Being able to identify and assess the value of all of your assets is one of the most crucial aspects of the divorce process. It is important to have documentation of when you acquired each asset, how much you acquired them for, and if they have increased or decreased in value over the years. This process can be extremely complicated, especially when there is a large number of significant assets involved, such as family businesses, homes, etc. Understanding separate versus marital property is the first step to getting your finances in order going into a divorce.
Separate vs. Marital Property. Before beginning a property settlement, you must define, value and assess how to divide the marital estate. Something important to take into account during the division is which properties are owned separately and which properties are considered marital. The classification of separate versus marital property varies according to whether state law follows equitable distribution (e.g. New York) or community property (e.g. California). While this area of divorce can be quite complicated, here are some general rules to help classify these assets.
Marital Property. Marital property is exactly what it sounds like: the asset is acquired during the marriage. The appreciation of separate property can also fall into this category, especially if the spouse’s active management of the asset contributed to growth in its value. However, marital property will take various forms depending on state law and you will want to consult with your own matrimonial attorney. Separate Property. Separate property is typically brought to the marriage. In New York, separate property includes personal injury awards, as well as gifts and inheritances made to only one spouse. In divorce, this separate property is typically not divided, but is kept by the spouse who owns it.
Commingled Assets. The line between marital and separate property becomes blurred when clients mix marital and separate assets together. Separate property becomes co-mingled when added to jointly owned assets or to separate property of the other spouse. Think of commingling assets as similar to mixing two different shades of sand. It is very tough to separate them, once you have poured them together in the sandbox.
Debt. Another area that must be addressed in divorce is debt. The liabilities and debts accumulated during the marriage and brought to the marriage should all be assigned, paid, or handled in some manner as part of the divorce settlement. The laws of each state vary on which marriage partner is responsible for certain debts, depending on when the debt was incurred (before the marriage, during the marriage or after separation). The purpose of the debt (necessities, an extravagant lifestyle, or expenses to pay for an affair) also factors into who is responsible for repayment.
Though organizing your assets may seem like a daunting task, with the help of a divorce financial planner, they can easily complete most of this for you and begin to help you plan ahead for a secure financial future.
If you’re interested in learning more about the services offered by Francis Financial, contact us for a free consultation by calling 212-374-9008 or emailing firstname.lastname@example.org.