The distribution of assets and the division of debts represent among the most important and challenging aspects of a divorce case. Typically, issues involving property and debt tend to be the most contentious in many divorce cases, after only those matters associated with child custody. With this in mind, there are five key financial dos to bear in mind and following a divorce case:
- Organize all relevant financial records
- Itemize debt
- Document assets
- Understand asset distribution and debt division laws in your state
- Update estate documents and instruments
Organize All Relevant Financial Records
At the commencement of a divorce case, both spouses will need to prepare and submit to the court a document itemizing property and debts. This written submission is made to the court under penalty of perjury.
In order to be prepared to make accurate submissions to the court, and to be able to effectively stake out your position regarding property distribution and debt division in a divorce case, you need to make sure you identify and then organize all-important financial records. Financial records needed for divorce proceedings include everything from bank account statements to tax records (going back at least three years). An experienced divorce lawyer can assist in making certain that you identify and organize all financial records vital to marriage dissolution proceedings.
In addition to organizing all key financial records, you also need to make certain that you itemize all outstanding debt. As part of the debt itemization process, you need to pay particular attention to any debt that you legitimately believe is not jointly owed by both you and your spouse.
Only marital debt – debt incurred during the marriage – is subject to division in divorce proceedings. Any debt you or your spouse garnered before the marriage typically is not subject to division in a divorce case. With that said, if marital assets were used to pay down a preexisting debt, the amount of money from the marriage that paid down a preexisting debt does become involved in the overall asset distribution and debt division in a divorce case.
You also need to thoroughly document assets. This can involve a number of different processes:
- Depending on the nature of particular assets, you may want to take photos or even video them.
- Certain assets may also require an appraisal as part of the property documentation process. For example, the marital residence (your home) will likely need to be appraised. In addition, any jewelry thought to be more valuable may need to be appraised as well.
Understand Asset Distribution and Debt Division Laws in Your State
In a considerable majority of divorce cases, the parties are wise to seek legal counsel. Even if you do hire a divorce attorney, you are wise to have a basic understanding of the key provisions of fundamental divorce laws in your state. This includes laws relating to child custody, child support, and the distribution of assets, and the division of debts.
There are two schemes used by different states to address property and debt in a divorce case:
- Equitable division of property standard
- Division pursuant to community property standard
Most states in the country utilize the equitable division of property standard in divorce cases. Pursuant to this standard, assets, and debts in a divorce case are to be divided between the parties in a manner that is equitable and fair based on the specific facts and circumstances of the case.
The community property standard is used in about a dozen states in the country. With that said, these states include California and Texas. When the community property standard is in place, the court presumes the assets and debts accumulated during a marriage should be divided equally between the divorcing spouses. Good cause must be demonstrated to deviate from the equal division of assets and debts.
Update Estate Documents and Instruments
Finally, at the conclusion of a divorce case, you need to update your estate documents and instrument. This includes everything from your last will and testament to your power of attorney for healthcare
As mentioned previously, the distribution of assets and division of debts in a divorce case can be challenging. This includes legal complexities associated with this task. Consequently, when assets and debts are an issue in a case, legal representation is recommended.
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