If the quote “marriage is all about love and divorce is all about money” is true then it is important for those facing divorce to plan accordingly. Without proper planning with regards to financial decisions during a divorce, people may put their financial futures at risk.
In this two-part post we will take a look at six critical areas that will determine the financial outcome of a divorce settlement.
- Division of Property: Divorcing parties are entitled to a fair division of property. However, a fair and equitable distribution of assets does not necessarily mean equal. In dividing assets and debts, courts will look at many different factors in order to make a determination as to what is “fair.” These factors will relate to choices made during the marriage, such as education and work outside the home. It is important to keep in mind that property may not be split 50/50 between the parties.
- Definition of Property: In order to receive a fair division of property it is imperative to understand the difference between marital and separate property. Generally, marital property includes all property acquired during the marriage, regardless of who actually owns the property. Marital property does not typically include property acquired before the marriage. However, state treatment varies and there are many gray areas regarding the division of property. Ignoring these rules could be a costly mistake.
- Assets: If divorcing parties have significant assets or high net-worth, discovering all property and dividing it equitably can be a complex task. All valuable assets should be considered in reaching an equitable divorce settlement. Assets such as businesses and real estate investments are some of the more obvious assets. It is important not to forget less apparent assets, such as future income. Such assets might include retirement accounts, IRAs, 401ks and deferred compensation. Other more obscure assets might include accrued vacation time, life insurance, time-shares, country club memberships and tax refunds. All of these may have value and should not be overlooked.
In our next post we will look at three more important financial considerations that divorcing parties should pay close attention to.
Source: The Huffington Post, “The Top 6 Serious Financial Mistakes Women Make During Their Divorce,” Jeffrey A. Landers, 18 Feb 2011