As part of a divorce, the parties' property must be divided, either by the court or by the parties. If the parties divide the assets, that information should be included in the separation and marital settlement agreement. If the court divides the assets, the parties will still need a list of all property owned by the parties and an assessment of property values.
Property division in a divorce has long term consequences. In order to avoid any problems, you should do the following.
Make a List of Property Interests
You'll need to compile a list of personal and real property owned separately by each party and by the parties together. Sometimes there is a dispute as to whether property is separate or marital property, or whether it is community property in a community property state. Consulting an attorney on property ownership issues is helpful. Using court-provided financial forms from the beginning prevents having to re-write lists.
- Separate property includes anything owned by one of the parties before the marriage, which the party continued to hold in his or her name after the marriage.
- Marital property includes property acquired by the parties after the marriage, excluding inheritances and gifts.
- Personal property includes items such as vehicles, stocks, bonds, banks accounts, pension accounts, jewelry, furniture, and businesses.
- Real property includes real estate.
Get a Professional Assessment of Property Values
Obtaining that assessment is almost as important as compiling a list of assets. You can locate professional appraisers through your lawyer or telephone directory. Although assessments cost money, they can reduce controversies over value and help achieve a fair distribution of assets. Be sure to save the assessments.
Make Sure the Family and Personal Debts Are Allocated
Outstanding loans on property reduce the property's value. Debts on property should be listed on the financial statements and in the separation agreement, and they should be allocated with the property. Unsecured debts should also be listed and allocated to the parties. Just remember, the creditor is not party to your separation or divorce agreement so if a joint debt is not paid, regardless of to whom it was assigned, the creditor can come after either party to recover.
Create New Assets for Property Distribution
Sometimes assets are not divisible, and the allocation of other property does not fairly divide the assets. In that case, the parties can create assets, such as setting up trust funds or purchasing life insurance policies, so that each party gets a fair share of the property.
Assess Tax Consequences
While spouses can usually transfer assets to each other without tax consequences, the sale of assets has tax consequences. Take tax consequences regarding the sale of specific assets you may be thinking of selling after the divorce is final into account when considering a division of property. If you don't, you may end-up with far less than you thought.
Address the Process and Time Periods for Division
Decide how and when assets will be distributed, and put that in the agreement. While specific dates may not be practicable, requiring certain actions to be taken within certain time frames is appropriate. That way, after the divorce is final, if your ex refuses to take actions he or she agreed to take, you can file a motion to hold him or her in contempt of court.
Decide the Process for Dividing Household Effects
Actually dividing household items can be stressful. Decide beforehand how the division is to take place and include that in the agreement. Having each spouse choose one item alternately avoids disputes.