What Factors Are Considered During The Division Of Assets And Debts In A Divorce?
Fault for the demise of the marriage is not a factor in determining the division of marital assets. Maine requires the court to divide the marital assets and assign responsible for debts in terms that are fair and equitable. The court has wide discretion in determining how property is divided and takes into consideration the relative contribution towards this acquisition of property. The typical process is to divide the assets on a 50/50 basis, but this is not required by law.
In dividing the assets and debts in a divorce, the first step is to take inventory of the assets that comprise the marital estate. The law dictates that anything acquired during the course of the marriage creates a legal presumption that it is a marital asset. The exception to this rule is property acquired by inheritance, acquisition of property by gift , or acquisition of property excluded by agreement between the spouses. . Determining the marital versus non-marital status of property can become complex if a party engages in conduct that transmutes the property from non-marital to marital. One example would be placing the funds from an inheritance into an account owned jointly by the spouses. The act of taking non-marital funds and placing them into a joint account would generally change the character of the funds from non-marital to marital.
Once the marital estate assets are identified, each party will be assigned a certain portion of those assets. If there is consensus amongst the parties, that will eliminate a piece of litigation. If there is no consensus, then it may be necessary to involve other people in order to establish values. For example, if parties are unable to establish the value of marital real estate, then a real estate appraiser may be necessary to establish a fair market value based upon the particular circumstances of the market and location of the property.
The value of 401(k)s, IRAs, and other financial accounts is easy to determine because there will be account statements that specify the values. Pension monies through defined benefit plans can be divided equally in two different ways. First is based upon a formula which includes the length of the marriage and the length of participation in the defined benefit plan to determine the marital portion. The distribution of the pension would be made at a later time when the parties retire. A defined pension plan could be valued as of the date of the divorce with the use of a qualified financial professional. This value could be used to offset other assets in the overall distribution. .
Once the marital estate has been identified and the values have been ascertained, the court would set aside to the respective parties the identified items and if the values are equal, a fair and equal division is achieved. If the values are not equal, then one spouse would pay the other the difference in order to equalize the distribution.
If this court is going to divide a 401(k) plan or other qualified retirement account, the process will be done utilizing a qualified domestic relations order. The qualified domestic relations order is a separate order issued by the court that directs the plan administrator to separate the accounts and establish an account for each party. This would eliminate any tax consequence and penalty unless a spouse chooses to withdraw funds prior to their retirement. Assuming that the spouses do not withdraw funds from that account, they would retain the qualified status and would not be subject to state or federal taxes or any penalties.
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