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How to approach stock investments during property division

Property division is a difficult endeavor. You have to find creative solutions to some challenging asset problems. For example, what’s the best way to handle the family lakeside cabin? How should you go about divvying up a small business? These are questions that often don’t have easy answers.

Few assets, however, carry the complexity of stock investments and brokerage accounts.

The basics of dividing investments

Stock investments are much like any other marital asset. A separating couple, as part of the property division process, must determine how these interests should be split between them. At their most basic, many common solutions are not that complicated:

  • Sell the investments, with the revenue split between each party
  • Split the investments down the middle, with each partner getting equal shares
  • Negotiate full control – I retain all stocks in Company A, you take everything for Company B, for example

While this division may not appear complicated on the surface, that’s a bit misleading. A ton of work must be done beforehand in order to make a wise choice.

Don’t just look at the current value

It is not enough to simply look at the current-day value of an investment, then use that figure as the basis for property division decisions. Instead, you need to consider some additional factors. A good starting point is to inventory all of your stock-related assets, and with each entry include both its current value and what you paid for it.

From there, you need to apply further scrutiny. That means calculating the costs basis, determining the holding period and laying out potential capital gains tax obligations. The repercussions, of course, will depend on your specific financial situation following the divorce. So in addition to having a clear understanding of the investment assets, you must also have a firm handle on your personal financial situation.

Investments are valuable. They are also far from simple. When they become mixed up in divorce proceedings, doing the proper legwork now can help you avoid costly, unpleasant pitfalls.