Divorce is a highly emotional process, but many couples are also worried about the financial impact of dividing their assets. Whether you have a high net worth or are simply trying to get by, divorce can put your financial security at risk if you don’t take asset division seriously. When you are filing for divorce, it’s important to have an attorney who can help you navigate the process of asset division to help you protect your financial future.
You can’t divide your assets until you know exactly what your assets are. Both spouses will take inventory of all assets and debts, including real estate, investment, bank accounts, retirement savings, and any other pieces of your financial portfolio. Not only do you need to make sure everything is accounted for, but it’s important that each asset has been valued correctly. For many accounts, this will be straightforward, but other assets may need a formal appraisal to determine an accurate valuation. If you are considering divorce, you may want to prepare your financial records first.
Equitable distribution is the way a court will divide assets in a “separate property” state. Ohio is a separate property state, which means that the court will decide on a fair division of assets based on each spouse’s situation. The division may not be exactly equal, but it will be fair. Most states are separate property states that rely on equitable distribution and will consider both marital and separate assets.
However, if your divorce is being filed in a community property state, this means that both spouses have equal share in any asset (other than inheritance or gift) that was acquired during the marriage or brought into the marriage. For example, even if one spouse owned a home before the marriage, in a community property state, that home would be considered a shared asset even if one spouse did not contribute to the property in any way. In a separate property state such as Ohio, the same situation may be looked at differently. The court will consider the appreciated value of the asset, as well as if both spouses contributed to the asset during the marriage.
For most couples, the biggest real estate concern is the home. Assuming you live in Ohio, which is a separate property state, and you either purchased your home during the marriage or both spouses contributed to purchasing the home, this asset will be divided. There are several ways to do this.
At first thought, this seems like the smartest option. Selling the home and splitting the proceeds is clean, straightforward, and easy to divide. However, depending on the market, this may be a poor financial decision. If you have children, losing the family home can be difficult.
This is often referred to as “buying out” the other spouse. One spouse will refinance the house into their name only, and after calculating the equity in the home, the spouse who is keeping the home will either pay a lump sum to the spouse giving up their share or give up their share in a comparable asset to ensure the division is equitable. While this arrangement does work for many couples, there can be complications in the financing process.
While this certainly isn’t a viable option for every divorcing couple, it is legally possible to co-own a home after a divorce. This is usually only an option when the market is not favorable for a sale, the couple owes more than the home is worth, or the couple decides to keep the family home as part of their custody agreement with the children.
One of the biggest mistakes that divorcing couples make during the process of asset division is making things contentious. Divorce can bring out strong feelings, but it’s important to remember that dragging out the process will cost you more in the long run and it will take longer to come to a settlement and move on.
There are some spouses that feel that the only way to protect certain assets from being divided with their partner is to attempt to conceal them, but again, this strategy will backfire. If you are found concealing or lying about assets during the divorce process, you can face serious legal consequences, fees, and delays. It’s important that you choose an attorney who can look at the big picture without emotion and help you make decisions that will be in your best interests.
In general, most spouses can protect their assets by keeping good records, being fully transparent, and negotiating fairly during the process. However, while asset division can be very straightforward, there are certain cases in which one spouse may be concerned about protecting certain assets, such as in the case of an inheritance or trust, if one spouse owns a business, or if one spouse had substantial assets prior to the marriage.
There are several things your attorney may advise you to do before filing for divorce. A pre- or post-nuptial agreement can outline individual assets, but your financial planner may advise business owners to keep their business and personal assets separate, so that business assets are considered separate. Although individual inheritance and trust funds are usually not considered marital property, you need to look at the language in these documents carefully to make sure you are protected.
If you want to keep your financial future secure during a divorce, it’s important to have an experienced attorney who is knowledgeable about asset division. Before filing for divorce, take a thorough inventory of your financial portfolio and speak to your attorney about the best way to proceed to ensure an equitable division with a stress-free process.
Divorce is hard, even when it’s the right thing to do. If you or your spouse plans to file for divorce, contact my office right away to prepare for a successful outcome so you can move on as soon as possible.