Stock Up on Knowledge: How Are Stocks Divided in a Divorce?

Posted August 20, 2020 by in Lifestyle
couple arguing

Most people who get married don’t expect their marriages to fall apart. In many cases, however, 40 to 50% of marriages in the United States end in divorce. The worst part is fractionating assets. How are stocks divided in a divorce?

Each state has rules about splitting the financial resources of divorcing couples. Believe it or not, each asset gets judged separately and isn’t always divided based on current value.

The type of divorce—contested or uncontested factors in as well. Also, is the divorce happening in a community property or equitable distribution state?

Going through a divorce is painful, especially when there are assets involved. You need to know how are stocks divided in a divorce if you have them. Here’s some helpful information you many need.

Are Stocks Considered Assets in a Divorce Settlement?

In a divorce settlement, the marital property comes into play. Marital property consists of any property obtained during the marriage by both parties. 

That property refers to income and assets:

  • 401K
  • Pensions
  • Property
  • Retirement Assets
  • Stock

Yes, any and all stock options earned during the course of a marriage is fair game to both parties. 

In some cases, you can get around including stock options. If the stock is separate property—earned before the marriage—you could disclude it from the divorce settlement. 

That’s only if the other marriage party signs a pre-nuptial or post-nuptial agreement.

How Are Stocks Divided in a Divorce?

The division of assets is not easy, especially allocating financial earnings from stock. Stocks have short and long-term value, so dividing them into a divorce gets monotonous. 

Sell the Stocks 

One of the first options to attempt to split stocks funds equally is by selling them. This poses a problem in most settlements because stocks are long-term investments. One party in the divorce may contest the sale of their stock. 

If both parties agree on the sale, they’ll need to choose a broker and a selling (trading) platform. On the platform, they’ll have to deposit the stock into an account. The divorcing party will then agree upon a selling price and put out a sell order.

Once tax penalties, if any, get met, the proceeds from sale gets split down the center. It’s not about how many stocks you own, but the value of them.

Divide the Shares

Instead of losing money on long-term investment stock, the couple can agree to split shares. 

What this means is if one party has 100 shares, one person takes 50 and the other the same. Or, if they have equal shares in different investments, one can take the full share in one investment while the other takes the other shares.

Again, these options depend on the divorce laws in your state. 

Know Your Options

Ending a marriage is not a celebration. Dealing with separating assets can turn things into a financial wrestling match. Find out your options upfront.

Know what to expect when it comes to knowing how are stocks divided in a divorce.

Need more information like this? Check out our lifestyle section for more financial information and tidbits.