What Are the 3 Types of Asset Classification?

How Are Your Assets Classified for Division?

Classifying your assets can help decrease how long asset division takes during your divorce or when planning your estate. One of the longest parts of divorce is asset division, including asset evaluation, usage, and physicality. The Law Offices of Diron Rutty, LLC offers an online divorce service that reduces the time it takes to finish your divorce and several online estate planning services.

To learn how to separate your marital assets for your divorce or estate, The Law Offices of Diron Rutty, LLC can explain. If you need help with the different aspects of the divorce or estate planning process, such as asset division, our family law attorneys/estate planning attorneys can help.

The Different Classifications of Marital Assets & Estate Assets

Three types of estate and marital asset classification are used to help those in the middle of a divorce or planning their estate. These asset classifiers are based on how they can be used, how they provide value, and whether or not they are tangible or intangible assets.

1. Convertibility

The convertibility of an asset is based on how easy it is to convert the asset into cash. When considering convertibility, there are two types of assets:

  • Liquid Assets: You and/or your spouse can quickly and easily turn these assets into cash without significantly affecting their value. Examples include cash itself and bank accounts.
  • Non-Liquid Assets: These assets cannot be quickly converted into cash or can only be converted with a significant loss in value. Examples include real estate and long-term investments. Evaluating and dividing these assets during a divorce or into a trust would take more time than liquid assets.

When dividing your assets, it’s important to understand their value during divorce and estate planning. This way, you know what assets you want or how you and your spouse can fairly divide everything. This also works to help you determine whether or not the assets you’re putting in a will or trust are enough to care for your heirs.

2. Physical Existence

The physical existence of an asset is exactly what it sounds like, whether or not the asset is physical or not. When considering the physical existence of an asset, there are two types of assets:

  • Tangible Assets: These are physical items that can be touched and seen. Examples of these include buildings, vehicles, and business inventory.
  • Intangible Assets: These include non-physical items that represent value but do not have a physical presence. Examples include patents, trademarks, goodwill, ownership of a business, and software.

Tangible assets are often easier to evaluate because they have a clear market value and cost of replacement than intangible assets. Intangible assets are typically more challenging to value as their worth is often based on future income potential or brand strength.

At the same time, tangible assets typically depreciate over time due to wear and tear, while intangible assets can fluctuate depending on their worth.

3. Usage

The usage of an asset refers to classifying it based on its contribution to your business’s operation. This is only relevant if you own business assets that need to be divided or added to a trust. There are two types of assets based on usage:

  • Operating Assets: These are assets used in the day-to-day operations of your business. Examples include office furniture, production machinery, and computers.
  • Non-Operating Assets: These are assets not used in daily operations. Instead, they might be held for investment or as a backup. Examples include vacant land, investments in other companies, and surplus equipment.

Operating assets are critical for running a business, and their efficiency directly impacts your business’s productivity and profitability. Non-operating assets can generate additional income, such as rental income from unused property or dividends from investments.

Contact the Family Law or Estate Planning Attorneys at The Law Offices of Diron Rutty, LLC For Help

Whether it’s for divorce or planning your estate, understanding everything you can about your assets can help you divide them. With this knowledge and the online services offered by The Law Offices of Diron Rutty, LLC, you can significantly quicken the legal process.

Our attorneys are available to help or guide you through the process as well. If you prefer to use more traditional in-person legal services, we can assist you as well. Contact us today for more information and to schedule a consultation.

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