Going through a divorce can be a stressful experience. Even when the relationship has been falling apart for a long time, negotiating and dividing assets can be exhausting.
In addition to being emotionally challenging, there are many myths when it comes to asset division. Whether you have heard them from an acquaintance or the media, it is always best to talk to a professional about your divorce, so you have the most accurate information.
Here is the truth behind some of the most common asset division myths.
One name on the account means it’s not marital property
Before you can begin negotiating who will get which assets, you and your spouse will need to figure out what assets are marital property and which ones are not.
This myth might make sense from an outsider’s viewpoint. After all, if there is only one name on the account, it would make sense that it belongs to the person named and not the other spouse.
When it comes to marital property, there is more to the decision than the name on the account. You will need to look at when and how the account was created and who contributed to it. Typically, if the account contains things like earnings, interest or dividends generated during the marriage it is marital property. Even if the account was opened prior to the marriage, some of the funds may be marital if they were added to the account during the marriage.
If we get divorced, everything has to be sold
The division of assets in divorce does not mean everything must be liquidated. While it might make sense to withdraw and divide the money in checking account, it does not always make sense to sell houses or cars or cash in retirement accounts. If assets are being divided equally, that does not mean each party will receive exactly half of each asset or debt. Rather, the division is more often achieved by looking at the net value of all the various items being allocated to each party and comparing the total combined value being allocated to each person.
We can’t divide an IRA without paying taxes and early withdrawal penalties
In connection with a divorce it is possible to transfer funds from an IRA or 401k in the name of one spouse to an IRA in the name of the other spouse. This is not classified as an early withdrawal, and no taxes will be owed on the funds unless and until the recipient spouse decides to withdraw the money from the IRA. This can only be done in connection with a divorce. Spouses who are not divorcing cannot divide or realign their retirement accounts in this way.