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How Are Assets Divided In A Divorce?

Divorce has an emotional, financial and physical impact on families. However, for those in the high-asset category or who have established retirement accounts and purchased property, the couple may find the financial consequences surprising.

Therefore, these couples should understand asset division during a divorce.

Community property versus equitable division

In equitable distribution states, a judge does not have to give each spouse assets that have the same value. However, in community property states, like Louisiana, a judge splits all marital property directly down the middle, so both spouses receive 50% of the value of the marital assets.

Separate versus marital assets

All the assets the spouses accrued prior to the marriage are separate assets and remain theirs. Therefore, if the wife has a retirement account prior to the marriage, her pre-marital contributions remain hers after the divorce. However, any interest or dividends accrued on those contributions as well as any new contributions she adds during the marriage are community property and subject to division.

In addition, any real estate, investments or other valuable assets that one spouse acquired prior to the marriage belongs to that spouse indefinitely, but any asset purchased during the marriage, even if only one spouse purchased it, is community property and is divisible.

Possible solutions

Liquidating a retirement account may result in penalties, fees and taxes, so it is always best to keep these accounts intact if possible. In addition, one spouse may want to keep the family home. Therefore, a judge will typically follow any agreement made by the parties. Debt is also divided, so if one party wants a specific asset, he or she may accept more debt to balance the asset distribution.

If you have specific assets you want to keep, prepare to negotiate.