When couples marry, they merge their lives, and this most often involves a merging of finances and possessions as well. Therefore, it follows that upon dissolution of the marriage, all assets will need to be redistributed back to the two individuals and all debts will need to be handled.
Types of Assets
Every asset that must be considered in a divorce agreement falls into one of three categories: marital, separate, and mixed.
Marital assets include any asset, such as property or income, that was obtained during the marriage. Both spouses have an equal claim on marital assets regardless of whose name the asset is in.
Separate assets, the second category, are something one party brought into the marriage, or received during the marriage but that are exempt from being classified as marital property (such as an inheritance or compensation for personal injuries). It is important to note, however, that separate assets will be considered marital assets unless specifically protected. For example, if separate property funds are deposited into a joint bank account, no one spouse retains a superior claim. Even keeping funds in a separate bank account may not be enough to protect those assets. Certain actions, such as paying joint income taxes on separate property investment income, can complicate the nature of the asset.
An attorney often needs to work together with a client’s accountant to sort out the funds and possessions in the third category, mixed assets. Mixed assets are those which clearly have a marital property component, but to which one party can claim that a portion of the asset is separate property.
Special attention will need to be given to business owners or spouses of business owners. A business is often the most significant asset in a marriage, and the distribution of the business assets will depend on how the business is classified.
The Division of Marital Assets and Debts
There is an important consideration in regard to the division of assets and debts that were obtained during the course of the marriage. To reiterate, both spouses are entitled to an equal claim on all marital assets. On the flip side, both spouses are equally responsible for any debts incurred while married.
A common misconception involves marital assets and debt that may only be in one spouse’s name, or for which one spouse may feel they have a greater or lesser claim. One example of this is if only one spouse is listed on the title to a house purchased during the marriage. Or, if one spouse was primarily responsible for most or all of a large credit card balance. Those factors are largely inconsequential when it comes to division. Most of the time, all marital assets and debts will be divided evenly between spouses, regardless of the details or circumstances.
The Professional Team
The division of assets and debts can be a complicated process. It’s important that in addition to an experienced attorney, you have both a financial planner and an accountant on your team. Those three professionals will work together to sort out each component fairly and in your best interest.
Get Personalized Legal Advice
Your divorce attorney will be your primary point of support and knowledge during the division of assets and debts. While the ideal is to settle outside of court, disputes may need to be resolved with the help of a judge. Therefore, it’s important to have an attorney with trial experience in addition to extensive knowledge about the distribution of assets and debts. Call Bates Family Law today at (585) 433-4661 to schedule your free consultation.