Asset division is one of the biggest sources of stress for couples during divorce. This is even more true if you have a robust investment portfolio. It’s natural to worry about splitting these assets fairly. Understanding how divorce splits investment assets can help you prepare for what lies ahead.
How California divides marital property
California observes community property laws. Couples share ownership of anything acquired during the marriage. However, property you had inherited or bought before marriage will remain your separate property.
Since California is also a 50/50 state, all marital assets are divided equally—regardless of who earned or managed them.
Take stock of all your investments
The first step in dividing your assets and finances fairly is to take stock of what you own. Create a detailed inventory of every investment account you and your spouse have. Identify the ownership of each account. Pay attention to whether the investment is solely in your name, your spouse’s name or jointly held.
Breaking down your investment portfolio
Here’s how courts usually divide different investments during divorce:
- Retirement accounts: If you started the retirement account before marriage, then part of it counts as a separate asset and is safe from asset division. The court splits the rest equally.
- Taxable investment accounts: Courts split these based on their market value. You may sell the investment for an easier division, but remember that it is subject to capital gains taxes.
- Mutual funds: The court divides these based on their value on your separation date.
- Stock options: If your options have matured, you’ll split them equally. However, unvested options may need special calculations to determine their worth.
- Real estate properties: Determine the current property value with an appraisal. Consider selling the property for an easy and fair split.
Investment account divisions often require specific documentation. These allow you not to worry about withdrawal penalties or taxes.
Ensuring a fair and smooth asset division
Investment division becomes simpler with prior agreements and professional guidance. A prenuptial or postnuptial agreement can outline clear terms for investment division early on.
Working with an experienced divorce attorney who understands complex investment assets can also make the process smoother. They can help ensure a fair asset division and protect your financial interests.