Divorce: Splitting Assets and Debts

You need to know what you and your spouse are worth together and what you're worth on your own. It sound like a big job but it comes down to a simple equation: Net Worth = Assets - Liabilities.

It does get a little more complicated. There are three categories of assets:

Joint Assets
These are accounts that you have built together including savings accounts, money market accounts, mutual funds or a co-owned business.

Your Assets
These are accounts that you opened before you were married and have been the only contributor to. Things that you owned before you married are also included in your assets.

Spouse's Assets
These are anything your spouse opened or owned before the marriage including an individual IRA or assets inherited from family members.

You're both entitled to a portion of each other's retirement benefits that were earned during marriage. In order to get part of your spouse's pension or 401(k), you'll need a lawyer to draw up a qualified domestic relations order, or QDRO (pronounced "quadro"). There are several options, including a one-time payment, monthly payments at retirement, or a lump-sum payment that you transfer directly into your own IRA, where your money will continue to grow tax-free until you retire. IRAs can be divided without a QDRO, as long as the division is clearly specified in your divorce agreement.

Be sure to consider the future value of these assets. If you give up pension, for example, in exchange for keeping the house or up-front money, you may feel short-changed when you reach retirement age. A pension can be very valuable down the road.

You may need to appraise real estate, artwork and collectibles to determine their value. If you both own a business, you will need to value it to determine the amount needed to buy out the other spouse's share of the business.