One of the most important steps in creating a divorce agreement is deciding how you will divide marital (or joint) property. This is called division of assets. Here are the basic steps:
- Identify all of the property either spouse owns. You must share detailed information with each other, including:
- Bank account numbers and balances as of a specific date. Be sure to include checking, savings, and brokerage accounts.
- Retirement accounts like pensions, annuities, stock options, deferred compensation, and bonuses.
- Do not forget to include real estate interests, precious metals, vehicles, and other non-financial items.
- Include business interests, professional practices, private equity investments, etc.
- Finally, don’t forget debts!
- Value the assets. This is easy for bank and brokerage accounts, but you might have to hire a neutral appraiser to value a business or real estate.
- Determine whether it is separate or marital property. This depends on a lot of different factors:
- Marital property includes property that you acquired during the marriage, property in joint name, and gifts that were given to both of you. It also includes income earned during the marriage and contributions to retirement accounts. Funds that are commingled are usually marital, except for real estate — separate property contributions are repaid.
- Separate property includes property you owned before the marriage that is kept separately, gifts from family, inheritance, and personal injury awards.
- Distribute the Marital Property.
Keep the following in mind!
- Because you are dividing up property you already own, there are no tax consequences.
- Distribution usually occurs in a lump sum. This is a one-time occurrence.
- Distribution of retirement plans have special rules:
- They will require a separate, signed order (called a Qualified Domestic Relations Order, or QDRO).
- Remember that you will have to pay taxes on retirement assets when you withdraw funds.
- In addition, you have to pay a 10% penalty if you withdraw retirement assets before you turn 59 1/2 except in special circumstances.
- The division usually happens after a settlement agreement is signed, or within a certain time after the divorce is finalized.
- Sometimes parties choose to make it a later date; e.g. dividing up the home.
While dividing up the marital property often seems like an insurmountable task, a qualified attorney will have the resources and training to make sure every detail gets done. For more information, contact me.
Joy S. Rosenthal, Esq.
Rosenthal Law & Mediation
225 Broadway, Suite 2605
New York, New York 10007
Phone : 212.532.4704