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How Does a Divorce Affect My Investments?

dividing investments divorce

Many couples work hard to achieve financial goals. Buying homes, investing for retirement, saving for a wish list item, and creating a rainy-day fund are all substantial investments during a marriage. However, when facing a divorce, assets will be at the center of the discussion. One of the main questions many people have is, “How does divorce affect my investments?” This article will answer this question and outline the changes divorce will have on your investments.

Community Property Law

In California, the law sees any assets attained during the marriage as community property. This categorization includes stock options and other investments. Community property is subject to equal distribution during divorce. Any property procured before the marriage, after the date of separation, or through inheritance or gift does not fall under community property.

Dividing Stock Rights During Divorce

dividing stock options during divorceIn California, the courts divide vested and unvested stock rights similarly. However, a stock right could be both community and separate property at the same time.   For example, if one person was granted a stock right that did not vest until a later date, or vested in increments over several years, and the couple decided to separate before all the granted stock rights vested, then there would be an apportionment of the stock rights to the community and also the separate estate of the party that earned the stock right.  Dividing investments is only one of many complex aspects where an experienced divorce lawyer can help you.

The predominant methods of apportioning divorce and stock rights to the community and separate estates are the Nelson and Hug formulas. However, they are not the only equations that courts use to determine what fraction of your stocks require division. Moreover, these formulas have their own intrinsic biases.

Investments After Divorce

Investments also require division, as courts consider them community property. However, investments made after the date of separation are generally separate property if separate property was used to fund the investment.   This situation leads to the question, “What is the date of separation?” It’s not necessarily the date one spouse moves out of the marital home, but rather is based on several factors including the date that one spouse decides to end the marriage and whether their actions generally reflect that decision.  

stock options after divorceIn determining the date of separation the Court will consider physical separation, financial separation and the behavior of the parties. If the couple cannot agree on a date of separation, a court will decide after considering all the evidence. 

Divorce and Retirement Accounts

During a divorce, pensions and other retirement accounts that a spouse contributed to during the marriage are also community property, meaning courts will divide them. There are different ways you can go about this division.  You can decide to divide each asset or if not practical for tax or other reasons, parties can agree to equalize the estate with each party taking one half of the value of the entire estate versus each asset. If the community interest in a pension and certain retirement assets are divided equally, typically a Qualified Domestic Relations Order (QDRO) is required that directs the administrator of your pension to give part of it directly to your ex-spouse after the divorce is final.

Divorce Is Difficult, So We Are Here for You

Are you facing a divorce, and you are unsure how it will affect your investments? You need to hire an experienced and professional divorce attorney to guide you through this process and help you make informed decisions regarding your finances. Yelman & Associates has a devoted team of attorneys with over 75 years of combined experience who are knowledgeable about investment division during divorce. We can ensure you get the share of the assets and investments that you deserve. Protect yourself, your children, your property, and your future with Yelman & Associates. Call us today at 1-619-282-1107 to schedule a complimentary telephone consultation.

Find more like this: Blog, California Divorce Law

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