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When a marriage ends in divorce there are numerous financial issues to resolve before an equitable property settlement can be reached and it is critical that each spouse have a complete understanding of the financial status of the household. A marriage is an economic partnership which means assets and earnings acquired during the marriage are generally considered marital property regardless of the name on the title. The exceptions would be if you received an inheritance or gift while married and kept it in individual name. If, however, you received the inheritance or gift and commingled the asset with your spouse you may have made a presumptive gift to the marriage.

Who, what, where, when and why?

Remember your English teacher drilling that into your head as a student? We should all be able to answer those questions about our assets and liabilities but it is especially important for a divorcing spouse.

Let’s start with who — whose name is on each of your assets including your home, bank accounts, investments, retirement accounts, and insurance policies? Just because an asset is titled in single name doesn’t mean it’s not marital. For example, an Individual Retirement Account (IRA) by definition can only be titled in one individual’s name but if it was funded during the course of the marriage it is considered jointly owned for the purpose of the property settlement. And don’t forget about debts including credit cards, car and other personal loans, and mortgages.

What do you own and owe? What assets and debt have you acquired over the course of the marriage? Start by looking at statements that arrive in your mailbox but keep in mind that some statements may be produced quarterly, such as employer sponsored retirement accounts, and others may be sent electronically to your spouse’s email address. Get a free copy of your credit report at www.annualcreditreport.com to see what debt is associated with your name. This is especially important at the date of separation since debts incurred post separation may not be considered marital.

Where are these financial assets held? Are there multiple financial institutions including banks, insurance companies, and investment advisors? Get copies if you don’t have access to the statements. Note, however, that even if it’s a marital asset or debt you will not be permitted a copy if your name is not on the account. Regardless, you and your spouse are required to provide full disclosure of all financial assets, liabilities, income and expenses to the court so you will eventually get the information.

When did you acquire the asset? This is especially important when dividing assets because there may be tax consequences associated with the sale of an asset. Simply knowing what it is worth today does not provide enough information to make an informed decision about whether to keep, transfer or sell the asset. Transferring assets between spouses pursuant to divorce is not a taxable event but the eventual sale of an asset could trigger a taxable capital gain. It’s critical to consider the after-tax value of each asset when negotiating a property settlement.

Why did you acquire the asset in the first place and does the need still exist? If you purchased life insurance to pay the mortgage and provide education for your children, and both the mortgage payments and kids are long gone, maybe it’s time to review your insurance needs. Although it’s important to gather the information as a general rule you aren’t permitted to make any substantial changes to your financial situation once you have filed or been served with a divorce petition.

Your recent joint tax returns can be a great source of information for assets that may have been spent, squandered or transferred to another party. Pay particular attention to assets that created taxable events such as capital gains or losses, interest or dividend income, or retirement plan and pension distributions. It is very easy for one spouse to take a distribution from their IRA or 401(k) and spend the proceeds without their spouse ever knowing if their spouse blindly signs a joint tax return. If you think your spouse may have been planning the divorce over a period of years take a look at your recent tax returns for distributions from IRAs, pensions and annuities. If assets were sold, such as stocks or mutual funds, they likely created a capital gain or loss on Schedule D and it’s important to know where the proceeds were deposited and how they were spent. Similarly, if there were funds in an account generating interest income over a period of years and then the income stopped you must determine how the asset was spent. To be sure, there may be a logical answer such as tuition payments or other necessary expenses but ask the question.

Achieving an equitable financial settlement isn’t always easy but it’s important to have access to all the necessary information so you can make an informed decision. Ask questions, get answers and surround yourself with experts to guide you through the process.
 

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3 comments

  • Comment Link Bob Thursday, 04 May 2017 22:33 posted by Bob

    Divorces are always hard, specially if it is from some one you really love. This sort of conduct makes a culture of disengage," Ray Kennan clarified. "On the off chance that one or both accomplices are unwilling to mellow the conjugal discussion and quit battling, the issue will deteriorate until there is no returning. Your accomplice is unnecessarily contentious. There will be times when your sentiment on an issue is so starkly not the same as your spouse's, you're out and out stunned. Leave it alone and settle on a truce. As a couple, Have you read the magic of making up you have to perceive that nobody wins when one of you generally must be correct, said relationship mentor Lisa Schmidt. lets not make that mistake again.

  • Comment Link Val Sunday, 22 May 2016 13:30 posted by Val

    I need some advice regarding this.............my husband has just asked for a divorce after 25 years. He makes $100K a year and in Jan opened his own savings account to deposit monthly proceeds from a Fidelity money market into. He has a $45,000 inheritance that he put into our fidelity account in as well as a 401K and IRA. We will be selling our home and I would like our other assets, boat and time share to be sold and proceeds split. I would like to know how much am I entitled to in alimony and if I am entitled to any monies from the inheritance. My husband is a financial planner for a living and I am concerned. I live in NH and since losing my flower shop in 2012 have only been able to find contract temp work. Any help is greatly appreciated. Thank you

  • Comment Link syw15 Monday, 21 March 2016 16:14 posted by syw15

    I need some help in this regards... Are you able to help. My husband acquired a lot of debt while we were married and now that we are going through a divorce he is using this as a leverage so I settle with nothing else (assets). Can you assist with some of this questions?