Divorce is a complex process, especially when it comes to the division of assets. One of the most critical stages in any divorce case involves dividing the marital assets and debts equitably between the spouses. But what does “equitable” actually mean, and how does the math work in practice?
In this blog, we will explore how assets are divided in a divorce, based on principles from family law. We’ll use an illustrative example, referencing the process explained by family law attorney Kyle Scoresby in his informative video.
Key Steps in Dividing Assets
Before the division of assets, it’s important to follow three crucial steps:
- Identify all Marital Assets
All property and debts that were acquired during the marriage must be identified. This includes everything from real estate to retirement accounts, cars, and even credit card debts. - Categorize Assets as Community or Separate Property
In most jurisdictions, only community property (assets acquired during the marriage) is subject to division. Separate property (assets owned before marriage or acquired through inheritance or gifts) remains with the individual spouse. - Valuing the Assets
Once the assets have been identified and categorized, they must be valued. Accurate valuation ensures that the division is both fair and legally compliant.
After these steps, we move on to the division of community property.
Example of Dividing Assets
Let’s break down an example to illustrate how the division of assets typically works:
The Scenario
Imagine a divorcing couple with the following marital assets and debts:
- House Equity: $50,000
- Boat: $20,000
- Husband’s Truck: $15,000
- Wife’s Car: $20,000
- Credit Card Debt: $15,000
- 401(k) (through the husband’s employment): $100,000
Now, let’s walk through how these assets might be divided.
Division Breakdown
In this scenario, we want to achieve an equitable division, meaning both spouses should end up with the same net value. Here’s one way this could happen:
| Asset/Debt | Wife’s Share | Husband’s Share |
|---|---|---|
| House Equity | $50,000 | $0 |
| Boat | $0 | $20,000 |
| Truck | $0 | $15,000 |
| Car | $20,000 | $0 |
| Credit Card Debt | -$10,000 | -$5,000 |
| 401(k) | $35,000 | $65,000 |
| Total Net Value | $95,000 | $95,000 |
- Step 1: Divide the House
The wife receives the marital home, valued at $50,000 in equity. This is a substantial portion of the marital assets. - Step 2: Allocate Vehicles
The husband keeps the truck, valued at $15,000, while the wife retains her car, worth $20,000. The boat, worth $20,000, is assigned to the husband. - Step 3: Split Credit Card Debt
Credit card debt is divided. The wife takes on $10,000 of the total $15,000, and the husband is responsible for the remaining $5,000. - Step 4: Adjust via 401(k) Distribution
After assigning the above assets, the wife’s net value is $60,000, while the husband’s is $30,000. To balance the division, the wife is awarded $35,000 from the husband’s 401(k), leaving him with $65,000. Now, both parties have $95,000 in total assets after accounting for debt.
The Math Behind Equitable Distribution
- Wife’s Net Calculation:
- House equity: $50,000
- Car: $20,000
- Credit card debt: -$10,000
- 401(k) award: $35,000
Total: $95,000
- Husband’s Net Calculation:
- Truck: $15,000
- Boat: $20,000
- Credit card debt: -$5,000
- Remaining 401(k): $65,000
Total: $95,000
This ensures an equal net value for both spouses, even though each individual asset might not be split 50/50.
Understanding “Equitable” vs. “Equal” Division
It’s important to note that equitable doesn’t always mean equal. In some cases, one spouse may receive more in assets while the other receives more in retirement or other forms of compensation. The goal is fairness, not necessarily an even split of every single asset.
For instance, while the wife receives more physical property in this example (the house and the car), the husband’s larger share of the 401(k) balances the overall distribution. Courts often strive to ensure both parties are left in a relatively equal financial position after the divorce.
Conclusion
Dividing assets in a divorce is a highly detailed and delicate process. It’s crucial to work with experienced legal counsel who can ensure your assets are categorized, valued, and divided fairly. Whether you are the spouse retaining more physical property or the one receiving a larger retirement share, understanding the math behind the division is essential for ensuring an equitable outcome.
Always remember, fair does not mean identical—but it does mean just.
