Let’s face it, separating financially after marriage is not easy and may take some time to happen. During the process, you need to be careful and protect yourself. Use your own personal resources of professional advisors whether it is your lawyer, financial planner, financial advisor, real estate broker or CPA so there is no conflict of interest. These professionals are there to provide insight and support to you so stay calm and get the help you need.
Figuring out how to divide your assets is top on your list of what you need to focus on. Your ultimate goal is for a fair division of assets. There are a number of issues you need to consider:
- How many years have you been married? At least 10?
- How are your assets titled? Joint or separate?
- How are your liabilities titled? Is the mortgage in both of your names? Are the credit cards in both of your names? You need to know if your name is on your soon to be ex’s car loan, home loan or student loan. A co-signor on any type of loan — has full responsibility on the amount of the debt so you might want to notify the credit card company that you want to stop the joint credit card.
- You need to do an accounting of all of your assets. Have copies of all retirement account statements, investment statements, mortgage, credit card, checking account and savings accounts…anything you can think of. Make sure you know how the accounts are titled.
- Do you need help in determining which assets to keep? The house vs. a retirement account? It is important to remember the tax consequences of your decisions. What is the cost basis of your house? A Roth retirement account is after tax dollars which is going to be more valuable than a Traditional IRA or 401K. Talk to your accountant and financial advisor.
- Is this an amicable divorce or not? If not, you might be put into a situation that requires you to freeze assets. A lawyer can help you with this. Sometimes one party starts spending like crazy after the Date of Separation. You need to be aware of what money is being spent because if there is not enough money to compensate you for this—there is not much you can do. Make it your business to know exactly what is going on with the finances.
- Is there an equity line on the house? Notify the bank of the impending divorce. One person might be able to withdraw on the equity line without the approval of the other.
- Do you know your credit score? This will make a difference in whether or not you personally can refinance the house or get a credit card in your name.
- How liquid is the asset you are deciding whether or not to keep? A house could take a year to sell in this market and who knows at what price. It might make sense to sell it jointly and split the proceeds but then this process results in another set of issues to deal with.
- What is your official date of separation? Is this the date you are valuing the division of assets? There can be complications depending on which date you choose.
- How do you come up with the market value of an asset that is not readily converted into cash? The appraised values of a personal business, private equity, real estate holdings, jewelry and artwork can all be manipulated.