Dividing assets during a divorce can be one of the most challenging and emotionally charged aspects of the process. It’s not just about splitting things 50/50—it’s about ensuring a fair and equitable division that sets both parties up for a stable financial future. But where do you begin? This guide walks you through the key considerations and strategies for dividing assets in a way that makes sense for your unique situation.
Understand the Basics: Marital vs. Separate Property
Before diving into the specifics, it’s important to understand what’s considered marital property and what’s considered separate property:
While this sounds straightforward, the lines can blur. For example, if you used marital funds to renovate a property owned before the marriage, that property may now have both marital and separate components. It’s crucial to have a professional, like a CDFA, help untangle these complexities.
Valuing and Dividing Complex Assets
Some assets are easier to split than others. Cash in a joint savings account. Simple. But what about a business, stock options, or retirement accounts? These require more careful analysis.
1. Real Estate
The marital home is often the biggest sticking point in a divorce. Do you sell it and split the proceeds? Or does one spouse keep it while the other takes other assets of equal value? Consider not just the value of the home but the costs of keeping it—mortgage payments, property taxes, and maintenance.
2. Retirement Accounts
Dividing retirement accounts is more than just splitting the balance. You’ll need to factor in penalties, taxes, and future growth. In many cases, a Qualified Domestic Relations Order (QDRO) is required to transfer retirement assets without triggering tax consequences.
3. Businesses and Professional Practices
If one spouse owns a business, it must be properly valued—something that’s easier said than done. You may need to bring in a valuation expert to determine the business’s worth and decide how it will be divided or compensated for.
4. Investment Portfolios and Stock Options
Stocks, bonds, and options have varying levels of risk and potential tax implications. It’s not just about dividing the dollar amount; you also need to consider the type of investment and its future value.
Don’t Forget the Tax Implications
One of the biggest mistakes people make is overlooking the tax implications of asset division.
For example, you might think that receiving a $500,000 home is equal to your spouse getting $500,000 from a retirement account. But that’s not necessarily the case. The home comes with maintenance costs and property taxes, while withdrawals from a retirement account could be taxed at the time of distribution.
A fair settlement isn’t just about the numbers on paper—it’s about what those numbers mean after taxes and other financial considerations.
Avoid Emotional Attachments to Assets
It’s natural to feel emotionally tied to certain assets, like the family home or a cherished piece of furniture. But letting emotions drive your decisions can lead to financial strain down the road.
Ask yourself:
Sometimes, letting go of an emotionally significant asset can provide you with the financial flexibility you need to move forward.
Hidden Assets: What You Need to Watch For
Unfortunately, not every divorce is amicable, and some spouses may attempt to hide assets. Common red flags include:
If you suspect hidden assets, it may be necessary to bring in a forensic accountant to ensure all marital property is accounted for.
Working Toward an Equitable Distribution
“Equitable” doesn’t always mean equal—it means fair. And fair can look very different depending on your situation. A Certified Divorce Financial Analyst (CDFA) can help you:
Final Thoughts: Focus on the Big Picture
Dividing assets during a divorce isn’t just about closing a chapter; it’s about setting yourself up for the next one. By approaching the process with a clear understanding of your financial picture and focusing on your long-term goals, you can make decisions that help protect your financial well-being.
And remember—you don’t have to go through this alone. With the right professionals by your side, you can navigate even the most complex asset divisions with confidence.
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Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Every investor’s situation is unique, and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation.
The foregoing information has been obtained from sources considered reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Elana Milianta and not necessarily Raymond James.
