The process of divorce is undoubtedly challenging for all parties involved. However, you can facilitate this difficult period by maintaining a sense of organization. One pivotal step is enlisting the assistance of a financial expert to guide you through the initial phase: the creation of a marital balance sheet. This balance sheet serves as a comprehensive record of the assets jointly owned by the couple, as well as the collective liabilities that need to be addressed.
The array of assets to be documented on the marital balance sheet encompasses various categories. These include funds held in savings and checking accounts, ownership of vehicles and valuable equipment, and properties such as the primary residence and any vacation homes. Additionally, it is imperative to account for financial instruments like IRAs, 401(k) accounts, pensions, and other retirement savings. Marketable securities should likewise find a place on this ledger. Furthermore, it is advisable to meticulously list personal items of significant worth, such as jewelry, artwork, furniture, and any holdings in private businesses.
On the other side of the equation lie marital liabilities, which encompass an assortment of financial obligations. Among these are credit card debts, student loans, outstanding home mortgages, lines of credit, vehicle loans, and any outstanding loans from retirement accounts. Determining whether individual assets and liabilities are to be included in the marital estate is a complex matter influenced by the jurisdiction's legal framework, varying from state to state.
Assigning accurate values to the cataloged assets and liabilities is a crucial aspect of this process. The values of bank accounts, retirement funds, and debts can typically be extracted from the latest account statements. However, certain assets like real estate, collectibles, and shares in private businesses may necessitate the expertise of an external appraiser to ascertain their true value.
In scenarios where one holds a stake in a closely-held business, liquidation is often not a feasible option. In such instances, consultation with a business valuation specialist becomes paramount in determining the "fair value" of the business. It's important to note that any value not directly associated with tangible assets and identifiable intangibles is categorized as "goodwill," and its treatment can diverge based on the jurisdiction's regulations.
Ultimately, the process hinges on having a qualified HoganTaylor financial expert to decipher what should be encompassed within the marital estate, adhering to specific criteria that align with the prevailing legal standards. While divorce is undoubtedly emotionally taxing, the strategic compilation of a marital balance sheet can offer a pragmatic and structured approach to navigating the complex terrain of asset division and financial settlement.
For additional information on this topic, see our previously written articles about divorce and finances written by Scott Logan, CFP®.
Part 1: Navigating Divorce with a Solutions-Based Mindset
Part 2: Navigating Divorce with a Solutions-Based Mindset
HoganTaylor Wealth
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INFORMATIONAL PURPOSE ONLY. This content is for informational purposes only. This content does not constitute professional advice and should not be relied upon by you or any third party, including to operate or promote your business, secure financing or capital in any form, obtain any regulatory or governmental approvals, or otherwise be used in connection with procuring services or other benefits from any entity. Before making any decision or taking any action, you should consult with professional advisors.
