Wildly fluctuating stock market can affect divorce settlements

By August 17, 2011Divorce

On behalf of The Marks Law Firm, L.L.C posted in Divorce on Wednesday, August 17, 2011

The stock market has in recent days seen some amazing ups and scary downs. Its wild fluctuations can make even the most steely-eyed day traders blink hard.

It’s not surprising that its wild rides are also making people facing divorce wonder how they might be affected as they try to divide their marital property.

Forbes columnist Jeff Landers writes that now is the right time to think about how stocks are divvied up in divorce.

First, he notes that people facing divorce should remember that there are two kinds of property the court will look at: marital property and separate property.

Here in Missouri, separate property consists of property acquired before the marriage or property received as a gift or by inheritance. It also includes property acquired after a legal separation and property excluded by written agreements such as a prenuptial or post nup.

That means if you received a gift of shares of Apple from your mother before you married, and you kept the shares separate from your marital investments, they might well be considered by a family law court to be separate property.

In an equitable distribution state such as Missouri, the goal of the court is to distribute marital assets fairly, not necessarily equally (though it might consider a 50/50 split to be fair and equitable).

Landers also writes that it’s important to understand the cost basis of your stocks. What’s a cost basis? It’s the amount you originally paid for the stock. If you bought Google on the day of its IPO, it went for $100 at that opening bell. If you got in at that level, that’s your cost basis for that stock.

It’s important to know this because the person who today holds that Google stock would have to pay capital gains taxes on them. As this is written, the price is just over $530 per share. So you would have to pay significant capital gains taxes on a property division settlement giving you all the Google stock and your spouse stocks closer to their original prices.

Source: Forbes: “What a Volatile Stock Market May Mean for a Woman’s Divorce Settlement Agreement” by Jeff Landers: Aug. 16, 2011