Property Division on Divorce: Marital Assets, Valuation, and Strategic Allocation

Most states follow the doctrine of equitable distribution divorce, which does not mandate a mathematical 50/50 split. Instead, the court looks for a "fair" distribution based on several factors. Conversely, in Community Property states, assets acquired during the marriage are typically divided equally.

Even in states that lean toward equal division, the "equal" part only applies to marital property. The classification of an asset as separate can fundamentally shift the math in your favor. SJKP LLP focuses on aggressive classification to remove assets from the "divisible" pot before the court even begins its calculations.

Generally, separate property includes assets owned prior to the marriage, as well as inheritances and gifts received individually during the marriage. However, the protection of separate property is fragile.

Note on Commingling: If you deposit a separate inheritance into a joint bank account used for household expenses, that asset has been "commingled." Once separate property is mixed with marital funds, the court may reclassify the entire amount as marital property.

If a separate asset (like a pre-marital business or house) increases in value during the marriage due to the "active efforts" of either spouse, that appreciation may be considered marital property. We apply a clinical "tracing" methodology to separate the original value from the marital growth.

For business owners, the "value" of the company is rarely what it says on the tax returns. We utilize several methods to determine the marital interest:

• Market Approach: Comparing the business to similar companies sold recently.
• Income Approach: Calculating the present value of future cash flows.
• Asset-Based Approach: Summing the fair market value of all company assets.

In the modern landscape, property division on divorce must account for "invisible" assets. Cryptocurrency, NFTs, and digital royalties are frequently overlooked or undervalued. SJKP LLP utilizes digital forensic audits to track wallet addresses and ensure these high-volatility assets are accounted for at their peak value.

You cannot simply "split" a 401(k) or a pension by writing it in the divorce decree. A Qualified Domestic Relations Order (QDRO) is a specific legal document required by the plan administrator to divide the account without triggering massive tax penalties or early withdrawal fees.

A dollar in a checking account is not equal to a dollar in a traditional IRA.

Net Value = Market Value - (Debt + Potential Capital Gains Tax)

If you take the house and your spouse takes the 401(k), you may be taking on a massive future tax liability that your spouse is avoiding. We perform a "Tax Exposure Audit" on every proposed distribution.

We look for "red flags" such as:

• Sudden decreases in business revenue.
• Large cash withdrawals from joint accounts.
• Transferring assets to "friends" or "family" for "safe keeping."
• Opening offshore or undisclosed digital wallets.

SJKP LLP employs forensic accountants to perform a lifestyle analysis. If your spouse’s reported income is $100k, but their lifestyle costs $300k, there is a "hidden source" that belongs in the marital pot.