Divorce can present a minefield of issues. The division of assets is often one of those areas that add another layer of complexity to the process.  How to address the equitable distribution of community property is one of the primary issues in a divorce and dividing the equity that has been earned over time. As a couple going through divorce, you need to be aware of the essential principles of equity division.

The basic principle is that community equity and debts are divided equally. In California, the concept extends to separate property, where assets traced back to a separate source warrant reimbursement. However, this seemingly straightforward process becomes nuanced when trying to offset other assets, such as retirement funds.

One common scenario involves a spouse buying out the other’s interest in a house. This can be achieved through trading assets, like retirement accounts, but caution is advised due to potential tax consequences. This involves the need for careful consideration, especially when contemplating the sale of real property, as the spouse retaining the house becomes responsible for associated taxes and fees.

Retaining a retirement account instead of real estate also means that the Party retaining a retirement account will not be able to invade it until they retire unless they pay taxes and fees associated with an early withdrawal.  While it is common for couples to offset values and split the difference in equity, the potential tax implications must be weighed. Even seemingly straightforward trades can have financial implications that need to be navigated wisely.

You should always be aware of the significance of equity in larger assets like houses, real estate, and retirement accounts. But while these may be the focal points of equity division, the fact is equity applies to all marital assets with value. Couples often grapple with determining the equitable distribution of items like furniture and automobiles, underlining the importance of clear communication and fair negotiation.

The division of equity in divorce involves a multifaceted process that demands careful consideration of financial implications and tax consequences. Couples are advised to approach the process with transparency, open communication, and perhaps seek professional guidance to ensure a fair and equitable distribution of assets. As you navigate this challenging terrain, understanding the complexities of dividing equity can empower you to make informed decisions that pave the way for a more amicable separation.

The Kim Mediation and Law Center is located at 3701 Wilshire Blvd. Suite 508 in Los Angeles, CA. You may schedule an appointment by calling 213-352-1000 or visit www.kimmediationandlaw.com