Divorce Diaries: Lessons From the Trenches
Welcome to Divorce Diaries, where host Cary Jacobson, attorney and mediator brings you real stories, hard truths, and practical advice on navigating divorce and family law. Whether you're going through it, considering it, or just curious, this is your place for clarity, confidence, and resilience.
Divorce Diaries: Lessons From the Trenches
EP #8: Dividing Assets During Divorce
Unlock the secrets of equitable asset division in divorce as host Cary Jacobson, attorney and mediator, guides you through one of the most challenging aspects of marital separation: dividing assets. Ever wondered how your assets would be categorized if you were to part ways with your spouse? Cary demystifies the distinction between marital and separate property, and explore how premarital assets, gifts, and inheritances play into the equation. With insights into the strategic use of pre-nuptial and post-nuptial agreements, you'll discover how to safeguard your interests and minimize conflict, making the divorce journey a bit smoother.
Visit jacobsonworkshop.com to learn more.
The only time I have experienced a scenario where a judge has divided assets outside of what would normally be the 50-50 is because one spouse was hiding money or used money and it couldn't be accounted for. So basically, what they did was add that pot of money back into the equation and then divide it.
Speaker 2:Welcome to Divorce Diaries, where attorney Keri Jacobson brings you real stories, hard truths and practical advice on navigating divorce and family law. Whether you're going through it, considering it or just curious, this is your place for clarity, confidence and resilience.
Speaker 3:Well, welcome back to Divorce Diaries, charlie McDermott co-hosting today with Keri Jacobson. Keri, how are you doing?
Speaker 1:I'm doing well. How are you?
Speaker 3:I'm doing terrific. Yeah, looking forward to another awesome episode. Boy, that last episode, as I mentioned, and for your listeners who are considering divorce, you know and want to just be prepared ahead of time and know what we're getting ourselves into at navigating alimony episode that you did is definitely a must watch and or listen to. So a great job on that. And you know you just keep raising the bar. So for this episode you are talking about dividing assets. Are you ready?
Speaker 1:I am.
Speaker 3:All right, love it, love it. So let's start with. What does property division mean in the context of divorce?
Speaker 1:So when we're talking about property division in divorce, we're really talking about dividing the assets that the couple has acquired, those things that they've purchased over the time that they've been together. So it could be their house, it could be cars, it could be stuff in their house and even those other intangibles such as bank accounts and retirement accounts, and even businesses, and even.
Speaker 3:So then, what's the difference between marital and separate property?
Speaker 1:So in Maryland the way that we define marital property is anything that either party in the relationship has acquired during the term of the marriage. So it doesn't matter how that asset is titled. So it doesn't matter how that asset is titled, so it doesn't matter if it's in one spouse's name, the other spouse's name or even if it's jointly titled. As long as it was earned or accumulated during the marriage itself, it is considered to be a marital asset. There are some exclusions to that, some of that being assets that are premarital, so things that someone came into the marriage with. Many times we see this, as you know. Probably the most common example is your retirement account. You've been working for a few years and maybe your account has $50,000 at it. When you get married, that $50,000 would be a premarital asset and would be separate property. But what can happen is you continue to work at that job after you're married, so for the next 10 years, and now you've earned another $100,000.
Speaker 1:So that extra $100,000 that you've earned during and saved during the marriage would be marital property, so it can be partially marital and partially non-marital. Another thing that is often excluded is if you received a gift from a third party, whether it's your parents. Um, you know, someone else has given you a financial gift or maybe it's an asset and those things that you may otherwise inherit from someone. So if you were to receive, as an example, you know, a financial gift or an inheritance from your parents when they pass away, that inheritance in theory is separate property, unless you commingle it in an account with other mineral assets.
Speaker 3:So it can get complicated. Wow. And then, of course, you have pre-nuptial agreements. Do you see much of that in these? Absolutely yes.
Speaker 1:So there are assets that can be excluded by way of the pre or post postnuptial agreement. We do a lot of those for clients. So if you've specifically carved out assets in those pre and postnups, that's going to define what's going to be marital and what's going to be non marital?
Speaker 3:what's going to be marital and what's going to be non-marital. Okay, okay, well, so I I guess it's important to and you said your firm does pre-nuptial and post-nuptial, so so I've never heard that term before. So that's after you're married, all of a sudden you wake up one day and go should have done it maybe before I got married, but let's do it now. Is that kind?
Speaker 1:of. Well, it can be, um, it could be one that you plan to do it and you just didn't get it off. You didn't check it off the checklist before you got there. So we have people that you know need to post up in that scenarios. And then I've had other scenarios. I honestly think most of the time it's because one of the spouses has started a business that is the most common time we see a postnup, but I've also had issues where one spouse may have had different spending issues throughout the marriage.
Speaker 1:And they want to put some protection there, issues where one spouse may be like getting into gambling debt and they want to protect the other from, you know, those kinds of debts. So there's lots of scenarios why a post-nob may come into play.
Speaker 3:Hmm, okay, interesting, all right. So then, how do courts decide on a fair division of assets?
Speaker 1:So here in Maryland we are considered to be an equitable distribution state. So in theory, what that means is a judge is supposed to take into consideration all the different things that are going on at the time of the divorce. All the different things that are going on at the time of the divorce, basically how much, how many assets each party has in their own name. That's going to be separate. How the assets or if you have, like, the inheritance on your you know, on your side of that sort of thing there's lots of different things they take are supposed to take into consideration.
Speaker 1:But in practice what I honestly have seen over, you know, over a decade of doing this, at the end of the day it comes down to, marital property is going to most likely be split 50-50. Even though there are other factors, you know, such as fault, that can play a role in theory, they almost never do. The only time I have experienced a scenario where a judge has divided assets outside of what would normally be the 50-50 is because one spouse was hiding money or, you know, used money and it couldn't be accounted for. So basically, what they did was add that pot of money back into the equation and then divide it. So really, it's in those scenarios where there's some dissipation, as we refer to it, of assets would be where I've seen a scenario where it's not 50-50.
Speaker 3:Okay, okay, and so dividing complex assets. I know you touched on the retirement accounts, but complex assets like businesses, pensions, investments, how are they divided?
Speaker 1:Each one's kind of done a little bit differently. So when we're dealing with a business, many times we may need to have that business evaluated. You know, have an appraiser come in to determine how much is that business worth. You know, have an appraiser come in to determine how much is that business worth. Sometimes it is really just sweat equity or you know the person's goodwill and it's really not going to be able to be sold to a third party without that person in the business. So it doesn't have a lot of extrinsic value itself. But then you know there are other times where the business can really run without that individual and it's worth something and could be sold to a third party. So in those scenarios you know it's potentially dividing the value of that business. The question is where do the funds come from? And so really looking at what the options are, you know to pay that spouse out for their share of the business.
Speaker 3:Wow yeah.
Speaker 1:When we're dealing with retirement accounts and pensions. It depends on the type of accounts that we're dealing with as to how they are divided, but there can be. The biggest piece to take away is that the division of retirement accounts is not taxable as long as it's going from one retirement account to another, so neither spouse will actually have to pay taxes on the division of that asset.
Speaker 3:Okay, okay. Well, that's good, one of the positives of getting into work. All right, let's talk about the role appraisers or financial experts play.
Speaker 1:Yeah. So, as I mentioned, you know, definitely important when we have a business. You know definitely important when we have a business. It can be important when we're dealing with property, real property. So if the intention is to divide the value of the house and one spouse wants to stay in the house, then we need to determine how much the house is worth, and so in that scenario we often will rely on an appraiser to determine what that value is. And sometimes you know if they're going to sell the house, then we don't necessarily need the appraiser because it's whatever the house is sold for right.
Speaker 1:Every once in a while, though it doesn't come up as often there may be scenarios where personal property within a home needs to be valued. But I think one misconception is most people think it's going to be how much I purchased these assets for. You know, did I pay $10,000 for the furniture? That's probably not what the value would be. When we're dividing. It's really like fast sale, flea market value. How much would you get if you put it on Craigslist, facebook, marketplace or whatever else you? Know, if you were to sell it today.
Speaker 3:Okay, okay. So how can individuals protect their interests during property settlement discussions?
Speaker 1:First and foremost is to do an inventory of all of the assets, really determine what everything is I don't necessarily mean the furniture in the house, but the house, the cars, your bank accounts, your brokerage accounts, your retirement accounts, all of those big assets. And then going back to that non-marital portion, did you come into the marriage with any value in those accounts? So ideally you can go back to old statements. You know to find that retirement statement that shows you had the $50, statements you know to find that retirement statement that shows you had the $50,000 in the account prior to the marriage. So really digging through and looking for those that documentation can be really helpful. And then back to the pre and postnup. You know having having one to begin with is ideal.
Speaker 3:OK, good tip there. Speaking of which, any tips on what you should avoid when dividing assets.
Speaker 1:I think one of the most common things people that comes up is trading taxable assets for non-taxable assets, and so most couples that we work with the majority of their wealth is in their retirement accounts and in their equity in the house, right? And so what often happens is one spouse wants to stay in the house, and so now they need to pay the other spouse a portion of their equity, right. Well, where are they going to get the money to?
Speaker 3:do that.
Speaker 1:Right, and so their options at this point are refinance and take out a new mortgage, which right now is probably going to be substantially higher than it was before, at a higher interest rate, or they may either not take a portion of the other spouse's retirement or pay, you know, do some sort of exchange of the retirement assets for the house.
Speaker 1:What doesn't happen is thinking through the fact that when you are going to pull that money out of the retirement account, you're going to have to pay taxes on it. So you know, taking that into the equation and bumping it up to equate to what the house value would be is one thing to really just be mindful of. Make sure you're trading, you know, the same dollars for dollars.
Speaker 3:Yeah, yeah, that's a really good point. Okay, how about our listeners who are trying to prepare for property division discussions? Any tips there?
Speaker 1:So, again, going back to making that list of all of the assets, also recognizing, you know, not every spouse has been the person in charge of the finances in the relationship, so some of that's going to be doing some investigation Right.
Speaker 1:If you have not been handling the money in the in the family, you may not know what there is. So the very first step is starting to learn what those assets are, and that can be asking your spouse if things are going well and communication is, you know, effective. But if not, going back through old records, finding tax returns, that's probably a great source of information because it's going to show if you've received interest from an account. It's going to have a lot of information in there. Maybe you don't necessarily understand it, but you can take it to a professional and they can assist. Looking at you know, did you have any reason to believe that either of you had an account at any particular time? Any source of information and documentation is going to be helpful in learning more about those assets. And so that's the first piece really diving in and seeing what there is.
Speaker 3:To begin with, Okay, Okay, so Carrie any tools, resources that you can recommend professionals for your listeners.
Speaker 1:So you're going to hear a lot of the same recommendations that I gave last time. The first is on our website, we do have templates for your assets so you can really look at what your assets are and also the liabilities your mortgage, your car payment, those types of things. And then, as far as professionals, again, I'm going to make a plug for the CDFAs that I work with, because they can really be a great source of information and assistance when, you know, trying to determine what the best way to divide assets are so that you don't have, you know, as high tax implications.
Speaker 3:Terrific, terrific. And yes, just to reinforce what Carrie just said, and we will say it over and over again, because the resources that you and your team, Kerry, provide are phenomenal, and they're on JacobsonFamilyLawcom and not only specific to what we covered today, but there are other resources on there as well. So, and feel free to share these episodes with friends, anyone that can use both the information that Carrie's sharing as well as the resources on the website. Again, it's jacobsonfamilylawcom. Carrie, once again, you knocked it out of the park. Thank you for your time today and we will see you in the next episode.
Speaker 2:You as well, thank you day and we will see you in the next episode. You as well, thank you. Thanks for joining us today on this episode of Divorce Diaries. Remember, every journey is unique, but you don't have to navigate it alone. Visit JacobsonFamilyLawcom or call 443-726-4912 for support and guidance.