By: Michelle Cortes-Harkins
When going through a divorce, this is usually the first question a couple faces. Many are filled with fear of the unknown. In reality though, how finances are split depends on your chosen divorce method and the laws of the state you live in.
If you are considering divorce, you may be wondering:
To answer any of these questions, you first need to understand the different ways of divorcing.
Litigation: This process means that your divorce is handled by opposing attorneys retained by each spouse. There often is a back and forth or give and take when it comes to how finances are divided. This process can be quite adversarial as the parties are pitted against each other, often resulting in one or both parties feeling as if they didn’t get their fair share. However, if you work with a certified financial divorce analyst, they will help you advocate for your position throughout the process.
Mediation: When you go through a mediated process, there are opportunities to discuss what each person may need as well as explore different options for the division of assets. If you work with a financial neutral in a mediated divorce, they can provide scenarios that show the impact of different division options. The financial neutral won’t provide advice or recommendations, but they can help navigate difficult conversations and come up with creative solutions.
Collaborative: In a collaborative divorce process a certified divorce financial analyst will act as a financial neutral and will meet with both spouses individually to generate ideas for the division of your finances and debts. Collaborative divorce is a team-led process consisting of each spouse’s attorney, as well as mental health professionals and a financial neutral. This process allows each person to express what they feel like their interests (aka needs) are post-divorce. How finances are split is decided as a group considering taxes, liquidity, and interests.
The way your finances are split depends on the way the state you live in views the division of assets. Some states are equitable division states where the entire marital pool of money is split equitably– this doesn’t necessarily mean equal. Everything is divided in a way that is considered ‘fair’ based on state guidelines or factors that are taken into consideration. If you live in a community property state, then any asset that is acquired during the marriage is considered the property of both individuals. These community assets are usually equally divided between the two individuals.
If you are unsure of the way in which you may want your divorce to happen or how your state treats the division of property, reach out to us.