Divorce proceedings can be intricate, and the process becomes even more complex when it comes to understanding how to split stocks in a divorce.
The additional complexity of dividing stocks makes it vital that you surround yourself with experts who understand the process, can clearly explain it to you, and can help ensure you get an equitable division.
The Role of a Forensic Accountant in Splitting Stocks
In some cases, your attorney may recommend using the expertise of a forensic accountant. This professional ensures that all assets, especially those in your spouse’s name, are transparently accounted for, and tax consequences are taken into account.
These experts specialize in valuing stocks and stock options and can explain your best options to get the fair division you deserve.
Options for Equitable Distribution of Stocks in Divorce
Here are several options that allow you and your spouse to split the stocks or stock options you own together or the shares that one of you owns but are joint marital property:
Selling the Stocks
While selling and splitting the stock proceeds might seem the most straightforward route, many Denver residents prefer to retain their investments to avoid tax consequences. However, the “tax basis” must be taken into account.
You will likely have to pay capital gains taxes if you sell stock for a profit. If you held the stock for less than a year, the gains would be taxed the same as your income bracket.
However, depending on your taxable income and filing status, you may be taxed at 0%, 15%, or 20% for stock owned for longer than a year. Long-term capital gains tax rates are usually lower than short-term capital gains.
It is important to note that the profit amount is taxed, not the total sale price.
Dividing the Investments
You can split your stock holdings as necessary to achieve a fair division. One person can take all the stock in one company while another takes ownership of another company’s stock. Or you can split the number of shares equitably.
If you have 200 shares, there is no reason why each of you can’t take 100 shares or divide them in another way that ensures you get your fair share according to Colorado’s equitable distribution laws. The division must include consideration of any tax consequences.
Other Methods of Division
In cases where stock is held only in one party’s name, often received as a work benefit, the stock will be at least partially marital property; property acquired before the marriage is not marital, but the increase in value is marital. If the party acquires the stock during the marriage, it is considered marital property.
If the holder does not want to sell the stock, they can offer cash or another asset to the other party to ensure a fair division.
Employee Stock Options Add to the Complexities of Splitting Assets
Splitting stocks you already own can be complicated enough, but valuing and dividing stock options during a divorce adds another level of complexity. Stock options, at their most basic, consist of an option to buy the stock at a specific price at a later date. Also, while the owner has the right to buy at a set price, the holder may not be obligated to buy.
These stock options may not have a cash value today, but depending on the company’s success, the options could provide a nice nest egg down the road. This uncertainty makes it hard to put a value on them.
Sometimes options are non-transferable, so simply dividing them may not work either.
If either party has stock options, you will want a forensic accountant and an attorney familiar with this topic’s expansive Colorado case law. Colorado does allow parties to take a “wait and see” approach, putting off the division of those assets until the owner purchases the stock.
Shapiro Family Law: Denver’s Go-To for Dividing Stocks in Divorce
Shapiro Family Law excels in high-asset and complex divorces in Denver. We’re adept at identifying, valuing, and guiding you on how to split stocks in a divorce. Our collaboration with forensic accountants ensures a meticulous process, from discovery to valuation, providing a strategic plan for asset division.
Connect with a Renowned Denver Divorce Attorney
With over four decades of expertise in Denver’s intricate divorce landscape, attorney Laura E. Shapiro offers personalized attention, empathetic guidance, and robust representation. Our team is committed to ensuring a fair division of assets during your divorce.
Contact us today to discuss your unique situation with our dedicated team.