Besides child custody, dividing up assets and debts can cause the biggest issues in a divorce.

Whether it’s a business, cash in the bank, real estate, or even furniture, everything you and your spouse own has to be accounted for and given to one person or the other.

Below are some quick tips on how courts go about doing this.

Some things belong to just one spouse

Not everything that you and your spouse own gets split up between the two of you. There are some items that often belong entirely to one spouse and not the other. With these items, the court has an easy decision to make and may not need to determine a value.

Some assets and debts that could fall into this category, sometimes called “separate property”, are:

• Tangible items purchased before marriage
• Property received through inheritance
• Money earned after the couple separated
• Money earned from other separate property

If something is considered “separate” for one spouse or the other, that spouse owns all of the asset or is responsible for all of the debt.

Other things have to be split up

For the most part, the rule is pretty simple – anything you bought or earned while you were married usually belongs to both you and your spouse. This is legally called “community property.”

Of course, there are a lot of exceptions and not everything falls neatly into the “before” or “after” category in your marriage.

Some of the most complicated things to divide are a home, a business, and a retirement plan. These bigger items have special rules that can be argued either way, making them difficult to value. If you’re fighting for ownership of one of these assets, contact our offices to make sure you know what you’re entitled to.

When the marriage ended is important

One key concept in the background of this all is the length of the marriage and when it legally ended. Many people think that their marriage ends when their divorce is finalized, but this is not exactly true. When dividing up property at least, a marriage ends when a couple officially separates.

But not all couples separate with a single, clean breakup. There may be times when people separate for a time, reconcile, and separate again.

One common marker for determining an official separation is when one spouse moves out of their shared home. This isn’t guaranteed to be the date courts use, but many have successfully argued that it’s a clear sign the marriage was over and it often becomes the date courts use.

Dividing a House

When it comes to dividing property in a divorce or separation, real estate, particularly the family residence, is often the largest asset that will need to be divided. It can also be the most emotionally charged asset, especially in longer marriages where one or both sides have an attachment to the house.

Fortunately, the California Family Code provides a lot of guidance on exactly how this should be done.

How much is the house or property worth?

The first step in dividing any real estate, marital home or otherwise, is almost always to first determine its value. To do this in a way that will hold up in court, you will likely need an independent appraisal. If you and your soon-to-be ex are able to agree on one appraiser that you both accept, this can speed things up and save some money by allowing the two of you to split the cost. If you can’t agree, then each of you will need to conduct your own appraisal.

After that step is completed, the two sides will ultimately settle on a current value for the house and then move on to options to fairly divide it.

How is the equity divided in a divorce?

Before you can clearly divide the home accurately, there is one very important question that the law asks: who is on title as the legal owner? Depending on the answer, how the equity is divided can vary.

Dividing a Business 

Other than a home, and perhaps a retirement plan, a business is often the biggest asset a couple has to divide, especially in longer marriages. Unlike other assets, however, a business can be very complicated to divide. There’s more than one way to do it and many of the factors courts look at can be interpreted differently by each side.

Here are a few key points to keep in mind if you’re considering tackling this issue in your divorce.

When the business started is important

It’s common for someone to have started a business before getting married, grow it during a marriage, and then continue to grow it after separation. If this is the situation, timing matters, because the business would not just belong to one person nor would it be split equally – it would be both.

This is often referred to as a “mixed asset”, meaning that part of the business belongs to one spouse, and the other part belongs to both spouses.

As with a home, the most common solution to dividing a business is for one spouse to buy out the other or, if necessary, sell the business altogether.

A few factors can make a big difference

On top of dividing the business properly, determining who was more responsible for growing it and what the business is actually worth can be an entirely separate challenge. Judges need to review a lot of information to try and make sense of what really happened – information such as:

• Which spouse worked in the business and when
• What each spouse did for the business
• Where the money to start the business came from
• If either spouse worked another job at the same time
• How much money did the business distribute to each spouse
• The health of the business then and now

Any one of these factors can have a significant impact on one spouse’s ownership percentage of a business or how much the business is worth.

Regardless of how amicable a divorcing couple might be, determining the value of a business will almost always require an expert’s evaluation. A specialized forensic accountant, with some knowledge and plenty of experience in family law, will usually prepare an evaluation in a way that can reliably hold up in court.

These evaluations can increase the time and money cost of your divorce but may be well worth it if there is a successful business at issue. A skilled forensic accountant doesn’t only describe the past but can give future projections of income and cash flow that could go a long way toward helping a judge make any sort of final decision on issues that are otherwise hard to pin down.

Dividing a Retirement Plan

Besides real estate, retirement plans and pensions are often the largest assets in a marriage.

You don’t need to wait until your spouse retires to divide a retirement plan; you can request it at the time of the divorce. A special procedure is required which isn’t always fast, but often well worth it. Retirement plans can be very valuable!

There are a variety of factors to consider when dividing a retirement plan:

Retirement plans usually belong to both spouses

If a retirement plan was built up during the marriage, it’s considered a joint asset. Either part of it or all of it belongs to both spouses. It’s common for someone to earn part of a retirement plan during marriage, and part of it before or after the marriage. This would make part of the funds belong to one spouse and part of them belong to both. This is often called a “mixed asset.”

How much is one spouse entitled to? The rules that govern the division of retirement plans can be complicated, and depend on the type of benefit being divided. But the general rule is to divide the benefits earned during the marriage right down the middle.

The first step in dividing a retirement plan is to determine which type of accounts you’re dealing with. Typically, there are two types of retirement accounts: defined contribution plans and defined benefit plans.

Defined contribution plans, also referred to as savings plans (such as a 401(K)), are retirement accounts where the employee, the employer, or both, make contributions into the employee’s retirement account.

Defined benefit plans (such as a pension) are company retirement plans that are based on the employee’s salary history and years of service. These plans pay monthly benefits when the employee retires, and payments continue for the rest of the employee’s life.

Valuing the retirement plan

Once the type of plan has been identified, the next step is to determine its value.

Some plans are easier to divide and usually only require an accurate accounting of when money was added and withdrawn over the years. Other plans, however, can be difficult to value and require an expert to review them.

Splitting the retirement plan

A divorcing couple can also choose whether to divide a retirement plan now, and pay out in a lump sum, or reserve dividing the benefits until the plan matures and is available for payment, which can be more common with defined benefit plans and pensions.

In these complex cases, your side of the story matters

The courts expect the spouses to do the work of digging through the paper trail of the business and explaining the significance of what is found. Numbers, just like relationships, are often open to interpretation. When fighting for your right to a business, it’s important to share your side of the story with documentation to back it up.

The attorneys at the Law Office of Benjamin Kanani are experienced in handling property division and work diligently to ensure the best possible outcome for our clients. Contact our office today for a free consultation! (310) 593-9592