Divorce is considered one of the five most significant traumatic events in life. They are personal and messy and are exceedingly more complicated when children are involved.
As a parent, your goal needs to be to walk out of the divorce knowing you can successfully provide for your children. Child support and its enforcement are significant factors in this, and so is the accurate division of assets.
To divide everything accurately, they need to be correctly valued by professionals through the court. This process may seem like a lot of extra time and work, but what happens to your home, assets, and pension will be the base of how you provide for your children after the divorce. Making sure it’s done right will give your children the BEST chance at having the same support as they had before the divorce.
How It Starts
It starts when assets are valued on the date you file for divorce. If any outside factors such as changing real estate conditions alter an asset’s value between then and when it gets distributed, both spouses will receive evenly distributed value changes. However, if the asset changes in value due to the action of one of the spouses, they will receive any gain or loss in value while the other spouse sees no change in their portion.
Who Keeps the Home?
Without children, the court will want to immediately sell the home and split the profit. When there are children involved, the court will want you, the custodial parent, to keep the house so the children deal with as little change as possible. They didn’t ask for this divorce, so bottom line, they need to be affected as little as possible.
Sometimes though, there aren’t enough other assets for the custodial parent to keep the home, forcing them to sell. How soon the court will want the house sold largely depends on the age of the children and how much a sudden move would affect them:
The court will usually order the home to sell immediately if the children are around 3 to 5 years old. It’s believed that children that young are more resilient to changes because they don’t have the same attachments to neighbors, schools, or the house itself.
Primary/ Middle School
Children in grade school or middle school not only have stronger attachments to everything around them, but their routines will be disrupted if they suddenly have to move out of the home they’ve lived in their whole life.
The court will want the home to sell at a time that is best for the children, usually after the school year, when their lives wouldn’t be interrupted, and they would be getting ready to transition into a new grade, classroom, and even school.
On the other hand, high school children will prompt the court to wait a long time to sell the home. High school students usually have their own responsibilities that will be uprooted, including classes, extracurricular activities, and jobs.
Many of these responsibilities extend beyond the school year, so there is never a good time to sell the home, prompting the court to wait.
Valuation of Assets- The Appraisal
People aren’t good at valuing their assets. They often look at them through rose-colored glasses, which is why it’s vital to have an unbiased professional look at them. Both spouses can agree to estimate the value of assets, but the Divorce Court wants everything to be as precise as possible.
A certified real estate appraiser can value property at a low cost, or a realtor will do it for free if they get to sell the home. A CPA, tax attorney, or business appraiser can value business assets.
Bringing in these professionals can seem daunting, but they will help you get the most accurate value for your home and other assets. Utilize their knowledge so that you can set up the best life for yourself and your children after you finalize the divorce.
Pensions, annuities, IRAs, and Keoghs are all divided between the two spouses. The value of 401Ks, Keoghs, and IRAs are seen easily in a balance sheet, but it’s more challenging to value a pension or annuity.
In its simplest sense, the value of a pension is the amount of money it would take to purchase a life insurance policy that would yield the same benefit. Once that value is found, you have to factor in the anticipated tax consequences of distributing it between the two spouses.
What is a Qualified Domestic Relations Order (QDRO)?
It’s great that they can divide the pension, but until recently, you had been assuming you’d benefit from it for a long time. What about all the benefits your ex will continue to receive? What if you can’t buy out your share right now?
In 1988, The Divorce Reform Act allowed for spouses to become participants in the pension plan. A QDRO comes from the Family Court, directing the pension plan administrator to separate a percentage for the other spouse and continue giving them that percentage.
Valuing your home, assets, and pension can be a tiring process, but it’s vital to do it right so you can take care of your family as best as you can. When divorcing, two spouses can agree on the value of assets without professional valuation, but a guess isn’t good enough when it comes to taking care of your children. Accurately valuing everything can provide your children with a stable home and the tools you need to take care of them.