and open one in your name only.
Money owed to you
You should only include money you actually know you will be receiving, not loans you aren’t sure if you’ll ever be paid back, or how much you’ll receive. Money you’re sure you’ll receive might include things like lawsuit settlements or tax refunds.
Collectibles
You might want to include valuable collectibles like antiques, art, tools, or other collections in your property division. How you determine the value will depend on what type of collection you have. You can go to an antique store, jewelry dealer, or even a pawn shop. You can also check eBay, which is sometimes good for unique or unusual items. When using eBay, be sure to check the completed items, not pending ones.
Opening bids are often much less than what the item actually sells for. Also check the item description for the condition or any other factors that would affect the price. It might be a good idea to check multiple sources. One pawn shop might be willing to give you much more than another.
Household marital assets
Pots, pans, furniture, and electronics can often be more or less valuable than people might think. Computers and electronics lose their value especially quickly. Sometimes jewelry, tools, silver, and china might be worth more than you think. Usually household items aren’t worth a legal battle, and there are many methods you can use for dividing them up. Walk through the house, either together or separate, and make an inventory of all the items.
You should make a list of all the items you want to keep, and all the items you don’t mind your spouse getting. Some things will probably be more important to you than others. Think of how easy each item will be to sell and what it might be worth. If there is anything that neither person wants, you could sell it and split the proceeds. You might have a garage sale or sell on eBay, go to a pawn shop, or even make a charitable donation.
If you both want the same item, you may have to negotiate. Who would get the most use out of it? Who has used it more in the past? Assign a value to each item and figure out how much each person has so far. If you still can’t agree on some items, you might be forced to simply decide at random who gets what.
