Divorce is not just an emotional ordeal. It also requires separating lives in concrete ways.
One such matter is divvying up wealth. While this task is often complex, understanding the process can make it easier.
Tally assets and debts
The first step in dividing portfolios is to create a comprehensive list of everything the couple owns and owes. Assets include property, bank accounts, retirement funds, investments, vehicles and personal belongings. Debts are mortgages, credit card balances, loans and other financial obligations. Both parties must be honest during this stage.
Separate marital from personal property
Once everything is out in the open, distinguish between marital and personal property. Marital property includes assets and debts acquired during the marriage. Anything owned by either spouse before the marriage or acquired through gifts or inheritance is personal property.
Valuate assets
Determine the current market value of properties, vehicles, investments and other items. Professional appraisers provide accurate valuations for real estate and personal belongings. Collect bank statements and financial records to determine the worth of accounts and vested interests.
Equitable distribution versus community property
Divorcing couples have to follow the rules by which they reside. Arkansas, for example, is an equitable distribution state. For couples living there, everything gets divided fairly but not necessarily equally. Factors such as each spouse’s income, contribution to the marriage and future needs influence the outcome. Other states, such as Texas, are community property states, where all marital assets and debts are split straight down the middle.
Negotiate
Both parties should discuss their preferences and attempt to reach a mutually acceptable arrangement. Compromise is often necessary to ensure both parties feel the deal is fair.
Finalize the agreement
Every divorce compromise needs approval from a court to make it legally binding. Among other details, the document should include specifics on any transfers of ownership or responsibility for debts.
Separating wealth in a divorce can be tricky. Despite this, a fair division allows both parties to move forward and put the relationship in the past where it belongs.
