Divorce Asset Division: Keep It, Divide It, or Sell It?
When you sit down across the negotiating table with your spouse, the two of you need to figure out a fair and equitable way to divide your assets. Easier said than done! You’ll both have to process a lot of difficult emotions, and you’ll probably have a lot of questions too. Like, how do you divide a house? Who’s going to get the RV? What about all the jewelry gifted over the years? In this article we offer some useful perspective on these difficult topics.
Your house is likely to be your biggest asset and is probably the most emotion-laden asset on the negotiation table aside from child custody. Your options are to try to negotiate for the house or to sell it and split the gain. There may also be an option to “divide it.” Each option offers benefits and drawbacks.
You may want to keep the house in order to maintain stability, especially if you have children. However, in order to keep the home, you’ll need to find a way to buy out your spouse’s share of the equity, and then you’ll need to shoulder the mortgage, property tax, insurance, and utilities on your own. Don’t try to fight for the home if it’s not something you can truly afford to keep on a single salary.
In many cases, selling the house makes sense unless it’s underwater. This way, you and your spouse can both walk away with the equity. This will allow you to find a new home that fits into your post-divorce budget.
In rare cases, you may be able to convince your spouse to “divide” the house. This often means one spouse continues to live in the house (usually with the kids), while the other spouse contributes to the mortgage. This can work if one spouse wants to continue investing in the house as an asset, or if you both agree it’s important to keep the house for the sake of the kids.
If you and your spouse each have a separate vehicle, then it might be easy to agree that you each get to keep your own car. Things get more challenging if one person’s vehicle is much more valuable than the other’s, or if you have additional vehicles or big toys, like an RV, a jet ski, or a four-wheeler.
Most cars that are not collectibles tend to lose value over time. It isn’t unusual for a car to be worth less than its loan. If this is the case, you may be able to keep your car simply by agreeing to take over the loan.
If you want to keep a car you’ve paid off, you may need to “buy out” your spouse even if you are the primary driver of the car. As long as it’s part of your marital estate (meaning you bought it while you were married), your spouse probably has some claim to the equity it represents.
This is true of any additional vehicles you want to keep. If an RV, jet ski, or the old Chevy Firebird your spouse has been fixing up has a positive net value, then one spouse will have to buy the other out or “trade” assets to make up the difference.
If you and your spouse have vehicles of similar value, keep things simple and agree to let each spouse keep their own car and be responsible for loan payments.
Selling vehicles can be tricky, because most of the time you won’t get nearly what you paid for them. Is it worth selling a car you love if you can only get $3,500 for it? Consider whether selling vehicles is worth what you can get for them.
Other Big Ticket Items
Do you own a significant amount of jewelry or high-end art? Does your spouse love their guitar collection signed by famous musicians? You’ll need to figure out a way to divide these items as well.
Many big-ticket items are purchased out of love and have a strong emotional connection for one spouse. If you want to keep the art collection, get ready to negotiate for it. Determine the current value of the art and offer your spouse other assets to match that value.
Don’t be surprised if your spouse argues that the asset is much more valuable than you claim so he can try to get more from you. This may require the services of a specialist who can properly value the items.
If both spouses want the same assets, it may be prudent to find a way to divide them. It may break your heart to lose some of your jewelry, but focus on keeping the most important pieces and let your spouse take what you are willing to give up. Asking to divide assets is also a negotiation strategy. Your spouse might hope that you will offer more than the assets are worth just to keep the entire collection.
Before you decide to sell assets, make sure you have a good idea of what they are worth. It doesn’t matter what you paid for that painting. It only matters what someone else will pay for it. Certain assets can be difficult to sell. Can you, for example, sell that piece of land in Arizona quickly or efficiently, or will it take years to find a buyer at the price you want? These are all things to take into consideration as you negotiate.
Find the Right Attorney
You should always come to the divorce negotiation table with a clear strategy, a deep understanding of what assets you own, and knowledge of what they are worth. Your divorce attorney can help you formulate your strategy and determine the full value of your estate (with the help of experts).
Have questions about how to negotiate for a specific asset? We recommend signing up for a Second Saturday Divorce Workshop in your area.
This article is reprinted with permission from the Women's Institute for Financial Education (WIFE.org), creator of the Second Saturday Divorce Workshops. Founded in 1988, WIFE is a non-profit organization dedicated to providing financial education for women. Copyright 2019.