In divorce, the process of identifying and organizing your assets and liabilities can be an overwhelming experience, particularly if you weren't the one handling the finances during your marriage. However, getting organized and understanding your financial situation is an important step in determining an equitable division.
This process will also give you a clear view of your financial position, which is essential for planning your future. It also helps reduce stress and boosts your confidence as you move forward. The following steps will assist you in gathering all necessary information and provide strategies to ensure your account for all assets and liabilities.
In divorce, some assets may be classified as non-marital (or separate) while others are considered marital. Non-marital assets are generally those acquired before marriage or received through inheritance or gifts specifically to one spouse. Marital assets are those obtained during the marriage. Don’t let this complicate matters, start by compiling a complete list of all assets and liabilities. Your financial and legal teams can assist in determining which assets fall under marital and which are non-marital.
Key Asset Considerations for Divorce
Pensions: Pensions are frequently overlooked, and this oversight can lead to financial imbalances. The value is typically calculated based on the accrued benefits up to the date of separation or divorce. Your financial and legal teams can help assess how this benefit should be divided.
Valuing Real Estate: Start with preliminary research to estimate your property's value using online real estate platforms like Zillow, Redfin, or Realtor.com. Initially, using this estimate will help keep the process moving forward. Eventually, you may need an official valuation, which involves hiring a professional appraiser to provide an unbiased and accurate estimate of your property's market value. The detailed report from the appraiser will be valuable for divorce proceedings.
Business Assets: If your spouse owns a business, it can complicate the division of assets. Business valuations are essential to determine the fair market value. Make sure to account for all business assets and liabilities, including income and expenses. A business valuation expert can give you an accurate assessment of the business's worth, which will facilitate a fair division of assets.
To ensure you have all the necessary information, utilize a financial checklist. The Institute for Divorce Financial Analysts (IDFA) provides a free financial checklist that can help you systematically organize your documents and information. This checklist addresses all aspects of your financial situation, making it easier to ensure nothing is missing. A spreadsheet can also be a useful tool for organizing and tracking your financial information.
Once you have gathered all the necessary information on assets and liabilities, the next step is to compile it into a financial affidavit. A financial affidavit is a sworn statement that outlines your financial situation, including income, expenses, assets, and liabilities. This document is required in divorce proceedings as it provides a clear and comprehensive picture of your financial standing to the court.
It's important to know that this document often changes as you recall or discover new information. After separating, you might also need to update your living expenses. Divorce is a process, and adjustments are common as you gain a better understanding of your financial situation.
With the complexities of divorce financial planning, it is wise to consider the services of a professional with qualifications and experience in assisting you through the process. A Certified Divorce Financial Analyst (CDFA) can be extremely useful in taking you through the financial process of divorce. They can assist you with the money aspects of your decisions, develop a plan that is specific to your new financial situation, and guide you through the process.
Organizing your financial information is a critical step in navigating divorce. By thoroughly gathering and documenting your assets and liabilities, you can ensure a fair division. Utilizing professional assistance and legal tools can further protect your interests. Remember, staying organized and informed empowers you to make sound financial decisions for your future.
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