How to Divide Assets in a Divorce: 7 Questions to Ask Yourself

certified divorce financial analyst dividing assets in a divorce house in a divorce property division in divorce retirement accounts in divorce
considerations when dividing assets in divorce

Are you worried about splitting assets in a divorce?

Worrying over financial decisions is normal on an average day, but when going through a divorce, it can be paralyzing. Unfortunately, the fear around these issues is completely warranted. You only have one chance to get it right, and your divorce could quite possibly be the largest financial transaction of your life - not to mention that you are likely overwhelmed by emotions related to all the changes in your life.

One effective strategy for addressing financial fears is to take charge of your situation. It's worth noting that during a divorce, there's no strict requirement to divide each of your accounts/assets exactly 50-50. In fact, it may not even be the most practical approach for you. Keep in mind that dividing certain assets in a divorce can result in significant administrative costs.

So, how do you navigate the process of splitting assets if it's not a straightforward 50-50 split? Let's explore further.

(Note: Scroll to the bottom of the post for a compilation of resources about dividing assets in a divorce.)

Take control of how to divide assets in your divorce by avoiding litigation

One effective approach to gaining greater control over the division of assets is to explore alternatives to the traditional litigation process. By considering methods like mediation and collaborative divorce, you not only open up new possibilities for resolution but also provide yourself with the opportunity to craft a more personalized and creative settlement agreement that aligns with your unique needs and preferences. These alternative processes empower you to actively participate in shaping the outcome, fostering a sense of ownership and satisfaction with the final agreement.

As a Certified Divorce Financial Analyst (CDFA), one of the key areas where I provide my expertise is in assisting parties with the equitable division of assets during the negotiation of their divorce settlement. With a deep understanding of financial matters and the complexities involved in divorce proceedings, I guide individuals through the process, ensuring a fair and balanced distribution of assets that takes into account their unique circumstances and financial goals.

 Identify and value all assets that need to be negotiated

The first step in the process is to create a comprehensive list of assets that require discussion. Identify the fair market value of each asset. This may require getting an appraisal on some assets.

Identify marital and separate property

It's also crucial to include the origin of each asset, as not all assets may have been acquired during the course of the marriage and, therefore, may not be categorized as marital or community property. It is imperative to ascertain whether there are any separate property issues that need to be identified and negotiated. Please note that the definition of separate property can vary depending on the state in which you reside.

If you find yourself unsure about the advantages and disadvantages associated with each asset or whether certain assets can be considered as marital or separate property, it is highly recommended to schedule a meeting with a Certified Divorce Financial Analyst (CDFA) to address any concerns and gain a better understanding. Once you have a clear understanding of the assets at hand, you can then evaluate which ones will align best with your financial goals and aspirations.

Sometimes Litigation is Unavoidable Unfortunately

While I would genuinely love to believe that all divorces could be settled in a way that prioritizes the parties' best interests, we all know that reality often falls short. In a litigated divorce, how assets are divided is heavily influenced by the specific laws in your state, which can vary significantly. For instance, in a community property state, marital assets (aka community property) are typically divided equally between the spouses. However, it's important to note that this doesn't necessarily mean that each individual account or asset is split down the middle.

On the other hand, if you find yourself in an equitable distribution state, there is generally more flexibility in determining what is deemed fair and just for all parties involved. This may involve considering various factors such as the duration of the marriage, the financial contributions of each spouse, and any other relevant circumstances. It's crucial to have a clear understanding of the laws and regulations in your particular jurisdiction to ensure a fair and equitable outcome.

7 questions to ask yourself when determining the asset division that's right for you

When it comes to making decisions about asset division, it's important to remember that it's not only about what is legally deemed fair. Taking into account your personal priorities and values is crucial. Consider your needs and envision what your transition will look like. By diving deeper into these aspects, you can make sure that the outcome aligns with your unique circumstances and aspirations.

  • Do I need liquidity?

    • What does that even mean? Do you need access to cash in the next year or two? It is imperative that you go through the whole budgeting process before you start looking at how to divide assets in your divorce. Keep in mind how much cash you may need for large upcoming expenses such as home repairs or a new car. Certain assets, such as a house or other real estate property, may take time to sell and would not be your best option if you need cash now. In fact, if possible, I would discourage you from looking at negotiating real estate to meet your cash needs at all.
  • What are my future income needs?

    • "Future income needs" is pretty broad. What do I mean by "future?" Future needs could include income you need in the next year or even in a more distant retirement plan. It should all be considered when negotiating how to divide assets in your divorce. The mistake I often see clients make is focusing so much on their short-term income needs that they give up retirement income. In other words, don't give up that monthly pension benefit just because you can't access the money now. That benefit could be extremely beneficial to you in the future.
  • What is the after-tax value of the asset?

    • I frequently see individuals (and even their attorneys), who show me spreadsheets that detail various account values, and that is the only number that they are looking at. When comparing assets, it's critical to have the cost basis of each asset and to consider the tax impact on tax-deferred assets such as pre-tax 401-K accounts and/or traditional IRAs. Without fully understanding the tax consequences of the division, there is no way to make an apples-to-apples comparison. One way to maximize the after-tax value of your marital estate is to award more of the tax-deferred assets to the lower-income spouse. This will reduce the future tax burden and create more after-tax assets for both parties.

  • How comfortable am I with risk?

    • I could write a whole blog post on this topic alone. For that matter, there are whole books on the topic. The important point here is that all assets are not created equal, and each has its own relevant risks associated with it. This includes cash! Of course, not all risk is created equal either. Some of the risk factors are detailed in other topics here. As a financial expert, I take time to get to know my clients to determine their comfort with risk. Make sure to take time to consider all of the risks of each asset.
  • What kind of returns does the asset generate?

    • How will each of your assets grow and/or generate income? This goes along with the risk issue since an increase in return potential generally means an increase in risk. Are you taking more of the savings and investment accounts and giving up your ownership in the family business or in real estate? Consider how this will impact your financial future.
  • How much experience do I have making investment decisions?

    • Certain assets require greater oversight. Do you want to take on the responsibility of managing investments that your spouse has handled in the past? If not, do you feel comfortable working with a financial advisor?
  • What is my life expectancy?

    • According to the Social Security Administration, the average life expectancy of a 65-year-old man is 84.3 years and the average life expectancy of a 65-year-old woman is 86.6 years. How long do you need your assets to last? If you think you may have a good long life ahead of you, it's important to plan for it. For example, are you considering a pension as one of the assets you're dividing? The lifetime income could be a critical component of your financial plan. Alternatively, your medical history may lead you to believe that the pension may be significantly more valuable to your soon-to-be-ex.

Divide the assets in your divorce in a way that aligns with your financial goals

When it comes to splitting assets in a divorce, there isn't a one-size-fits-all approach. It's crucial to begin by considering your overall financial goals, which will serve as a guiding compass throughout the process. Take the time to reflect on what you want and what you'll need in the future as you move forward.

If you find yourself unsure of where to begin, don't hesitate to reach out to us. We are dedicated to providing comprehensive financial education, ensuring that you make informed choices during your divorce. Remember, your divorce settlement is a one-time opportunity to get things right, and you don't have to navigate it alone. We're here to support you every step of the way.



What about the logistical aspects of splitting assets?

It's important to understand that depending on the asset being divided, there are different processes and costs associated. For example, when it comes to splitting employer retirement accounts, understanding a Qualified Domestic Relations Order (QDRO) or similar Order is important. These legal orders are used to distribute funds from an employer retirement plan, ensuring that each spouse receives their fair share of the plan's assets.

A QDRO is particularly important when dealing with retirement plans, as these assets are not only significant in value but also subject to specific legal and tax rules. It allows for the division of pension plans, 401(k)s, and other retirement accounts without incurring early withdrawal penalties. However, it's essential to ensure that the QDRO is drafted accurately and reflects the agreement reached between both parties.

When dividing assets, it's common for certain joint accounts to be closed, and the assets are then moved into separate accounts in each individual's name. This process often involves bank accounts, investments, and credit accounts. It's vital to handle this division carefully to avoid unnecessary taxes or penalties.

It's always advisable to work with a financial advisor when dividing assets in a divorce. We can provide guidance on the relevant process, tax implications and ensure that all assets assets are transferred to the intended party. Remember, the goal is to arrive at a fair division that sets both parties on a stable financial path post-divorce.


A Compilation of Resources on Dividing Assets in a Divorce

As an experienced divorce financial advisor, I work closely with clients on a daily basis to guide them through the complex process of asset division during divorce. I understand the importance of ensuring a fair and equitable distribution of assets, and I am here to provide expert advice and support throughout this challenging time.

To help you out even more, I've put together a curated collection of resources that cover different aspects of splitting assets in a divorce. These resources cover a wide range of topics, including property division, financial considerations, tax implications, and more. By exploring these valuable resources, you can gain a deeper understanding of the intricacies involved in this process and make informed decisions that align with your unique circumstances.

Whether you are just beginning to navigate the complexities of divorce or seeking additional guidance, I am here to help you every step of the way. Feel free to explore the resources below and reach out to me if you have any questions or require personalized assistance. Together, we can work towards achieving a fair and equitable division of assets that sets the foundation for your future financial well-being.

List of Resources About Splitting Assets in Divorce

How to prepare for a divorce

We offer an entire course on the topic of preparing for divorce. Here's a link to the course. Additional resources are listed below.

Real Estate in a Divorce

Splitting assets in a divorce

Handling retirement accounts in a divorce

Debt, credit, and divorce

Life insurance and divorce

Recovering financially after a divorce

Please note that this post is for educational purposes and is not intended to provide legal or financial advice. 


About Intentional Divorce Solutions

At Intentional Divorce Solutions, we're committed to guiding individuals through the complexities of divorce with an approach centered on empowered choices and respectful outcomes. Our team provides comprehensive support and expertise in several key areas:

  • Divorce Financial Planning and Analysis: Providing in-depth financial insights and strategies for a secure future post-divorce.
  • Divorce Mediation: Facilitating respectful and balanced negotiations to reach mutually beneficial resolutions.
  • Divorce Coaching: Offering personalized support and guidance to help you navigate through emotional and practical challenges of divorce.
  • Divorce Support Groups: Creating a space for sharing experiences and finding strength in community support.

Please Note: We focus on providing support and solutions in various aspects of divorce. However, we are not attorneys and do not offer legal advice.

Work With Us

If you are on the journey of divorce and seeking professional, empathetic support, we are here to assist you. Reach out to us to discover how our services can be adapted to your unique needs, empowering you to make informed decisions for respectful and positive outcomes.

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