Distribution of Financial Investments

In the State of New Jersey, all marital property is subject to equitable division in divorce. In addition to assets like bank accounts and houses, some of the marital assets are often in the form of financial investments, such as stocks and bonds. Even when it may be relatively easy to establish a fair market value for these assets, it is not always easy to determine how they should be divided during a divorce. If you need legal advice or representation regarding how to divide financial investments, Bergen County property division lawyer Brian D. Iton can assist you. He has many years of experience advising Northern New Jersey residents in these complex matters.

One of the key aspects of property division is determining the fair market value of the asset at the time of divorce so that, in the equitable division of assets, the court can make a fair allocation of assets between the spouses. When financial investments are the assets in question, it is relatively easy to determine valuation if the stocks are publicly traded, since the published stock value will establish the investment value.

However, even when it is relatively easy to establish value and to divide the assets according to that value, financial investments should receive more scrutiny when deciding how to divide them in divorce. For example, there are occasionally complexities regarding whether a particular investment—or which portion of it—constitutes pre-marital or separate property. If one spouse held certain investments prior to the marriage, those assets are usually separate property. However, if marital funds are later commingled in investment accounts the act of co-mingling may have changed (transmuted) separate assets into marital assets subject to equitable distribution. Resolving this issue may be particularly complicated when the investments have increased significantly in value, and when both spouses have participated in making investment decisions.

Stocks—and to some extent even bonds—may have widely varying degrees of risk. Even if their value may be established, simply “splitting” stock ownership in divorce is not necessarily fair without evaluating the different risk tolerances of each spouse. Also, since some stocks provide dividends, while others remain passive, and bonds mature at different times, how they are divided will have different financial consequences.

A spouse who understands the stock market and market trends more thoroughly may have an advantage over the other spouse in advocating for a certain allocation if that spouse anticipates that a particular investment is likely to yield a greater short- or long-term return, or a stock has poor long-term value. Consequently, each spouse should consult a financial advisor. While there are no guarantees that any particular division will ultimately produce fair results, at the time that it occurs, the division should reflect a reasonable and justifiable allocation of marital assets.

Although liquidating an investment and dividing the proceeds may seem to produce a straightforward result, liquidation will often result in serious and costly tax consequences, particularly if tax basis issues are not thoroughly investigated. In advance of any liquidation or transfer of investment funds both spouses need to look at the potential tax ramifications of the contemplated action

Sometimes stock ownership is related to one spouse’s employment, including the existence of incentive options or other stock-purchase vehicles. An equitable division should account for the desirability of allowing the spouse who has a direct relationship to the stock to retain ownership, perhaps with an offset against other marital assets

Finally, your broker should be notified of any pending divorce to ensure that all investment decisions—sales, purchases, or transfers—of any marital financial assets are made with the joint consent of the parties.

In the planning and execution of a divorce it is always important to compile a complete and accurately valued asset list. Particularly with regard to financial investments, other factors besides “raw” value must be taken into consideration, including the potential tax ramifications of any transfer or liquidation. A financial investment division should reflect not only a fair allocation but an allocation that satisfies, as much as possible, your priorities and long-term financial security. If you need assistance with the division of financial assets, call Bergen County property division attorney Brian D. Iton toll-free at (844) 431-3380. Alternatively, you can use our contact form to set up a free consultation. Brian D. Iton represents people who need a divorce attorney in Hackensack, Paterson, Newark, Jersey City, and other cities in Bergen, Passaic, Essex, and Hudson Counties.