How Do We Divide Our Assets and Debts in Divorce?

Your attorney can help you with a plan for dividing property and debt, but here are three important steps to help you on the path to a successful division of assets and debts:

  1. Write down all property and all debts.

Making a list is the first step of dividing everything fairly. Here’s a list to get you started thinking through your own finances:

  • Real property – your home, land, investment properties
  • Other property – Furniture, jewelry, cash, technology, automobiles, recreational vehicles
  • Wage earnings
  • Investments – stocks in an individual account, Roth IRA, 401K
  • Health Saving Accounts
  • Pensions
  • Mortgage
  • Student Loans
  • Credit Card Debt
  • Automobile Loan
  • Loans from family members
  1. Label each as community property or separate property
  • Community property – assets, income, or debts earned or acquired during the marriage.
  • Separate property – property owned before the marriage, property inherited or gifted to one part during the marriage, money from the rent or sale of a separate property, money earned while legally or physically separated from the spouse, and items given from one spouse to the other with the intention of designating it as separate property.
  • Common question: What do we do with an asset that can’t be divided physically? For example, do we have to sell the house in order to divide the money?  The answer is that each spouse has to get assets equivalent in value, so in lieu of selling the house, one spouse may keep the house and the other would get the value of half of that asset.
  1. Place a value on each asset and debt.

In preparing for a divorce, it may be helpful to see if you and your spouse have the same estimation of the value of assets and debts or if there is a large disparity. For your list, make an estimate of the value of each item.

  • Be aware that some items may have more value than you realize. For example, a pension plan can be very valuable and special rules apply to pension plans. In this situation, consulting with an attorney on the value and division of the pension plan can be important.