Liquidity of assets and property division

Posted by Lauren S. CohenApr 29, 20140 Comments

When in negotiations regarding how to divide property in a divorce, there are a wide variety of different things that it is important for individuals to consider. One of the more obvious things is the value of the various assets in the marital estate. However, there are also some perhaps less obvious aspects of the various martial estate assets which can have impacts on how fair a given division of property will ultimately be.

One aspect of the various assets in a marital estate that divorcing individuals sometimes make the mistake of not considering when in property division negotiations is the liquidity of the assets. The liquidity of an asset involves how easily the asset can be sold at its value.

Some assets that are often in a marital estate, such as a family home and certain types of investments, are fairly illiquid (difficult to convert to cash at value).

One thing that can occur when liquidity of assets isn't considered in a division of property is that a situation can inadvertently arise in which one of the parties ends up with most of the assets they received in the divorce being illiquid ones. This can be a problem if a sudden financial issue arises in which this person needs to quickly have access to cash, as they may be forced to have a “fire sale” of illiquid assets in which they receive far less for the assets than their on-paper value.

Thus, liquidity of assets is one of the many things that, in addition to the on-paper value of assets, should be kept in mind when deciding how to divide property in a divorce.

Experienced divorce attorneys understand that reaching a fair division of property can be a very complex process and that having the right information during this process is extremely important. Such attorneys can work to get divorcing individuals the information they need to make well-informed decisions regarding property division.

Source: The Wall Street Journal, “The Biggest Financial Mistakes Divorcing Couples Make,” April 24, 2014