When exchanging vows or walking down the aisle, divorce isn’t on the minds of the couple. However, since half of marriages end in divorce, thousands of Americans face the reality of splitting assets in a divorce every year.
When splitting from a long-term partner, you must go through the process of untangling your life from each other. When it comes to your assets, this becomes complex. The longer you are with your ex-to-be, the more complicated this will be.
You’re already shouldering the emotional impact of a divorce; you don’t need the added headache of trying to split assets yourself. Work with an attorney to make this process smoother. In addition to helping you navigate this process, a competent and compassionate legal professional will help protect your money through the divorce proceedings.
What does splitting assets in a divorce mean?
“Splitting assets in a divorce” refers to separating your assets from those of your ex-spouse. There is a lot to consider when it comes to dividing your marital estate, including:
- Individual vs. marital assets
- State laws
- Debts and liabilities
- Tax consequences
- Supporting children
- Shared property
- Wasted marital assets
Most states use equitable division for splitting marital assets. This doesn’t mean the assets are split evenly, however. A judge will divide marital property in a way they feel is fair to both you and your ex-spouse, depending on the circumstances of your case.
When splitting assets, you need to open a new bank account if you don’t already have an account separate from your soon-to-be ex-spouse. Closing any joint bank accounts or credit cards is one of the first steps you’ll take when splitting assets.
Splitting assets in a divorce is rarely simple. You need a qualified asset protection lawyer to help you through this.
How To Split Assets in a Divorce
So, what does this process look like? While every divorce is different depending on the circumstances and parties involved, the process of splitting assets generally uses the following steps.
Consult With an Attorney
Find an attorney as soon as you and your spouse decide to part ways. Even if you think you can settle this amicably, having a legal professional on your side ensures your assets are protected.
An attorney will explain the basics of asset division and any relevant state laws you should be aware of. For example, some states use community property rules rather than equitable distribution. These states include:
- New Mexico
Community property rules state that spouses share joint ownership of all marital property. In the division of assets, these states divide all assets equally. This differs from states with equitable division policies, which focus on the individual needs of the spouses involved.
Having an attorney on your side who understands these different rules is essential to protecting your assets during division.
Identify and Value Assets
Next, identify all the assets you share with your spouse. This list will likely be extensive if you have been married for several years if not decades.
While this may seem tedious, you must handle it with care. Forgetting about certain assets could mean losing them. Your attorney can help you understand the full scope of your assets.
Assets in a divorce may include:
- Joint bank accounts
- Homes or other properties
- Gifts or inheritances
- Retirement accounts
Your attorney can also help you determine which assets aren’t marital property. For example, some use trusts to protect their money in a divorce. If you have a trust with assets that are yours alone, you may not need to share this with your ex-to-be.
Negotiate or Mediate
Next, you and your spouse can negotiate how to divide your assets. If you don’t believe you can have a civil conversation, use a mediator. This is a neutral third party who can help you come to a settlement agreement.
You and your spouse should also have legal representation present. Your attorney can be as involved as you wish. They can handle everything for you, or you can simply consult them when needed.
As if taxes weren’t complex enough, divorce only complicates matters. An attorney can guide you through the tax implications you’ll face during divorce. In many cases, you won’t owe taxes on property transfers as long as you make the transfer within six years of filing for divorce.
If you collect alimony from your ex-spouse, note that this may be taxable income. For the IRS to consider payment to be alimony, it must be a transaction between you and your spouse using cash under a divorce settlement instrument. Payments that may not count as alimony include:
- Child support
- Voluntary payments
- Noncash property settlements
Another tax implication to consider is your filing status. If you are still legally married at the end of the tax year, you can still file jointly to save money. You can also file as married filing separately if you prefer to keep your taxes separate. When you are legally divorced, you must file separately.
If you share a child with your soon-to-be ex, note that only one of you can claim the child tax credit per child. You or your spouse may sign a waiver to relinquish your right to this credit.
In many cases, you can divide your assets amicably with your spouse. However, in complex situations or when there is conflict, a court resolution is necessary.
Avoid this solution as much as possible, as it significantly adds to the cost of divorce. However, with a skilled attorney on your side, they’ll work to make the trial move efficiently.
Types of Assets Subject to Division in a Divorce
The assets subject to division in your divorce depend on how you and your ex-spouse kept your assets during your marriage. Some couples choose to keep their assets separate even when they’re married by having separate bank accounts. This simplifies divorce proceedings. However, many couples intend to be together for the long run and combine assets for convenience.
Any assets acquired during the marriage are subject to division in a divorce. This includes shared bank accounts, trusts, properties, and businesses. It also applies to smaller items you may not think of, such as household goods.
Closing joint bank accounts can be as simple as a visit to the bank with your ex. If you share retirement or investment accounts, liquidation is an ideal option. Retirement accounts have their own requirements for division, depending on the type. To divide a 401(k) or 403(b) plan, you need a court-ordered qualified domestic relations order (QDRO).
As for homes, you can either refinance the house to have it in one name alone or agree to sell it and split the profit. Continued co-ownership is an option, but this arrangement can get complicated if you aren’t on good terms with your ex-spouse.
if you sign a prenuptial agreement before marriage, this simplifies the division of assets. There is likely already an agreed-upon division of assets outlined in the document.
What happens if one spouse has debt at the time of divorce?
You didn’t just share assets with your spouse; you likely also shared debts. These include loans, mortgages, and credit card debts. Use your credit report to determine what your shared debt is. Building your own credit is vital, so taking out a credit card separate from those you share with your ex-spouse during this process is a good idea.
The ideal approach to shared debts is to pay them off and close the accounts as soon as possible. Note that if you are an authorized user on your spouse’s account — or vice versa — you can simply remove yourself or your spouse. Only jointly owned accounts need settling.
Can assets acquired before marriage be considered in the division?
Each state has its own laws regarding property ownership. When splitting assets in a divorce, the property is either community or separate.
Community property includes all assets you acquired during your marriage. On the other hand, separate property includes anything you owned before the marriage as long as it has remained disconnected from joint accounts.
For example, if you owned a property before the marriage and remained the sole owner, that property might not be considered in the division. Similarly, if you own assets like offshore trusts that only hold your money, those assets may not be considered in the division.
What are the consequences of hiding assets during divorce proceedings?
If you are worried about protecting your assets, your instinct may be to hide them. This might involve lying about bank accounts, property, or other assets. Hiding assets doesn’t have to involve deceit or direct lies, though. It can be as simple as knowingly not mentioning an asset to your spouse during divorce proceedings. This is never a good solution.
Hiding assets during divorce proceedings may result in fines, loss of credibility in a court of law, and even jail time. With the help of an asset protection attorney, you can protect your assets safely and legally.
Getting divorced? Protect Your Assets With Blake Harris Law
Splitting assets in a divorce requires significant time, effort, and money. Let Blake Harris guide you through this process. He will help you protect your assets before, during, and after your divorce proceedings.
With years of experience and depths of knowledge, Blake Harris Law has helped many clients protect their assets.
Contact Blake Harris Law today to take the first step in securing the safety of your assets.