Divorce marks the end of one chapter of your life and the beginning of another, and odds are, you’ll look back at this time and see it as a positive turning point in your life. However, before you achieve that perspective, there’s plenty to go through – and much of that comes down to finances.
Financially speaking, divorce is mostly about the division of marital property (and debts). Most couples today have complex financial portfolios that include many kinds of assets, and at first, figuring out how to divide everything fairly can seem overwhelmingly complicated.
For example, valuations of even the most common assets, such as real estate and bank accounts, cars, boats, and the like, can be points of contention in a divorce. Then, there are investments and employee compensation plans–including life insurance policies, retirement plans, pensions, stock options, restricted stock, deferred compensation, brokerage accounts, etc. –which must also be inventoried and evaluated for the purpose of division in a settlement agreement. Complicating matters further, the current dollar value of assets such as these isn’t necessarily the best basis for determining their worth.
Plus, there are many more types of assets to consider: valuable home furnishings, art, antiques, horses, wine collections, rare coins, classic cars. . . . and if you or your husband have been given significant gifts, or have interests, passions or other ventures that you’ve invested in during the marriage, it’s likely these have resulted in marital assets that are now subject to division, as well. (Interestingly, these types of assets often prove the most difficult to Think Financially, Not Emotionally® about. Even if your husband has never shown any interest in your beloved collection of rare first editions, don’t be surprised to hear him express a sudden attachment to it once he learns the collection is subject to division.)
Many women find there are marital assets that didn’t come immediately to mind, yet would have significant value or consequences should they fall to one or the other spouse. Please don’t forget that you may be entitled to:
Benefits from previous employers
Your check list should include stock options, restricted stock, retirement accounts (401Ks and pension plans) and deferred compensations plans from previous employers.
Capital loss carryover
Check tax returns for this one. If capital losses exceed capital gains, and also exceed the tax deduction allowable for a single year, the loss can be carried over to future years. If the loss occurred during the marriage, it is a mechanism for reducing tax liability and should be addressed in your divorce settlement.
Cemetery plots, or equivalent
Given that you’re divorcing, it’s a fair bet you’ve changed your mind about wanting to be buried by his side. A cemetery plot can have significant value and should be negotiated.
Collections and memorabilia
Think about what you have in storage, as well as on display in your home. Comic books, gold and silver coins, stamps, books, art and antiques are all potentially valuable items, as are some sports and election memorabilia. If an item or collection is specifically noted in your homeowner’s insurance policy, it’s probably important to your divorce settlement, as well. But, even if you forgot about it when buying insurance, be sure to remember it now.
Country club, golf course and other memberships
It could be that your husband is the only golfer in the family, and that the club membership is not something you particularly valued during the marriage. However, many clubs require substantial initiation fees to join, as well as annual dues, presenting an asset to divide.
Gifts you gave each other during the marriage
Gifts received from each other while married are marital property, subject to division in divorce. Gifts given before you were wed, such as your engagement ring, are separate property. (Read about the difference between separate and marital property here, and remember: Separate property can lose its separate property status if you commingle it with marital property or vice versa. For example, if you re-title your separately owned condo by adding your husband as a co-owner or if you deposit the inheritance from your parents into a joint bank account with him, then that property will most likely now be considered marital property.)
This includes trademarks, patents, copyrights and royalty rights. While these may not have generated much income during your marriage, that doesn’t mean they won’t in the future. Intellectual property rights should be specifically addressed in a divorce settlement agreement.
If a winning lottery ticket was bought during the marriage, the winnings are marital property.
Money loaned to others, payable to either spouse
For example, if your husband loaned his sister $10,000 during your marriage, the money she’ll pay back to him is subject to division in divorce.
Divorce laws of most states treat pets as property, not family members. Pets may be more commonly assigned to the spouse with a more flexible schedule, and/or who has historically taken care of the animal. If custody of a pet is important to you, make sure your attorney knows to make it a priority.
Photographs and keepsakes
These are literally invaluable assets. With the prevalence of digital photography, it should be no problem for each of you to keep the entire library of recent family photos, but many of us still also have collections of older photographs and negatives. If necessary, make an agreement to share the cost of having them copied. You’ll also need to make arrangements about keepsakes that can’t be duplicated.
This refers to the portion of corporate income that is retained by the corporation rather than paid out as dividends to shareholders. If your husband owns a business, this is one of many things to watch out for.
Depending what time of the year finds you in the thick of divorce settlement negotiations – or if the process spans more than one year – it could be surprisingly easy to overlook a pending or past tax refund.
Term life insurance
Whole life insurance policies with cash value are obviously subject to division, but term policies can also be important to negotiate, especially if yours is a “grey divorce” or if one of you is ill and/or uninsurable.
Travel reward program points
These can make for some nice luxury travel for the spouse that keeps them. Check out my article about who gets the air miles.
There is, to put it mildly, lots to consider, and state laws vary greatly, especially between Community Property and Equitable Distribution States. Fortunately, there is also excellent professional expertise available to work through various financial strategies for dividing each of these types of assets, and to help you be sure that nothing falls through the cracks. Knowing that your divorce settlement leaves no stone unturned, you can turn with confidence to that next chapter you’ve been looking forward to.