November 26, 2022
When couples decide to part ways, they must go through the difficult process of dividing their assets. It can be a complicated and confusing process, especially if you are unfamiliar with the laws surrounding asset division. Learn what you need to know to make the process as smooth and stress-free as possible.
What Is an Asset?
Generally speaking, an asset is anything that has value or the potential to generate income. Examples of assets include real estate, personal property, vehicles, investments, retirement accounts, bank accounts, insurance policies, and even pets. Assets can also include businesses, debts, patents, intellectual property, and stock options.
Who Gets What Asset?
Equitable division means that the division of assets should be fair, though it does not necessarily mean an even split. Factors that courts consider when determining equitable division include:
- the length of the marriage
- the age and health of each spouse
- the financial condition of each party
- each party’s ability to support themselves
- each party’s contributions to the acquisition of the asset
- the custodial parent’s need for custody of the child
Generally speaking, divorcing couples have two options for dividing their assets: either through direct negotiations or through court intervention. Negotiating directly with each other is often preferred because it allows the couple to come to an agreement that works best for them and their family. However, if they cannot come to an agreement on their own, they can go through the court process.
How Are Assets Valued?
Generally, assets are valued at their fair market value, meaning the price that an asset would fetch if it were sold on the open market. When determining the fair market value of an asset, courts will consider factors such as the asset’s age, condition, location, and even comparable sales. When valuing real estate, for instance, appraisers may use the comparative sales approach. This involves finding properties with similar characteristics, such as location and size, that have recently sold in order to estimate the fair market value of a certain property. When it comes to financial assets, such as stocks and bonds, courts will generally rely on the most recent trading price on the day of the valuation. Similarly, personal items like furniture and jewelry will be valued at what an individual might expect to receive if they sold it on the open market.
How Are Debts Divided?
The court must first determine which debts are marital debts and which are separate debts. Marital debts are those that were incurred during the course of the marriage while separate debts are those that were acquired before or after the marriage. If a spouse incurred a debt solely in his or her own name, then the court will most likely consider it to be his or her own separate debt. Once the court has established what debts are marital and which are separate, it must decide how they should be divided. Generally, each party is responsible for his or her own separate debt and both parties must be equally responsible for the marital debt. The court will also consider any factors related to the couple’s financial situation and the fact that some debts may have been acquired for joint purposes.
How Can I Protect My Assets in a Divorce?
Protecting your assets very much depends on what you have — this could include transferring certain assets, such as real estate or stocks, into a trust or other entity that will not be subject to division in the divorce proceedings. Additionally, creating a prenuptial agreement before getting married can help protect your assets if a divorce occurs in the future.