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Common Mistakes in Evaluating Assets and Debt

Assets

Active v. Passive

Some people do not realize that assets do not all fall under one general category. They can often be split up into what are called active and passive assets. Active assets are things that required you, or you and your spouse, to actively grow. A great example would be a small business run by either one, or the both of you. The Philadelphia Business Journal recently wrote an article about the importance of annual business evaluations. One of the reasons it mentioned for getting an evaluation is to know what your business is worth in the event you would need to sell it or leave it after a divorce.

On the other hand, a passive asset is something that does not require effort on your part to continue. These are things such as stocks and bonds. Generally, people believe these assets belong to one spouse or the other if they were obtained prior to the marriage, but this is not always the case with assets that passively appreciate. Passive appreciation is when an asset gains value without any activity on your part. You may be entitled to an equitable share of the appreciation of the asset during the time of the marriage.

Valuation Dates

Failing to take into account when you value your assets could seriously harm you in a dissolution of marriage. Although you may have a valuation on a piece of property, failure to account for improvements on it, or even changes in the market place, might mean that you do not get the full value of the property by the time you reach an agreement with the other party. Even if you got a valuation of an asset right before filing for divorce, the value may still have changed between then and the actual divorce.

Hidden Assets

Hidden assets are those assets that many spouses allege, but have trouble locating. Often enough, they do not exist, but there are many instances when a spouse might be hiding something. A recent Huffington Post article cited a study that indicated 3 out of 10 adults with combined finances hide some assets or purchases from their partner. Although a party may fill out a financial affidavit, this is not always accurate. The best way to determine what assets may be hidden and what they are worth is to look at documents like tax returns and W-2s, or 1099s.

Debt

Credit Card Debt

As much as assets can be miscalculated, so can debt. Credit card debt is what most people are familiar with. Division of credit card debt can be affected by who uses the card and for what purpose (i.e. personal expenses or family expenses). Knowing how much debt is on a particular card, and what purchases were made, can be very important, even when it is not in your name.

Loans

The status of loans is also very important. This is especially true if both parties have previous student loans or housing loans that are being paid off. Calculating the present values of loans, as well as noting whether any of them were consolidated, is very important to a proper evaluation when proceeding with your divorce.

Getting the Help you Need

Collecting accurate information on all of these things is hard enough, but to do it all with the stress of an impending divorce action is nearly impossible. This is why it is important to retain the assistance of experienced family law counsel that can assist you with your divorce. Our attorneys at Mariani Reck Lane, LLC can provide you with professional and experienced legal representation. Call us today at 860-443-5023 to discuss your case.

Assets

Active v. Passive

Some people do not realize that assets do not all fall under one general category. They can often be split up into what are called active and passive assets. Active assets are things that required you, or you and your spouse, to actively grow. A great example would be a small business run by either one, or the both of you. The Philadelphia Business Journal recently wrote an article about the importance of annual business evaluations. One of the reasons it mentioned for getting an evaluation is to know what your business is worth in the event you would need to sell it or leave it after a divorce.

On the other hand, a passive asset is something that does not require effort on your part to continue. These are things such as stocks and bonds. Generally, people believe these assets belong to one spouse or the other if they were obtained prior to the marriage, but this is not always the case with assets that passively appreciate. Passive appreciation is when an asset gains value without any activity on your part. You may be entitled to an equitable share of the appreciation of the asset during the time of the marriage.

Valuation Dates

Failing to take into account when you value your assets could seriously harm you in a dissolution of marriage. Although you may have a valuation on a piece of property, failure to account for improvements on it, or even changes in the market place, might mean that you do not get the full value of the property by the time you reach an agreement with the other party. Even if you got a valuation of an asset right before filing for divorce, the value may still have changed between then and the actual divorce.

Hidden Assets

Hidden assets are those assets that many spouses allege, but have trouble locating. Often enough, they do not exist, but there are many instances when a spouse might be hiding something. A recent Huffington Post article cited a study that indicated 3 out of 10 adults with combined finances hide some assets or purchases from their partner. Although a party may fill out a financial affidavit, this is not always accurate. The best way to determine what assets may be hidden and what they are worth is to look at documents like tax returns and W-2s, or 1099s.

Debt

Credit Card Debt

As much as assets can be miscalculated, so can debt. Credit card debt is what most people are familiar with. Division of credit card debt can be affected by who uses the card and for what purpose (i.e. personal expenses or family expenses). Knowing how much debt is on a particular card, and what purchases were made, can be very important, even when it is not in your name.

Loans

The status of loans is also very important. This is especially true if both parties have previous student loans or housing loans that are being paid off. Calculating the present values of loans, as well as noting whether any of them were consolidated, is very important to a proper evaluation when proceeding with your divorce.

Getting the Help you Need

Collecting accurate information on all of these things is hard enough, but to do it all with the stress of an impending divorce action is nearly impossible. This is why it is important to retain the assistance of experienced family law counsel that can assist you with your divorce. Our attorneys at Mariani Reck Lane, LLC can provide you with professional and experienced legal representation. Call us today at 860-443-5023 to discuss your case.

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