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Investment accounts and divorce: How to protect what’s yours

On Behalf of | May 20, 2020 | Property Division |

Once you decide to divorce, a good portion of your time will immediately turn to matters regarding property and debt division.

For example, if you have investment accounts, these have the chance to be among the most valuable assets in your divorce. And for that reason you want to take every step you can to protect your legal rights, so that you get what you deserve.

Taxable investments, such as stocks, can be among the most complicated to address in divorce. Not only do you have to consider the actual value of the accounts, but you must also take into consideration the tax implications.

Despite these concerns, there are options available to you. Consider the following:

  • Sell the investments: If you jointly own stocks, you could sell all your investments and split the proceeds down the middle. Doing so will have tax consequences, so take this into consideration before you go down this path.
  • Split the holdings: Take, for example, an account that currently holds 1,000 shares of stock. If it’s subject to division, both individuals could opt to receive 500 shares.

Both of these options have pros and cons, so carefully consider the details before pushing for one or the other.

For instance, pay close attention to the holding period of the investments, as this will impact you should you decide to sell in the near future. If the investments were held for less than a year, you’re taxed at your ordinary tax rate. However, if you wait for longer than a year, you’re only taxed at the long-term capital gains rate.

For many divorcing couples, investment accounts are their biggest asset. Not only that, but both individuals may be relying on the money to help them financially in retirement.

With so much on the line, it’s critical that you fully understand your options when it comes to dealing with investment accounts in divorce.

If you neglect to understand your legal rights and take the necessary steps to protect them, it could cost you in the long run. Create a strategy for protecting your investment accounts during this difficult time of your life.