Couples typically combine their assets and finances during marriage to simplify bill paying and other financial matters. But this can cause complications when they decide to end their marriage. Addressing this problem requires planning.
Determining who owns property and assets is an important first step in determining property division in a divorce. Courts determine whether assets are marital and separate property when they rule on property division.
Marital property is property that the spouses acquired after marriage. It usually includes:
- Their primary residence
- Vacation homes and rental properties
- Bank accounts
- IRAs, 401k plans and other retirement accounts
- Taxable investment accounts
- Business assets
- College saving accounts for their children’s behalf
- Antiques and other collectibles
Separate property is owned by spouses before their marriage. It may also include any inheritances they receive after marriage.
Courts must follow equitable distribution rules. This does not require an equal division, but the allocation must be fair under the circumstances. Judges may consider whether the spouses work, their earnings, their estimated future financial obligations, and the circumstances surrounding their divorce.
Prenuptial or postnuptial agreements can set forth property division if there is a divorce and other issues such as spousal support. Without these agreements, however, spouses can also take other steps.
It is helpful to create an inventory of jointly owned and individual assets. For bank, retirement, and investment accounts, set forth where these assets are held, which spouse has access and their most recent balances.
Speak to an attorney first before withdrawing money from joint accounts. Withdrawing these funds, selling off assets or retitling them may cause legal problems before your divorce.
Set up an independent account. If withdrawing money from joint accounts is advisable, be transparent and carefully document any transfer of money.
Retirement accounts may be divided if these are considered marital property. The court may order that half of a 401k or IRA goes to the other spouse. A court must issue a qualified domestic relations order to enforce the division of a 401k.
After divorce, change the beneficiaries on retirement accounts. A spouse’s consent is required if this occurs before divorce or if you elect to obtain a 401k loan.
Spouses need to address their liabilities. Consider who will be responsible for a shared mortgage, cosigned student loan or other debt. After divorce, close joint credit card accounts, establish an emergency fund and take out a life insurance policy in your name.
Attorneys can help spouses assess their property and rights. They can assist them with seeking a fair and reasonable decree.