Is My Divorce Uncontested Checklist: Dividing Assets and Debts
In order for your divorce to be uncontested, you and your spouse need to agree on every aspect of your divorce. When it comes to the allocation of assets and debt, here is what must be agreed upon prior to hiring your uncontested divorce lawyer:
Houses, Condos, Real Estate.
If you have a house (or condo, real estate, etc.), you have to figure out what's going to happen with it. Your options would be, Husband gets it, Wife gets it, house is sold, or, although probably not ideal but I have seen it a few times, both parties walk away and allow it to get into foreclosure. If one of the parties is taking the home (the "Husband gets it" or "Wife gets it" scenario), then you have to figure out how the non-taking party will get their marital equity out of the home. If there is no equity, which is unfortunately somewhat common these days, then it's easy, there is no marital equity to divide so the non-taking party just leaves. If there is equity in the home, then the parties need to figure out what an appropriate buyout amount would be and how that buyout will be paid to the non-taking party. Often times this can be done when the party who is taking the home refinances the mortgage (which is generally done to remove the non-taking party's name from the home loan).
What if you're unable to get the cash necessary to pay a cash buyout? When the party taking the home is unable to get the liquid cash necessary to pay the non-taking party a buyout, the parties may avoid a cash buyout by instead agreeing to an uneven distribution of the marital equity of different asset. A simple example helps clarify this: let's say Husband and Wife own a home with $100,000 in marital equity, that Husband has an IRA worth $50,000, and that Wife has a 401(k) worth $150,000. For our example, we'll assume all of these were completely accrued during the course of the marriage. The parties agree that they want to divide the marital assets equally, and that Husband will remain in the home. If it turns out that Husband can't get $50,000 cash to buyout Wife's one-half share of the home, the parties in this example could instead agree that Husband takes the home outright ($100,000) and his IRA outright ($50,000) and Wife takes the entirety of her 401(k). Then, as you can see, without a single dollar changing hands, each party will receive $150,000 in marital assets/equity, which is the 50/50 split that the parties in this example desired.
Cars, Boats, Planes.
Parties in an uncontested divorce must determine who gets what vehicle(s) and who pays for the loans, if any, associated with those cars, boats, etc. Further, the parties will need to come to an agreement as to whether or not jointly-titled vehicle loans will need to be refinanced in order to remove the non-taking party's name from the note.
Are there joint accounts? If so, how are the contents of those joint accounts going to be divided? I have had many uncontested divorce cases where one party has gotten a new bank account in their sole name, and the other party has continued to use the joint account as his or her account. In this scenario, assuming there is no division of the account contents, we can simply direct the party who is not using or taking the joint account post-dissolution to remove his or her name from that joint account. Of course, the party with the account in his or her sole name takes their account post-dissolution. If the parties are dividing the contents of the joint account and thereafter closing the account, that is fine too, but you will need to determine what percentage of the joint account each party will take as his or her sole and separate property.
Retirement and Investment Accounts.
You will need to figure out who is getting which investments and who is taking what retirement accounts. If the parties are dividing a retirement account, they will want to determine if a Qualified Domestic Relations Order (QDRO), will be necessary to facilitate the division of the account. If a QDRO is required, the Marital Settlement Agreement should outline how the costs associated with drafting and administering the QDRO will be split between the parties.
Household Goods, Furniture, Personal Items.
I find that parties going through an uncontested divorce have usually been separated for awhile, and often already live in separate residences. In these situations, the parties will have generally already divided the household items, furniture, etc. If that division has already occurred, most parties will be comfortable enough with a settlement provision simply saying something along the lines of, "Wife is awarded everything in her possession and/or in her residence and Husband is awarded everything in his possession and/or in his residence." If the parties still have co-mingled household items, furniture, and personal items, then the parties should have a list of what each party will take after the divorce. The descriptions of these items and furniture, which you will provide to your attorney, should be specific enough so that if there is a dispute in the future, the item description clearly articulates which household good or piece of furniture is being identified.
The parties in an uncontested divorce will need to decide who is paying what loans. Jointly-titled loans provide an additional layer of complexity, as the parties will need to address whether refinancing of those loans will be required to remove the non-taking party's name from the note and, if so, how long the taking party will have to complete that refinance process.
Who is going to pay which credit cards? If you have credit cards where both parties are co-borrowers, I am of the opinion that those cards should be given prioritizing in being paid off, so that they can be cancelled or, alternatively, so that the non-responsible party can be removed as a co-borrower from the card. I have had clients and their spouse elect to each take out a loan or a credit card in their respective sole name to each pay off one-half of a joint credit card. This allows the debt to be apportioned in the divorce and provides that neither party will be adversely affected by the other party's failure to pay their 50% share.
First and foremost, let's clear up a common misconception about tax status and divorce. I don't know where some of these attorneys get their information, but I can't tell you how many times I've had clients tell me that a previous attorney they spoke with told them that their tax status was determined by how many days of the tax year they were married, or whether the marriage lasted past July 1st, or some other arbitrary calculation. Here is the rule: your tax status is determined on December 31st, period. If you are divorced on December 30, 2014, you cannot file a married tax return for tax year 2014. If you're divorced on January 1, 2015, you have the option to file married returns for 2014. Easy as that. Parties who are divorcing towards the end of the year often have me "sit" on their divorce well past when I would normally submit the case for finalizing, because they are wanting to push back the date of divorce to after the new year, so that they can file joint returns.
Couples looking for an uncontested divorce need to consider things they may have done throughout the year that could lead to tax ramifications on one party or the other. For example, let's say in February that Husband and Wife decided to buy a house. In order to purchase this home, Husband took an early withdraw from his 401k. The year goes on and the parties decide to divorce. Their divorce is finalized in October and nothing is mentioned about the taxes that will have to be paid on Husband's 401(k) withdraw. The parties, being single on December 31st, file single tax returns. Husband learns that his tax liability includes the taxes from the withdraw from the 401(k). The resolution to this scenario, whatever it may end up being, is not important to communicating the message that the parties must consider (and address in the Settlement Agreement) what "actions," like a 401(k) withdraw, may have occurred during the course of the marriage that will affect the tax liability of one of the parties.
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