In a community property state, like California, the law provides that all assets a married couple accumulated during their marriage belongs equally to them both. When they divorce, those assets are to be divided 50/50. At least that is how it should be done in theory.
In reality, the 50/50 division is almost a myth. There are factors that affect how this division is done. Often, couples who do this division on their own without professional help or advice realize later that what they thought was an equal division actually benefited one of them much more than the other.
Collaborative Divorce Helps Equalize the Division of Assets
One example of how a division of assets that appears to be a 50/50 division but is not involves a comparison between a retirement account and equity in the family home that is sold. On paper, without evaluation, the assets appear to be equal in value. One of the spouses may say, “You take the equity in the house, and I will take the retirement account.” Seems fair? Not really.
The equity in the house is taxed differently than the funds in the retirement account. If the exchange is not handled properly, it may turn out that if the one who gets the retirement account takes cash out of the account, the taxes substantially reduce its value.
In a Collaborative Divorce, a team of divorce professionals work with the couple. This includes a financial professional that will look carefully at all the assets and explain the real value of an asset to the couple after considering all the tax advantages and drawbacks.
This way, the couple is making an informed decision about how to divide their community property, so the division is fair. This is essentially what the purpose of the 50/50 division of community property is meant to achieve.
Heberger & Company – Divorce Financial Professionals
At Heberger & Company, an Accountancy Corporation, we are CPAs that assist couples going through a Collaborative Divorce. We analyze each asset, its value, and the tax consequences that each party will face if given a particular asset.