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Liquidity and Divorce

When dividing assets during a Pasadena divorce, it’s important to consider the difference between liquid assets and illiquid assets. Even if the math shows a perfect 50/50 division of assets between spouses, you can run into problems if you end up with assets that aren’t easily converted into cash when needed.

Liquid assets are either cash or assets that can quickly be sold if needed. Examples of liquid assets include stocks, money market instruments, and government bonds. If you ran into financial problems and needed a fast source of cash, these are the types of assets that would be most useful.

Illiquid assets are assets that are harder to sell on the open market. Fine art or antiques would be examples of illiquid assets because these types of items are only of interest to a limited group of potential buyers. They can be sold, but finding the right buyer requires time and patience. Houses, cars, and an interest in a family business are also examples of illiquid assets.

Women with young children often run into trouble after a divorce when they forfeit an interest in other assets in order to keep the marital home. The home has value on paper, but they can’t easily use this value in the event of a job loss, medical emergency, or other financial crisis. If child support and/or alimony payments run out and there’s still a mortgage on the home, the woman risks losing the property entirely due to a lack of cash flow.

If your spouse handled most of the finances during your marriage, working with a financial planner might be a useful way to help you better understand what types of assets are best suited to meet your long term financial goals. A small investment now could avoid big problems with illiquidity down the road.

How Can We Help?

If you arein need of legal representation during your divorce, please call our office at (626) 683-8113 or email us at info@PasadenaLawOffice.com. Our Pasadena divorce attorneys have extensive experience handling a variety of settlement concerns.

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