In 2023, 672,502 divorces were documented, according to CDC findings. A large share of these marital dissolutions involved arguments that were more or less tied to property and debt.
The process of property division is arguably among the hardest procedures in a divorce. In some cases, the couple must adjust their retirement accounts, mutual funds, active businesses, cars, liabilities, and a host of other shared wealth. Divorcing couples often have to identify who owns the family residence or manages the joint savings accounts.
As property division laws differ among states, it is beneficial to entrust your property litigation case to a specialized family attorney. The attorney will safeguard your financial rights and ascertain the accurate values of certain assets.
It is important to seek help from an attorney when the assets in a separation of a high-net-worth couple are difficult to trace or convert into money, when a spouse has his/her own business, or when the former couple has many investments and even debts.
Being familiar with how a family law attorney can assist with property division helps you in deciding your next steps during divorce proceedings.
Identifying What Is Actually Subject to Division
Which assets count as marital property? Under equitable distribution principles, which 41 states follow, marital property includes assets and income gathered during the marriage.
Separate property is usually not on the table for division. Separate property includes things that one spouse owned before the marriage and gifts or inheritances that only one spouse received.
The issue of dividing property becomes complicated when spouses commingle separate property with marital property. For instance, an account that was originally separate but was used to pay marital expenses might become marital property.
An inheritance that gets added to a jointly owned account might lose its separate nature.
The asset categories that most often trigger valuation and identification problems in a divorce include:
- Retirement accounts, which can mix marital and pre-marital portions depending on when the contributions were made
- Business interests, which often need professional valuation and may involve goodwill, deferred compensation, and equity.
- Deferred compensation stock options and restricted stock units.
- Real estate where appreciation happened during the marriage on property one party already owned
- Pension benefits, which require an actuarial review to figure out the present value of future payments
The Role of Forensic Accounting When Finances Are Disputed
The most obvious benefit of having a lawyer represent you in asset distribution is that you gain access to the investigative means they can use. If one spouse runs the household money, manages a business, or simply has the records, the other spouse can’t readily access them.
Family law attorneys work alongside forensic accountants to trace financial activity, analyze tax records, dig through bank statements and credit card records, and point out assets that may have been moved around, undervalued, or quietly concealed.
According to Orange County property division attorney Dorie A. Rogers, married partners must meet the same fiduciary duties as business partners. This means you must disclose all assets and share that information with your spouse during property division.
Courts treat intentional concealment as a serious matter. Sanctions can include giving the other spouse a larger share of the assets that the court finds.
Forensic accounting is useful in cases involving business ownership, cash-heavy operations, offshore accounts, and complicated investment portfolios. Forensic accounting is also useful when there is a mismatch in income versus one’s standard of living.
Retirement Accounts: Why the QDRO Matters
Retirement plans are usually one of the biggest marital assets and also the most challenging to divide from a technical standpoint. The amount contributed to the 401(k), pension, or any other employer-based plan during the period of marriage is classified as a marital asset in both equitable distribution and community property states.
If you try to divide these accounts without the right court order, you risk serious financial trouble. In the case of 401(k)s and pensions you acquire through the help of your employer, there are specific divisions that are delineated in a Qualified Domestic Relations Order (QDRO). A QDRO is an extended court order that tells the decision maker of the funds how to distribute the assets.
A well-prepared QDRO can deposit the assigned amount into his/her own retirement account, with no claims for early withdrawal penalties and income tax. Meanwhile, poorly prepared QDROs or the absence of a QDRO can lead to indebtedness, loss of entitlements, and ongoing disputes with plan administrators.
Different retirement plan types, including federal government plans, military pensions, and union plans, often use different language and have different paperwork requirements for the division order.
In these situations, a family law attorney works with the plan administrators. In complicated matters, QDRO specialists help implement the order properly.
How Settlement Strategy Differs From Courtroom Advocacy
Most property distribution disagreements settle through negotiations. The agreement they reach and how they construct it determine the tax consequences they will face long after the divorce is finalized.
Say for example, these are two assets that start out with the same nominal value. One is a brokerage account holding $200,000 in unrealized capital gains, and the other is a savings account holding $200,000 in cash. The person who ends up with the brokerage account will owe capital gains tax later, once they sell those investments.
The person who gets the savings account won’t face that same tax liability. The numbers may look equal on paper but the after-tax amounts are not equal.
The family lawyer structures the agreements accordingly so that the final document reflects the bottom line for each party, not what each person appears to be getting according to the document when it is signed.
Frequently Asked Questions
What happens if my spouse hid assets and we already have a final divorce decree?
If a divorce case has been completed, most states may allow a final divorce decree to be reopened if it can be proven that the other spouse had hidden assets or provided inaccurate financial statements. The usual reasons for reopening are misrepresentation, violation, and coercion, but the requirements and conditions for proving such allegations would vary from one jurisdiction to the next.
Do both spouses need their own attorney for property division?
Each party has the right to their counsel, and in contested cases that involve significant assets, separate representation is strongly advisable. An attorney retained by one spouse can’t ethically advise the other. Sometimes, divorcing parties agree with one mediator and have different lawyers during the signing of the final contract.
How are business interests valued in a divorce?
Divorce business valuation requires hiring a business appraiser who will employ acceptable valuation methods. It is not enough to value tangible assets but it is also necessary to take into account intangible assets such as goodwill. The treatment of goodwill will depend on whether the state recognizes it as a divisible marital property or not.
What is dissipation of marital assets?
Dissipation arises in instances where one spouse squanders the marital property. Common scenarios include gambling losses, extramarital relationships, or third-party financial and property transfers. In equitable distribution jurisdictions, the court can usually respond by giving the spouse who didn’t dissipate a bigger slice of what’s left in the estate. But to really establish dissipation, you need to prove with documents both the actual expenditure and how that spending lines up with the breakdown of the marriage.
What Property Division Actually Requires
Divorce property division is a financial and legal process that still affects both people for a long time.
The job of a lawyer representing clients in family law is to develop an accurate representation of the marital estate, challenge items that seem lacking or incorrect, and craft agreements that take into account the true post-tax value.
The lawyer must see to it that the legal documents carrying out the agreement, including the QDRO, deeds, and account retitles, are properly completed.
