Dealing with complex financial issues is rarely easy, even in the best of times. The divorce process is, what we’ll just call something less than the best of times. That can make the work of getting to a fair division of property with your spouse even more difficult. It’s a necessary difficulty though and doing the work of protecting your assets in divorce now might eventually pay off.
When we advise clients to “value everything”, we aren’t making sentimental references. We are referring to the importance of placing a concrete dollar value on everything you own.
This means getting a value on real estate, starting with your home, and including any other land you and your spouse may own together. It includes the value of your possessions. Were either of you collectors of art, antiques, sports memorabilia, or anything else that’s likely to grow in value? An independent expert should take a look and determine its value.
The financial assets have to be valued and this can get complicated. Do either of you own stock options at work that will vest at some point in the future? Did either one of you bring any investments into the marriage that were pooled into a joint portfolio? Those have to be valued.
Perhaps you or your spouse are self-employed. The business has a value, and don’t assume that the value will simply be whatever the annual gross revenue stream is. That’s a great starting point, but it doesn’t factor in several other areas that make a business valuable.
Does the business have physical assets? Most anything that requires a storefront probably will. Current inventory might not be contributing to gross income today, but it will tomorrow–and it was purchased while you were married. The same might go for any equipment or intellectual property that was developed. Invoices that have been issued, but not paid, will add to the value of the business.
Calculating the value of assets like investments and business holdings is complex and it can easily become an area of dispute between the spouses during a divorce settlement. That’s why it’s important that your lawyer ensure you are connected with a good forensic analyst. It’s imperative that your side of the story gets told in court by an acknowledged subject matter expert.
Know the Origins of Everything
The assignment of a dollar value is just the beginning. The asset in question must be defined as marital property or separate property. The distinction is significant. Separate property belongs to you. Marital property is subject to Tennessee’s equitable distribution laws–meaning you will either have to share the asset in question with your spouse or at least give them something of equivalent value in return.
There can be a lot of money riding on the distinctions between marital property and separate property and the way to protect yourself is to know the origins of each and every asset you own.
Separate property is that which you owned prior to marriage or inherited. Marital property is that which you accumulated after the wedding date. That can sound straightforward enough but implementing these principles in the real world can still get complicated and underscore the need to protect your assets.
Let’s say you are working at the same job you were at when you were single. You’ve been there 17 years and your 401(k) balance is healthy. The account is in your name, and you started it prior to being married. So, it should be separate property, right? Not entirely.
The first thing we need to do is dispel a common misconception–the fact the account is exclusively in your name will not mean anything in court. The amount of money you and your spouse earned after being married is all marital property. Some of that money went into the 401(k) account. Ergo, those funds are marital property.
The next assumption might be to assume you can just look at the account balance on the date you get married, with that being the total amount of separate property. We’re getting closer to the truth now, but we’re not quite there yet.
In this case, the mitigating factors might work in your favor. Investment accounts build up money because of interest. The more that’s in the account, the more interest is accumulated. Interest that was built up after the marriage only could do so because of money that was there before the marriage.
The lesson here is not to just concede that everything in your 401(k) that added up after the marriage must be shared equally. An astute forensic analyst might be able to assess how much interest should really be separate property and give testimony to that effect.
That’s why you have to know where every asset you owned had its origins. That’s not a finishing point, but a starting point that can have significant ripple effects across the settlement.
Be Transparent With Everything
We can’t emphasize enough how important it is to be completely transparent with all your assets. If you have a complex financial portfolio, it might seem tempting to hide money or try to underreport income. This is a very bad idea on at least two different fronts.
For one, your credibility with the court can be gravely damaged when the attempted deceit is revealed. You may well suffer financially in the final settlement. If child custody and visitation is at stake, being caught red-handed at fraud won’t exactly make a good impression with the judge.
Then there’s the criminal liability. Your financial statements are a part of official court proceedings. Deliberately filing incorrect information can be considered contempt of court. If it was given under oath, a perjury charge might be forthcoming. Either sanction comes with fines and possible jail time.
So, it’s not a good idea. Furthermore, if you suspect your spouse is trying to hide assets, it’s important to communicate that suspicion to your attorneys and the forensic analysts. Your tip might be an important lead in helping them uncover what your spouse is trying to keep hidden.
When you and your legal team have been attentive to detail, transparency can be your ally in a court of law. Casey, Simmons & Bryant, PLLC has been diligently helping Tennessee couples work through divorce settlements for over 30 years. We know the questions to ask, and the documentation to secure. We know how important it is to combine legal knowledge with a persistent fighting spirit, all aimed at helping you in your settlement. Call us today at (731) 256-0023 or contact us online to set up an initial consultation.