WHAT IS IT? Understanding Your Assets in Divorce: Part 1—Cash Accounts

One of the most common concerns during divorce is, "What do we actually own, and how will it be divided?"

Gathering financial information can be time-consuming and emotionally draining, especially when you discover accounts and benefits that sound more like alphabet soup than assets. You may encounter retirement accounts such as 401(k)s, pensions, and annuities. Others may have more complex assets such as restricted stock units (RSUs), stock options, deferred compensation plans, employee stock purchase plans (ESPPs), or health savings accounts (HSAs).

For the next series of blog posts, I am going to address the basics of some of these, how they impact your divorce and how they may be valued or divided. This is an overview, so please remember to consult your financial advisor, CPA or CDFA for more guidance.

It is important to know that an account titled in one spouse's name is not necessarily that spouse's property alone. Whether an asset is considered marital or separate property depends on the facts and the laws of your state.

Let's start with the simplest assets to identify and divide: checking accounts, savings accounts, money market accounts, certificates of deposit (CDs), and cash held in brokerage accounts. These assets are generally worth the balance shown on your most recent statement or banking app. Cash accounts are generally among the easiest assets to divide and usually can be transferred without immediate tax consequences.

When gathering information, please note in whose name it is titled (yours, your spouse or joint) and the last 4 digits of the account number. Recording the last four digits helps distinguish between multiple accounts at the same institution and makes it easier to track assets throughout the divorce process.

Your list might look like this:

               BOA checking x1234– joint                                    2,000

               BOA savings x5678– joint                                      4,000

               BOA CD x7716-joint                                               10,000

               Santander checking x 9321– husband            1,000

               Santander savings x2287-husband                  3,000

               CitiBank checking x4321-wife                             5,000

               Fidelity MM x8765-joint                                          9,000

The total value of these cash accounts is $34,000. If the goal is an equal division, each spouse would receive $17,000. It is not necessary to divide each account in half to accomplish this. One spouse might keep the accounts already titled in their name ($4,000), while the other spouse keeps the accounts titled in their name ($5,000). The joint accounts could then be divided with $13,000 allocated to one spouse and $12,000 allocated to the other.

Keep in mind that account balances change daily. The balance shown on a statement is simply a snapshot in time, and your attorney, mediator, or financial professional can help determine the appropriate valuation date for your case.

Cash accounts are usually the easiest assets to identify, value, and divide. Unfortunately, not every asset is that straightforward.

In the next post, we'll discuss brokerage and investment accounts, including why two accounts with the same balance may not have the same after-tax value.