Dividing Assets in Divorce
When a couple divorces, important and often difficult decisions must be made about how property will be divided. Assets to be divided can include everything from land, real estate, vehicles and household items, to cash, bank accounts, stocks and other liquid assets.
Retirement accounts are among the most valuable assets a couple owns. Dividing 401(k)s and IRAs comes with unique tax implications that impact both spouses’ financial futures.
Some couples can negotiate these choices out of court through mediation or arbitration. For others, the courts make these determinations in accordance with state laws.
Division of Assets in a Divorce: Make Informed Decisions with the Guidance of a CDFA
If this all seems a bit daunting, consider enlisting the guidance of a Certified Divorce Financial Analyst (CDFA) at EP Wealth. With specialized training and certification in divorce financial planning, CDFAs offer invaluable insight into how the choices you make in the present can potentially impact your financial life after divorce.
We work with your divorce attorney(s) to try to help couples reach a fair and equitable plan that positions them for financial stability going forward.
Determining Marital vs Separate Property
When dividing assets in a divorce, classifying each item as marital or separate property is the first step.
A marital asset is anything you and your spouse earned or acquired during the marriage. That includes homes, vehicles, furniture and other items you purchased while married.
A marital asset is anything you and your spouse earned or acquired during the marriage. That includes homes, vehicles, furniture and other items you purchased while married.
Joint bank accounts, securities, pensions, and retirement accounts are also treated as marital assets. When a retirement account is owned by one spouse, any contributions made from a shared bank account (and the earnings on those contributions) are subject to division upon divorce.
Separate assets are items or funds a spouse possessed before the marriage. If you or your spouse received a gift or inheritance in your name during the marriage, they generally remain separate property.
Separate Assets Can Become Marital Property
There are scenarios where the separate property becomes a joint property that is subject to division in a divorce.
Let’s say you saved a significant sum of money as a single person. After you got married, you put those savings into the joint bank account, and funds from that joint account were used to pay household bills and other expenses.
By commingling these funds, you’ve likely given your spouse some claim on any money that remains in the account. A CDFA gathers all your financial records to identify all assets, determine what they are worth, and if they are subject to distribution when you divorce.
Retirement and Investment Accounts
Regardless of when retirement and investment accounts are established (before or during the marriage), contributions and growth during the union are considered marital property.
When it comes to dividing these assets, CDFAs consider several variables when making recommendations. They estimate both spouses’ current and future financial needs and calculate the value of all marital assets overall.
They also factor in each spouse’s age, earning potential, and timeline for retirement.
State and federal divorce laws influence their decisions, along with the tax implications for liquidating investments and transferring retirement funds.
The goal is to divide marital assets equitably, according to what is deemed “fair” based on your financial situation.
Special Considerations for High Net-Worth Divorce
In a high-net-worth divorce, assets can include multiple homes, businesses, and foreign assets. All these high-value assets must be accounted for and valued. This requires the experience of CDFAs and other financial experts.
Child support can be a thorny issue in high-asset divorces because there may be additional costs associated with the children’s care and education, like school tuition, tutors, and lessons and training for sports and other extracurriculars. Parents may not agree on who should pay these costs.
When a family accustomed to a certain lifestyle goes through a split, spouses may disagree on what it costs to maintain that standard of living after divorce. If one feels the other is being unreasonable, discussions regarding alimony and asset division may be stalled.
CDFAs and other financial advisors can help you potentially avoid the stressful back-and-forth cycle by offering sound, objective financial advice for your situation. Armed with this knowledge, you may be better equipped to determine when to make concessions, and when to remain firm when it comes to what you are entitled to from the marriage.
Negotiating Settlements & Mediation Support
Negotiation can be a powerful way to cut down on the time and money required to settle your divorce. CDFAs provide objective advice for couples to potentially help them resolve asset division and other divorce matters out of court. With a certified divorce financial planning professional on your team, you may have peace of mind knowing the choices you make are in your best interests.
To learn more about the benefits of working with a CDFA during divorce and post-divorce financial planning, call or connect online to find an advisor near you.
DISCLOSURES
- EP Wealth Advisors (“EPWA”) makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information presented. All expressions of option are subject to change without notice.
- The Certified Divorce Financial Analyst (“CDFA®”) that are employed by EP Wealth Advisors, LLC are not practicing attorney, accountant, tax professional, or legal expert. All assessments and subsequent recommendations limited and are performed exclusively under the guise of financial planning. An attorney must be retained in order to professional and accurately assess legal options and/or to provide counsel. We also recommend consulting a CPA, accountant, or tax professional.
- Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions. Content does not involve the rendering of personalized investment, tax, or legal advice nor is it intended to supplement professional individualized advice by the appropriate professional(s).
- The decision to work with a CDFA® professional will differ amongst clients and depend on individual circumstances of each respective client. There is no guarantee or warrantee that the services offered by EP Wealth Advisors, LLC and/or a CDFA® will satisfy your divorce service needs. Services offered by other professionals may align more to your specific needs.
- Request an appointment with an EP Wealth Advisor when you have a minimum of $500,000 in investable assets – which includes qualified retirement plans (IRA, Roth IRA, 401(k), taxable brokerage, cash (savings / checking) and CDs. Investable assets do not include your home, vehicles, or collectibles.
- EP Wealth Advisors, LLC. Is registered as an investment advisor with the SEC and only transacts business in state in where is properly registered or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the commission, nor does it indicate that the advisor has attained a particular level of sill or ability.
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