This guide is to help you be as prepared as possible for what information you will typically be asked to provide during the divorce mediation or collaborative process. During this understandably stressful time having as much knowledge as possible regarding what to expect can hopefully ease some of the anxiety that can accompany this time in your life. All of this preparation will help you to make informed and sound decisions about your financial futures when you are living separately.
Equitable Distribution of Marital Assets
New York is an equitable distribution state, which means that assets acquired during the marriage will be divided equitably between the spouses. Equitable does not necessarily mean equal and in divorce mediation or the collaborative process, we help you talk about and negotiate the distribution of marital assets that will meet your respective needs as much as possible and depending on the particular circumstances.
A. House and other real property
For most couples, the largest asset is their marital residence, whether it is a house, co-op or condo. You will be asked to provide the most recent mortgage statement and/or a home equity line of credit (“HELOC”) statement. If one spouse is buying out the other spouse’s share of the equity in the marital residence, you will also need to obtain comparable sales listings similar to your residence from usually at least two different real estate brokers who are very familiar with your neighborhood to determine the fair market value of the marital residence. An appraisal of the marital residence is another option. Equity is generally determined by subtracting the existing balance on the mortgage and/or HELOC from the fair market value of the house.
B. Checking, Savings and Brokerage accounts
You will be asked to bring in the latest statements of any checking, savings, or investment accounts. These accounts may be in your joint or individual names. Regardless of how they are titled, if they were acquired during the marriage, you and your spouse will decide how they should be divided.
C. Retirement Accounts and Pension Plans
There are different types of retirement plans, the most common are: 401(k) plans, Individual Retirement Plans (IRAs), Deferred Compensation Plans, and pensions. A pension is different from the other retirement plans because a pension will pay out a monthly amount upon retirement. The other plans are comprised of employee and/or employer contributions that are invested to be withdrawn as needed following retirement. You will need to provide the latest statements of these retirement plans. The portion of these plans that have accrued during the marriage will be subject to equitable distribution. Any part of these plans that were accrued prior to the marriage are considered separate property.
Different scenarios may include the following: one spouse may be the sole owner of a business or have a partnership interest in the business with third parties or both spouses may own the business together or one spouse may be the sole owner of the business, but the other spouse works in the business or the other spouse is not involved directly in the business. A business is generally considered a marital asset. If it is decided to have the business valued by a financial professional, you will generally need to provide the business accounts, tax returns, list of business assets (real property and equipment), debts and business agreements. All of this will be discussed in the mediation or collaborative process to determine what is necessary regarding the business and how it will be handled.
E. Children’s Custodial and Education Accounts
One of the issues that will be discussed is how accounts set up for the children will be used. If you have a checking or savings account set up for the children, will that account be used for purchase of a car, for example, or for other personal expenses of the children? Alternatively, you may decide to earmark the custodial accounts for the children’s college education. Some accounts such as 529 accounts are specifically set up to pay for college. A review of the latest statements for the children will impact decisions both parents will make for their children’s non-educational expenses as well as for their college education.
F. Life Insurance Policies
You will need to provide the cover pages of any life insurance policies you have. You may be required to have life insurance to cover your child support or spousal support obligations in the event of your death.
G. Health Insurance
If you have children under 21 years of age, health insurance coverage for them is required. The health insurance may be provided by an employer or purchased through New York State’s health insurance marketplace. You will be asked to bring in the front and back of your health insurance card and, if needed, a list of the premiums charged for individuals, parent with child, or a family plan.
Just as assets are divided, spouses will also need to decide how debts acquired during the marriage will also be paid off. Such debts may include credit card debts, student loans, personal loans or IRS debts, among others. Current statements reflecting these debts will need to be provided.
I. Tax Returns, W-2s, 1099s
The most recent tax returns, W-2s and 1099s will need to be provided to determine whether or not child support or spousal support will be paid by one spouse to the other spouse. Calculations will be prepared for you pursuant to guidelines in NY. Spousal or child support obligations will also be discussed for any possible deviations up or down depending on your particular circumstances.
One of the most important tasks you will be asked to complete is to determine what your monthly expenses will be once you live separately. We will provide you with a detailed budget that includes categories such as housing, utilities, food, clothing, child expenses, auto and recreation expenses. We then compare your expenses to your take home pay (your income after taxes) and any child or spousal support you will be receiving. If there is a deficit for one or both spouses, our aim is to try to equalize those deficits and to help each of you figure out how you can manage your budget going forward. We will provide assistance in helping with budget forms and understanding of expenses.
While collecting all of this information may feel overwhelming at first, as experienced divorce mediators and collaborative attorneys we will help walk you through this process with the goal of providing you with all of the help that you need to have the best outcome for you and your family going forward. We work step by step and we are always mindful that this is a challenging time. We strive always to make the process as comfortable as possible.