Wait, what: Half of “his” 401(k) will be mine??

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Wait, what: Half of “his” 401(k) will be mine??

If you take away nothing else from this article, know this: It doesn’t matter whose name is on that bank account or 401(k) account or whatever. When it comes to divorce, unless there was a prior agreement to the contrary, half of that money will be yours.

Of course, I wish it were that simple. In this article, I’d like to explain to you what “separate property tracing” is, because it affects situations like this, where the new question becomes “Half of what?”

I know you’re most interested in the bottom line: You want to get an idea, as soon as you can, of what you can expect in your divorce settlement, especially if you’re the financial out-spouse in the relationship.

I can help. This is my specialty. I’m a CPA, a CERTIFIED FINANCIAL PLANNER^® professional, and a Certified Divorce Financial Analyst^® professional who provides divorce financial counseling for affluent women like you.

What is “separate”?

In what’s known as a community-property state—like Arizona—everything that’s acquired during the marriage becomes what’s called community property. In the case of divorce, it gets split in half. As I mentioned, it doesn’t matter if your name isn’t on that bank statement.

But there are a few notable exceptions, such as gifts and inheritances. If either of you inherits money, that’s yours. It’s not part of the “marital” or “community” property. Unless, of course, you mix this money with that money.

Which gets to the most common scenario: Often, a husband will have a 401(k) that he’d started before the marriage. In that case, what it was worth, right up to the marriage, was his. But over the years, the two of you had “commingled” your common/community money with his original money by making payroll contributions to the account with income earned during the marriage. See how it gets messy?

I’ll stay out of the weeds, but this is what “separate property tracing” is all about. It’s my job, in cases like these, to determine how that 401(k) has changed in value from the date of the marriage to the date of the separation (when the divorce papers were served and accepted). I use special tools, software, and know-how to calculate what percentage of that 401(k) will be his vs. yours, as of the date of separation. See?

So it might be 70/30, with him getting the 70 percent. But you’re entitled to the appreciation (increase in value) of your 30 percent over all those years.

As I’d said, it involves a lot of tricky math and CSI-like forensic accounting, but I can tease out that “magic number” that will start to give you some clarity.

Big bonus: I can also help you craft a plan that helps you realize your dreams for your new life, after divorce. Yes, good dreams. There is light at the end of the tunnel. Trust me. I’m divorced, too.

Separate property tracing doesn’t need to be scary or intimidating. Contact me today and let’s start to put your mind at ease.