Assets: Savings and Investments
Janene Baedke, Extension Educator; Sharon M. Danes and Jean W. Bauer, Extension Specialists and Professors — Family Social Science; Kathleen Lovett, Extension Educator; Kathryn D. Retting, Professor — Family Social Science; and Patricia Stumme, Extension Educator
It is important that families have the assets that they need to meet the needs of their family. Determining the right combination of assets that will be best for your family depends on several factors, such as your future plans for yourself, education, needs of your children, your age and ages of your children, risk tolerance, income needs, and investment experience. Assets are valued as of the separation date.
During a family transition like a divorce or separation, it is critical that you assess the ownership of your financial assets, their fair market value, and their tax basis. Fair market value is the price at which an item could be sold. For divorce purposes, it also means the amount the investment is worth before any debt is subtracted. Tax basis (taxable value) is the original purchase price plus improvements minus any tax benefits. Because tax consequences are so fundamental to the retention of an asset, you should know the tax basis before you divide your assets, not after.
The Tracking Savings and Investments (Assets) (PDF) form can help you get started with tracking your assets. If you're unsure where to locate the information needed for the form, your federal income tax returns for the past few years are excellent sources of information. You can learn about ownership and value of financial instruments from completed tax form 1040 and additional schedules (B and D). In addition to income tax returns, the following will be helpful in tracking assets:
- Family record files for loan requests
- Savings account passbooks/registers
- Monthly financial statements from financial planning firms
- Children’s bank account statements
- Company annual reports
- Financial statements prepared for loan requests
- Canceled checks and check registers
- Safe deposit box contents and activity
- Knowledge of cash transactions or bartering
- Phone inquiries to businesses and institutions
Making Decisions About Assets
What to do with your assets is another important decision during a family transition. Here are some things to consider when making decisions about financial assets:
- An investment in marriage may make little sense in singlehood.
- Don’t retain an investment you can’t live with.
- Use your divorce to cut your losses.
- No investment is risk free.
- Balance security, income, and growth.
- Know the tax basis or the tax bill may shock you.
- Beware of the effects of inflation and exaggerated claims about asset value.
- Look to total return, not yield.
You may realize that some assets, like investments, need to be divided. Here are some questions to ask yourself as you’re preparing to split investments:
- What investments do you and the other parent hold?
- Who owns each investment?
- What investment distribution will best secure the financial future of your children?
- What investments would best provide for the educational and other needs of your children?
- What is the legal value of each investment?
- What is the after-tax/after-sale value of each investment?
- Which assets should you keep?
- How will you and the other parent divide the investments?
- How do you feel about your decision?
For a description of the chief advantages of various savings and investment types, consult the University of Minnesota Extension publication, Planning Ahead for Retirement. This publication also describes nine decision criteria to use in your investment decisions. You may also be interested in the online course Invest NOW: Money in Retirement.
Cooperative Extension System. (2008). Investing for your future.
Danes, S. M. (2009). Planning ahead for retirement. St. Paul, MN: University of Minnesota Extension.
Planning Ahead for Retirement — Guides you in developing a retirement plan that takes into account the financial, emotional, and social aspects of your life.
Invest NOW: Money in Retirement — Online course that will give you the basic education you need to start investing for your future.