Most people going through divorce have a general idea that assets get split. What they don't realize is how complicated that split can get when there's real money involved.
How is property divided in divorce when you're dealing with retirement accounts, business interests, stock options, and multiple properties? That's a different conversation from dividing a checking account and the furniture.
I work with clients who have spent decades building wealth. They come to me worried that they're going to lose assets they're entitled to, or end up with a settlement that looks fair on the surface but costs them money for years afterward.
The division process matters. Getting it wrong is expensive.
Marital Property vs. Separate Property
Before anything gets divided, you have to figure out what's actually on the table.
Marital property is generally everything acquired during the marriage. Doesn't matter whose name is on it. If you bought a house together, that's marital. If your spouse's paycheck went into an account with only their name on it, that's still marital.
Same with retirement contributions made during the marriage, investments purchased with marital funds, and businesses built while you were married.
Separate property is what each person brought into the marriage, plus inheritances and gifts received individually. In theory, that stays with the original owner.
Here's where it gets messy. Separate property can become marital property if it gets mixed together.
Someone inherits $200,000 and deposits it into a joint account that both spouses use. That inheritance may have just become marital property.
A retirement account that existed before the marriage but kept getting funded during the marriage? Part marital, part separate. Drawing that line requires going back through years of records.
What Gets Divided in High-Asset Divorces
When there's significant wealth, the list of assets to divide gets long.
Real estate. The family home is usually the obvious one, but there may also be vacation properties, rental units, or land. Each needs to be valued, and you have to decide who keeps what or whether something gets sold.
Retirement accounts. 401(k)s, IRAs, pensions, deferred compensation. For a lot of couples, this is where most of the money sits. Dividing these accounts has its own rules, which I'll get into below.
Business interests. If one spouse owns a business or has a partnership stake, that ownership has value. Figuring out what it's worth is often contentious.
Investments. Brokerage accounts, stock portfolios, stock options, restricted stock units. These all need to be valued and divided, and each comes with different tax treatment.
Other assets. Life insurance policies with cash value, club memberships, intellectual property, collections, vehicles. I've seen cases where frequent flyer miles became a sticking point.
The goal is to get a complete picture before dividing anything. You can't split assets fairly if you don't know what exists.
Dividing Retirement Accounts: Why QDROs Matter
Retirement accounts are tricky. You can't just withdraw half the money and hand it over. If you try that, you'll trigger taxes and early withdrawal penalties. The IRS doesn't care that you're getting divorced.
For employer-sponsored plans like 401(k)s and pensions, you need a Qualified Domestic Relations Order.
A QDRO (people say "quad-row") is a legal document that tells the plan administrator how to divide the account between spouses.
Without a properly drafted QDRO, the plan administrator won't release any funds to the non-employee spouse. Your divorce decree can say whatever it wants about who gets what. The plan administrator only cares about the QDRO.
Here's what trips people up. The QDRO has to meet the specific plan's requirements. Every plan is a little different.
A generic template might get rejected. I've seen cases where someone thought the QDRO was handled, only to find out months later that it was never approved by the plan.
Meanwhile, the account kept changing in value, and the division they agreed to no longer matched reality.
Pensions add another layer. With a 401(k), you're dividing an account balance. With a pension, you're dividing a future income stream.
The QDRO needs to specify how that works. Does the non-employee spouse get their own separate benefit? Do both spouses share the payments when the employee retires?
What happens if the employee dies before retirement? These details have to be in the QDRO, or the non-employee spouse could end up with nothing.
IRAs don't require a QDRO, but the transfer still needs to be done correctly. It has to be processed as a "transfer incident to divorce" to avoid taxes and penalties. That means the divorce decree has to spell it out, and the custodian has to handle it properly.
Steps to Getting Property Division Right
Get a complete inventory. List every asset and every debt. Bank accounts, retirement plans, real estate, vehicles, business interests, insurance policies, credit cards, mortgages, loans. If you're not sure what exists, that's a red flag. A forensic accountant can help uncover what's not being disclosed.
Value everything accurately. A house is worth what an appraiser says, not what Zillow shows. A business needs a proper valuation. Retirement accounts need current statements. Stock options need to be analyzed for what's vested versus unvested. Getting values wrong means the division will be wrong.
Understand the tax implications. A $500,000 brokerage account and a $500,000 retirement account are not the same thing. One gets taxed at capital gains rates when you sell. The other gets taxed as ordinary income when you withdraw. A fair settlement accounts for these differences.
Don't forget debt. Marital debt gets divided too. Credit cards, mortgages, car loans, lines of credit. Make sure you know the full picture before agreeing to anything.
Handle QDROs properly. Get the QDRO drafted, submitted to the plan for pre-approval, signed by the court, and then submitted again for final processing. Don't assume it's done until you have confirmation from the plan administrator.
Common Mistakes I See
Waiting too long on the QDRO. Some people finalize their divorce and then sit on the QDRO paperwork for months. In that time, the account value changes, the employee might retire or change jobs, or worse, something happens to them. Get it done.
Accepting equal division without looking deeper. A 50/50 split sounds fair. But if one spouse gets the house and the other gets retirement accounts, those assets behave very differently. One is illiquid and costs money to maintain. The other is locked up until retirement. Fair doesn't always mean equal.
Overlooking survivor benefits. If you're entitled to part of a pension and your ex-spouse dies before you start collecting, you might get nothing. Unless the QDRO specifically addresses survivor benefits. I bring this up with every client because it's easy to miss.
Not getting professional help. Attorneys know divorce law. They don't always know retirement plan rules, tax consequences, or how to value a business. A divorce financial planning expert fills that gap.
Get the Division Right the First Time
Property division isn't something you can easily fix later. Once the settlement is signed and the divorce is final, you're stuck with what you agreed to.
I've talked to people who gave up assets they didn't realize they were entitled to, or who took on debt they didn't have to. By then, there's not much to do about it.
If you're going through a high-asset divorce, take the time to understand what you own, what it's worth, and how dividing it affects your future. That work up front is what protects you. Book a consultation and let's look at your situation together.