Splitting assets and debts

You need to know what you and your spouse are worth together and what you’re worth on your own. It sounds like a big job but it comes down to a simple equation: Net Worth = Assets – Liabilities.

It does get a little more complicated. There are three categories of assets:

Joint assets

These are accounts that you have built together including savings accounts, money market accounts, mutual funds or a co-owned business.

Your assets

These are accounts that you opened before you were married and have been the only contributor to. Things that you owned before you married are also included in your assets.

Spouse’s assets

These are anything your spouse opened or owned before the marriage including an individual IRA or assets inherited from family members.

You’re both entitled to a portion of each other’s retirement benefits that were earned during marriage. In order to get part of your spouse’s pension or 401(k), you’ll need a lawyer to draw up a qualified domestic relations order, or QDRO (pronounced “quadro”).

There are several options, including a one-time payment, monthly payments at retirement, or a lump-sum payment that you transfer directly into your own IRA, where your money will continue to grow tax-free until you retire. IRAs can be divided without a QDRO, as long as the division is clearly specified in your divorce agreement.

Be sure to consider the future value of these assets. If you give up pension, for example, in exchange for keeping the house or up-front money, you may feel short-changed when you reach retirement age. A pension can be very valuable down the road.

You may need to appraise real estate, artwork and collectibles to determine their value. If you both own a business, you will need to value it to determine the amount needed to buy out the other spouse’s share of the business.

Information you will need

Gather your paperwork into one container, preferably mobile, that will help you be prepared and organised. Included should be:

Tax returns for the past five years

Retirement account records for both spouses

You and your spouse’s paycheque stubs to show current income and withholdings

You and your spouse’s employee benefit statements

Copies of all insurance policies including life, health, homeowners and auto

Current statements for all bank and brokerage accounts

Mutual fund statements

Copy of the deed or lease agreement on your home

Statements on all outstanding loans, including your mortgage and credit cards

Employer stock option plans

Copies of wills and trusts

Copies of powers of attorney

Receipts for major purchases

A copy of your estate plan

Copies of birth certificates and marriage licenses

Depending on what is being contested, you may also want to keep records for the following: A prioritised list of assets you want to keep. Your children’s records, including how much time you spend with them, the activities you do together, and the expenses associated with their upbringing.