What happens to your stocks in a divorce

On Behalf of | Jul 1, 2021 | divorce |

Many couples who are ending a marriage have retirement accounts such as an IRA or 401(k) that they must divide during the property division phase of their divorce.

You may be among those who have investment accounts to divide. What will actually happen to your stocks during the divorce?

Marital versus separate property

When you are facing the property division phase of your divorce, your assets will be divided into separate and marital property. Stocks that you purchased prior to your marriage will remain your separate property. Such investment holdings that you received as gifts from a  non-spouse or that you inherited during your marriage will also qualify as your separate property.

The appreciation factor

On the other hand, although stocks classed as your separate property are not subject to property division during your divorce, any appreciation in value that occurred during your marriage may constitute marital property. Whether it does, depends on the cause of the appreciation. The increase in value will be subject to equitable distribution if it resulted from the joint efforts of you and your spouse. If market forces caused the increase, the appreciation in the value of the stock will remain your separate property.

Professional management

If an investment adviser or stockbroker has managed your stock portfolio, how is appreciation in value handled during the divorce? Is the appreciation more a result of competent management than market forces? The decision may lie with the court as to whether it feels the actions of the adviser or broker reflect your efforts in causing the appreciation.