Having investments can go a long way in supporting financial wealth. You may have started investing early on in your career in hopes of seeing significant payoff, and fortunately, your efforts have been successful. After your marriage, you and your spouse may have accrued additional investments that also proved lucrative for you, and your finances possibly have not posed much concern.
Now, however, you and your spouse are getting a divorce, and those investments may not seem as secure as they once did. Having concerns about your investments is understandable and, in fact, wise. In some cases, individuals can overlook their intangible assets and find themselves in a difficult spot later on. By accounting for these assets early, you may have a better chance of preparing for their division.
Addressing investments during a divorce
Handling intangible assets can certainly prove tricky, and it is important to remember the tax implications involved as well as the actual monetary value of the assets. After all, when you receive your investment statement, the amount included on those statements likely does not reflect the amount you will have after paying taxes. As a result, if you chose to sell your marital investments and divide the proceeds, you and your spouse would have tax ramifications to address, which may mean ending up with less than you thought.
On the other hand, you could instead choose to divide the investment shares without cashing out. The benefits of taking this route include keeping the cost basis, or the original purchase price, and holding period the same. As a result, if your holding period is over a year, you would face a lower tax rate for long-term capital gains. Of course, the exact amount you end up with will depend on various factors, including the cost basis, tax rate and holding period.
Should you try to keep your investments?
In some cases, divorcing parties can negotiate in a way that allows one party to keep the investments or more of the investments in exchange for other assets. Whether this option suits your circumstances will depend on the specific details of your case, the investments, potential for growth, your needs and other factors. It could also depend on whether your spouse wants to negotiate in your favor when it comes to the investments.
Because you undoubtedly do not want your long-term financial strategy to take a major hit because of your divorce, understanding your options for handling your specific investments may be of use to you.