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How to Split These 7 Assets During a Divorce

By Maurie Backman - Dec 7, 2017 at 10:00AM

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Dissolving a marriage is never easy. Here's how to divvy up the various things you own.

A woman looking upset with a man in the background


Getting divorced can be more than just an emotional experience; it can impact everything from your taxes to your monthly budget. If you're in the process of getting divorced, you'll no doubt have to go through the potentially grueling process of splitting up the assets you and your soon-to-be former spouse have acquired. Here are a few specific items you'll need to figure out how to divvy them up.

A house with landscaping


1. Your home

If neither you or your spouse has a particular attachment to your home, then there's a fairly easy solution here: You can sell your property, divide the proceeds, and move on. That, however, assumes you have equity in your home. In some cases, you might have to sell your home at a loss and determine who will be responsible for paying the remaining mortgage amount. Another option is to go the short sale route, but that can be complicated.

If you're in a situation where one of you wants to keep the home rather than sell it, there's always the option to have one spouse buy out the other person's half. This is a viable solution if one party has the cash to fund a buyout, or can qualify for a new mortgage individually. However, it also means you'll need a clear assessment of what your home is actually worth, keeping in mind that the amount you and your spouse paid for it doesn't necessarily reflect its current value.

A black car on a driveway


2. Your car

If you and your spouse own a car together and you're both vying for it, things could get complicated -- especially since you can't exactly cut it in half. Your best bet, therefore, is to split the value of that vehicle down the middle.

Say the book value of your car is $10,000. You then have two options: Sell the car and divide the proceeds, or have one person keep the car but pay the other party for his or her share. So if, for example, you're the one who gets to keep that car worth $10,000, you may need to pay your former spouse $5,000 to do so.

Lamp next to a tan couch and a small white table


3. Your furniture and household items

Building a life together means acquiring a fair amount of furniture and household items. So when the time comes to split those assets up, your best bet is to take inventory, determine the value of each item, and divide it fairly so that you each come away with a reasonably equal share.

If your divorce is amicable, you can aim to work things out so that you each end up with the items you really want. Say you absolutely adore your dining room set, your spouse really wants your living room furniture, and both are worth similar amounts. In that case, you might as well each take what you want and call it even.

The same holds true for smaller household items. If you're an avid cook and have a dozen or so kitchen gadgets worth $2,000 in total, you can ask for those in exchange for granting your spouse the $2,000 TV you own together.

A blue and yellow painting hanging above a dark gray couch


4. Your artwork and collectibles

Divvying up artwork and collectibles can be tricky because of the sentimental value involved. If you can't agree on a way to split up your collection fairly, your best bet might be to sell everything off and split the proceeds. If you don't want to go that route, then you'll need to hire an appraiser to see how much each piece of your inventory is worth. From there, you can divide up your pieces based on their respective values and your own preferences. For example, if you and your spouse each have a favorite painting, and it turns out both are worth roughly $2,000, you can agree to call it even and walk away with what you want.

401k in gold letters on a wooden background


5. Your 401(k)

Apportioning a 401(k) can be tricky, so it's crucial to go about the process correctly. And the best way to do so is to get a Qualified Domestic Relations Order (QDRO), which is a legal document that outlines the way an employer-sponsored retirement plan will be split. The benefit of a QDRO is that it helps you avoid taxes and penalties that might otherwise stem from taking early distributions from your plan.

Imagine you have a 401(k) in your name, of which your spouse is entitled to half. Your spouse might choose to roll his or her share of the money into another plan, or leave his or her share in your account and take withdrawals when you retire. He or she might also opt for a cash payment. Either way, your QDRO should outline the specifics of how your spouse will collect his or her share of your plan assets, keeping in mind that should your spouse choose to take a lump-sum payout, it will typically involve getting approval from your plan administrator.

Egg labeled IRA in a nest


6. Your IRA

Unlike 401(k)s, IRAs do not require a Qualified Domestic Relations Order to allocate account assets. Rather, funds in an IRA are split according to the divorce agreement at play.

If you need to transfer funds to your spouse as part of your agreement, you can either move money directly into his or her existing account, or set up a new IRA for your spouse and then transfer the funds over. Either way, it's critical that the funds be moved as a transfer, and not a distribution, to avoid taxes and potential penalties.

Investment statement with calculator


7. Your nonqualified brokerage account

Some couples hold the bulk of their investment assets in retirement accounts. But if you have a traditional brokerage account, you'll need to prepare to split that up as well. You can start by making a list of your individual holdings and seeing not just what each is worth today but what you paid for it. That's because if you or your spouse opts to sell a given asset, you'll need to account for capital gains, which can eat away at your proceeds.

Once you sort out the above, you'll have the option to liquidate your portfolio and divvy up the cash proceeds you receive or split your actual holdings based on their respective values. Keep in mind, however, that assets currently worth less than what you initially paid for them have value, too. That's because you're allowed to use investment losses to offset gains (and, in some cases, income) for tax purposes. If you choose to each retain specific securities, be sure to factor the benefit you or your spouse will derive from prospective losses into the equation.

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