Dividing Non-Liquid Assets in Divorce

In a divorce, non-liquid assets such as your marital home, vehicles, antiques, or interests in a family business often need to be divided. These assets are not easily or quickly converted into cash, and their value can be challenging to predict. Additionally, selling non-liquid assets may result in a significant loss of value, making their division more complex.

Dividing these assets involves several key steps: determining their value, assessing how much of that value is marital, and deciding how to equitably distribute or offset the marital share. Often, one spouse retains ownership of a non-liquid asset by compensating the other with a payout plan or through an exchange of other marital assets. Contrary to popular belief, immediate liquidation of assets–”fire sales”– is rare. It is important to focus on the larger ticket items, rather than spending too much time on lower-valued items.

Some things to consider when dividing non-liquid assets are:

Dividing Non-Liquid Assets

Prioritizing Your Interests

When thinking about how to divide assets, one effective strategy is to make a comprehensive list of the marital assets and identify which items you value most. We then reconcile the list with what the other person wants. Often, couples find that they agree on the majority of items, significantly narrowing the scope of disputes. Out of a hundred items, you may only be fighting about three, and we can come up with a mechanism to resolve those issues. Interestingly, many individuals don’t want to keep possessions that carry negative memories. You’d be surprised how often one party says, “I don’t care. Let them keep it.” By determining where you agree on who gets what, and focusing only on these few contentious items, couples can save time, energy, and money.

The last thing that you want to do is to pay attorneys to divide the pots and pans.

Valuation of Assets

You can’t divide anything until you have an idea of value, so that is always the first step in the process. Once you determine value, you have to assess how much of that value is marital, meaning how much of the value was attained during your marriage and is subject to division. Depending on the asset, we may rely on financial experts, like a business valuation expert, or have an item appraised.

Appraisals and Differing Opinions

For higher-value items like real estate, art, or antiques, appraisals can become a sticking point. Disputes often arise when expert appraisers provide widely differing valuations, making it difficult to determine a fair division. In one recent case, a couple was disputing a lake house, with real estate experts nearly $1 million apart in estimated value. The judge couldn’t reconcile it and ultimately resolved the issue by ordering the property sold, using the sale price as the true fair market value. While this approach may not be ideal for everyone, it provides a definitive resolution when agreement isn’t possible.

Exchanging Assets

It is very unlikely that both spouses are going to continue to have an ongoing interest in each asset. Once you have determined the value of the marital estate assets, you can split them. It doesn’t have to be the same asset that you’re transferring – you can trade another asset to satisfy your spouse’s interest. For example, you might trade the value of your retirement account for the marital value of the family business. If there are no assets to trade, you can offer a lump sum payout or payout stream over a period of time to satisfy that interest.

Personal Effects

When considering non-liquid assets, most personal effects, like clothing, will not be included. If you have unique assets with significant value, like a million-dollar wine collection, that will likely go on the balance sheet, while personal items like engagement rings may be excluded if they were exchanged before you were married. Ultimately, couples are advised to amicably resolve disputes about minor assets. Litigation over personal effects can be costly and inefficient. The last thing that you want to do is to pay attorneys to divide the pots and pans.

While we won’t focus on every small item, we will consider the replacement value of items, such as the other spouse keeping all the furniture. If you are left with no furniture, you have to consider how much it is going to cost you to go out and replace it. You’ll both need furniture. If neither spouse is interested in specific assets, they can be sold. However, selling items can come with a financial caveat. The resale value of personal property is often significantly lower than its original price, sometimes cents on the dollar.

Final Word

Dividing non-liquid assets during a divorce can be a complex process, but with careful planning, clear priorities, and open communication, it is possible to achieve a fair and equitable resolution. By focusing on accurate valuation, leveraging expert appraisals, and seeking creative solutions such as asset exchanges or payout plans, couples can address even the most challenging assets. Prioritizing cooperation and narrowing disputes not only saves time and money but also allows both parties to move forward with a clearer sense of financial stability.

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