When going through a divorce, one of the most daunting prospects facing you is the impending division of your assets and liabilities. It is important to understand that while you and your spouse can come to any agreement you wish, there are general guidelines to help when dividing assets and debts. This section focuses on the general guidelines for the division of marital assets and liabilities when going through the divorce process. There are always exceptions to general guidelines, so you should consult a divorce lawyer about your specific situation before applying any of these general guidelines to your situation.
MARITAL VERSUS NONMARITAL (SEPARATE)
This is an important distinction to understand. If a valid prenuptial agreement is in place, it will determine what is marital property and what is separate property. Absent a prenuptial agreement, there are general guidelines on what is marital property and what is separate property. First, any property that you inherited or received as a gift, both before or during the marriage, will remain your separate property and is not subject to division provided that the asset is traceable from its original form to its current form. Any property you owned at the time you were married which is traceable from its original form when you were married to its current form will remain separate property. Also, the active appreciation of a separate asset is subject to division while the passive appreciation of a separate asset is not. Generally, all other assets that were accumulated during the marriage are considered marital property.
DIVIDING MARITAL ASSESTS
Generally, the total value of all marital assets is equally divided between the divorcing couple. A creative divorce lawyer can help divide these assets by understanding the importance of each asset to her client. In most cases it does not make sense to equally divide each specific asset. For example, it may be in both parties’ interest for one spouse to take the house while the other maintains a stock account that is equal to the value of the equity in the house. The goal is to equally divide the total value of the total of all the assets, not equally divide each specific asset.
DIVIDING MARITAL LIABILITIES
The same general guidelines that apply to the division of assets also apply to the division of liabilities. Generally, debt (mortgage, home equity loan, automobile loan, credit cards, lines of credit, etc.) that has been incurred during the marriage, regardless of whose name it is in, is marital (there are some exceptions). Accordingly, you are both responsible for paying half of the marital debt. This is another area where a creative and experienced divorce lawyer can be invaluable. It is particularly important to ensure that you are protected if most of the debt is in your name, but your soon to be ex-spouse is responsible for half of it. There are many creative ways to deal with this issue which include, among other things, taking more assets to compensate for the fact that you are taking more debt and your spouse refinancing debt into his/her name, and/or transferring credit card balances to a credit card in your spouse's name.
CONSIDERATIONS FOR BUSINESS OWNERS
As with all other assets, the marital value of your business is subject to division. You must look to the current value of your business and the value of your business at the time you married your spouse. In most cases, the increase in value is marital and subject to division. During the dissolution or divorce process, your business will likely be valued by a professional business valuation company to professionally determine your business’ marital value. In some cases the parties will hire a neutral business valuator and in other cases each spouse will hire their own business valuator. Once you know the value of the marital portion of your business, you need to consider how you are going to fund buying out your spouse's interest in the business. Some alternatives include: offsetting other marital assets and liabilities, financing the money you will owe to your spouse, or making monthly, quarterly or annual payments to your spouse. An experienced divorce lawyer will be able to help you creatively structure a solution to fit your specific situation.