Dissolving your marriage is a tough process. Not only is it an emotional struggle, but it can also impact your finances, too. The outcome of your divorce may affect everything from your monthly budget to your taxes. The main aspect of the split that influences your financial life is the asset division process.
Dividing and distributing marital assets can be confusing, grueling and contentious. It helps to have an understanding of how the process works. Here is a look at some of the items you may need to divide and the options available.
1. The home
How you handle the family home depends largely on whether either of you has any attachment to it. If someone wants to keep the home, that spouse may be able to buy out the other. This is a viable option if the spouse has enough cash for a buyout or good enough credit to qualify for a new mortgage.
Another strategy is to simply sell the property and split the proceeds – if you have equity. If you sell your real estate at a loss, you will need to figure out who is responsible for paying any remaining amount on the mortgage. You could also pursue a short sale.
2. The car
If you own a car with your spouse, it can be complex to handle in a divorce. There are two main ways to go about dividing a vehicle. First, you can sell it and split the profit. Secondly, one of you can keep the car and pay the other one half of what the car is worth.
3. The 401(k)
The best way to split up a 401(k) is by obtaining a Qualified Domestic Relations Order. A QDRO is a document that details the manner in which you will split the retirement plan. Getting a QDRO is necessary for avoiding penalties and taxes for early distributions.