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Division of property isn’t so simple

On Behalf of | Nov 16, 2016 | Divorce

Assets get more and more complicated the deeper you look. In splitting marital property the suggestion is a 50-50 share, but making an equitable division doesn’t often work in the real world. Sure, you can split a pile of cash two ways, but a house or a retirement fund are different types of investments with different regulations. It’s not just the value of a house on the market or the total of your Roth IRA, there are transaction fees and taxes that significantly alter the numbers on your statement.

There are two ways to measure your assets: in face value and tax value.

Down the middle

To make a divorce settlement 100% fair down the middle, you would have to liquidate all assets and split the return. In reality this will never happen. Items have practical and sentimental value. The house may be next to the kids’ school and your jewelry may have belonged to your grandmother. You aren’t going to trade them at cash value just to get your ex out the door faster.

Fine print and fees

For most families, the house and the retirement plan are the most valuable properties. Each has different rules attached, which complicates the math even if they were coincidentally of equal face value. A house is sold without paying tax on profit in most cases, while cashing out a retirement plan comes with taxes and fees that can cost the recipient thousands of dollars. This extends to other properties and investments, such as stocks and bonds, which may be subject to capital gains.

Equalizing shares

The rule is to not simply trade items: the car for the boat, etc, but to review them with a financial planner to get value comparisons in relation to their untouched worth. It’s common to come out of a divorce settlement smiling, only to learn on Tax Day that you took a hit.

Other items of concern are tax filings and any marital debt. Debt is, technically, an asset. Both partners will split debt regardless of personal circumstances that created it. Similarly, both parties are liable for any tax payments owned on a jointly filed tax form from years past or the final year as a married couple.

Even the simplest things become complicated quickly. While working through the stress of a divorce and, often, relocation and custody at the same time, it’s easy to overlook the little things. Experienced family attorneys are accustomed to reading between the lines to make sure that you get through a divorce both respectfully and with everything in order.

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