Any couple in California going through a divorce knows that property division can oftentimes be complicated, especially when there are a lot of assets involved. Of course, each spouse will want marital assets divided fairly, but in order to do so, the liquidity of assets must be taken into consideration.
For spouses seeking fair marital property division, it may mathematically make sense that if one spouse keeps the house, the other spouse gets a comparable amount in retirement, savings and brokerage accounts. However, if cash flow becomes scarce, it may cause financial problems down the road for the spouse who acquired the house, because that property may not be able to be converted into cash immediately after selling it.
In addition, if the spouse who acquired the house depends on alimony or child support payments to help pay the mortgage, problems may also arise when the payments are scheduled to cease. Aside from the property being a non-liquid asset, it may be emotionally difficult to sell the house if there are children who live there, as any parent wants to provide a stable environment for their kids, especially during a divorce.
A California spouse who owns a business may have a hard time putting a numerical value on the business overall, and if the business does not have potential to turn into cash on the market, it can create financial problems for the spouse who acquired the business as part of the marital property division.
Divorcing couples seeking fair marital asset division with items like a house, a business or retirement accounts, may want to consider speaking with a legally trained professional. With a little guidance, the chances of one spouse ending up illiquid after divorce is less likely, and each individual can then move forward financially.
Source: The Wall Street Journal, “Don’t Let a Divorce Leave You Illiquid,” Ted Jenkin, April 18, 2014