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Investments can be a major concern during property division

On Behalf of | Apr 21, 2024 | Equitable Distribution

A couple that is going through a divorce must take the time to divide all of their assets and debts that each spouse acquired during their marriage fairly. Common assets that require attention include a marital home, vehicles and investment accounts.

Determining how financial investments, such as stocks, bonds and mutual funds, will be split can be difficult. Thinking about each point logically may help you make the most appropriate decisions about each asset when it comes to your unique divorce situation.

How are investments classified for property division?

The property division process begins by determining which investments are considered marital property or separate property. Marital property includes all assets acquired by either spouse during the marriage, while separate property refers to assets owned by one spouse prior to the marriage or received as a gift or inheritance.

How are investments valued during this process?

Once the classification is completed, the next step is to ascertain the current value of these investments. This often requires appraisals or professional assessments, especially if the investments include complex assets like stock options or business interests.

Accurate valuation is critical because it affects how assets are equitably divided. Market fluctuations can also impact the valuation process. This sometimes requires a snapshot of the values at the time of separation and close to the final settlement.

What are the tax implications of dividing investments?

Dividing investments is about splitting assets and managing the tax implications associated with these transactions. For example, selling investments as part of a divorce settlement can lead to capital gains taxes.

Prematurely withdrawing funds from a retirement account may result in penalties and additional taxes. Couples often need to work with financial advisors or tax professionals to understand the best strategies to minimize tax liabilities for both parties.

What options are available for division?

Couples have several options for dividing investment assets. They can sell their investments and split the proceeds, one spouse can buy out the other’s share or they can agree to continue co-owning some assets post-divorce.

Due to the complexity of dividing investment assets in a divorce, each spouse should seek independent legal guidance. This can help to ensure that each person is making decisions that are in their best interests throughout the process, and that arriving at a fair settlement is the overarching end goal of each individual’s approach.