How do we analyze how to divide property and debt in a divorce?
We use a balance sheet that lists the property and debts of the marital partnership. The house, the 401(k), the cars and anything else of significant value go in the top portion as assets. The mortgage, the car notes, the credit card balances, and any other debts go in the bottom portion as liabilities.
The assets are totaled and so are the liabilities. We then subtract the liabilities from the assets. The difference is the net worth number and it goes at the bottom. Usually, the net worth is more than zero but sometimes the debts are more than the value of the property and the couple has a negative net worth.
There are two more columns after that. One is for the wife and one is for the husband. We use these columns to show who is getting what property and who is taking on what debts. We use those two columns to experiment with different ways of dividing the property and allocating the debts.
At the very bottom, we show which spouse is coming out ahead and how much cash they would need to transfer to the other spouse to make things come out equal.
Usually, we add a column that has the Bates number of the source document where the figure can be found so everyone can verify the numbers are correct.
