Step 3: How Should The Asset Be Divided?

One you know whether an asset is community or separate property (or a combination of both) and its value, division of the property is simply a question of makes sense for the family. Here are some examples.

1. A house can be sold and its net equity divided. It can also be awarded to one spouse who receives the entire equity and buys the other one out through a cash payment or in exchange for something of equal value. If spouses are unable to agree, the Court will generally order the home to be sold. But what happens if the house is upside down? A house that has no equity in it generally won’t result in a cash payment or buyout unless the home has such sentimental value to one spouse that he or she is willing to pay to keep it. Such homes either have to be kept by one spouse who wants it in exchange for indemnifying the other from the loan or the home will have to be sold. A house that is in distressed condition or significantly upside down in value generally goes through a short-sale or, in the worse case scenario, a foreclosure.

2. A business cannot be divided without significant difficulty. Therefore, almost without exception, once a business is valued, the spouse who keeps it has to buy the other spouse out. The terms of the buyout vary from case to case. In the higher asset Orange County divorce cases, the buyout can be paid at once or through the exchange of other property (for example, real estate, bank accounts or deferred compensation plans such as 401(k) or pensions). In most cases, the buyout will result in a payment plan and the terms may include interest. Do not assume that just because you own a business that it has a “value” that entitles your spouse to money. That is not always the case especially in situations where the business is purely a service oriented one that heavily on your time and effort and not on the value of the businesses’ assets or goodwill. Similarly, the spouse that doesn’t operate the business should not simply take the word of his or her spouse that the business has no value.

3. Bank accounts are generally divided as of the date of separation. For example, if an account has $50,000.00 in it at the time the couple separates, that money (unless part of the money is separate property) should be divided $25,000.00 to each immediately. This gives each spouse the ability to do with that money as they please and prevents one spouse to have an unfair financial advantage over the other.

4. 401(k) and pension plans of significant value are generally divided by a Qualified Domestic Relations Order, which is an order created by an attorney and submitted to the 401(k) or pension plan provider for approval. Once approved, the Plan provider will distribute or roll over the non-participating spouse’s 50% community property interest to that spouse.

5. In most Orange County divorce cases, the division of cars is simply a matter of each spouse keeping their own car. However, this may not be practical if one car has more equity and value than the other. In such an instance, the spouse who receives the car with the greatest net value (total worth minus the debt) must buy the other one out through a cash payment or the division of another asset.

Farzad Family Law are experienced divorce lawyers in Orange County and can help you understand the how, when, and why of property division in your Orange County divorce case. Call or email us today for advice.

B. Robert Farzad
FARZAD FAMILY LAW, APC
Orange County Divorce & Family Law Attorneys
1851 E. 1st Street, Suite 1150
Santa Ana, CA 92705
Telephone: (714) 937-1193
Facsimile: (714) 937-1192

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