Dividing Stocks, Bonds, and Other Securities in Divorce

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Divorce can be a messy and painful process. Dividing what you’ve worked so hard to build together can be the hardest part.

Understanding how your divorce agreement may affect your net worth, income, and lifestyle is essential to come to a fair and equitable agreement for both of you.

In a divorce case, parties may divide a variety of investments.

These include stocks, bonds, money markets, CDs, and savings accounts. Mutual funds are also popular investments among couples.

Our marriages are meant to be successful, but sometimes things don’t go according to plan. These tips can help you better understand and stay in control of your investments, regardless of whether you’re working through a divorce or just want to be prepared.

Update Your Account Beneficiaries

Your beneficiary designations on your investment accounts may need to be updated for various reasons. Divorce may be one of them. Contact an experienced Florida divorce lawyer if you don’t want your spouse’s name on your stocks, bonds, and other investment accounts. The parties involved can avoid a messy situation this way.

Find Out How to Access Your Investment Accounts

Families often divide household duties between spouses. One person cooks and does laundry, and the other does the dishes and makes the bed. It is common for one person to handle the family’s finances and manage accounts to ensure bills are paid and investments are handled appropriately. Consider taking some time to ensure you have all the information you need about all of your assets, such as stocks, bonds, and other investment accounts, if you are not this person.

Ask yourself: Do I know about all the investments, bank accounts, or other assets that may be mine? Are the accounts set up in my name alone, my spouse’s name only, jointly held, or some other way? What are the account numbers, login credentials, contact information, and other information I need to access these accounts? If necessary, can I place a hold on withdrawals from these accounts? Understanding where things stand will be helpful if something goes wrong in the future.

Taxes and Other Penalties

Before selling stocks, bonds, or other securities, consider any tax consequences and other potential costs or penalties. Capital gains taxes may be triggered when securities are sold in taxable accounts.

In addition, early withdrawals from some assets, such as annuities, can result in steep penalties.

Also, timing is important—if your divorce occurs during a market decline, it might not be the best time to sell. Some investments, including retirement accounts, may be subject to penalties if withdrawn early or liquidated. In addition, you can avoid taxes and penalties by keeping your holdings and dividing them evenly between the spouses.

The Division of Taxable Investment Accounts

Each type of investment account will have its own processes for splitting assets between spouses. Generally, you must provide a letter to the financial institution requesting that your joint taxable account be closed and that separate, individual accounts be opened in each person’s name.

There should be a detailed description of how the investment assets will be allocated between the two accounts in the letter. Some assets, such as proprietary investment funds or insurance products, may not be transferable to a new firm and will result in financial penalties, tax implications, and fees if liquidated.

If you are concerned about investments or withdrawals your spouse may make in a joint brokerage account, you might need to take immediate action. If you can’t come to an agreement on how to divide your assets, such as stocks, bonds, or other securities, you can ask your financial institution to freeze your account. After that, contact an experienced Florida divorce lawyer for guidance.

Hire a Professional

It can be overwhelming to divide financial assets during divorce, so you’ll want to consult an attorney for guidance. An experienced lawyer can assist with estate planning and other investment-related issues. To understand all the tax implications, you may also want to work with a broker or another type of financial professional and an accountant. The Financial Industry Regulatory Authority (FINRA) offers a series of steps to follow when choosing a financial professional.

As state law requires, securities products can only be purchased and sold by persons and firms registered with FINRA (brokers) and the Securities and Exchange Commission (SEC).

Contact a Florida divorce lawyer if you have additional questions about how your stocks, bonds, and other securities will be divided during your divorce.