Dividing Investments in a San Diego Divorce
When a couple divorces in California, the property they own is divided between the spouses. First, all property owned by either or both spouses is classified as either separate or marital property. Only marital assets are divided in a divorce. This property may include the family home, the furniture, the vehicles, and the bank accounts. It may also include investments, such as stock options, as well as pension plans, IRAs, and other types of less tangible assets.
Under California law, marital property (assets and debts acquired during the marriage) belongs equally to both spouses. They must be divided equally in a divorce. You and your spouse can decide how to divide your property between you, or the court will decide for you. The three main steps of the property division process are:
- Classifying assets and debts as separate or community property
- Reaching agreements on the value of community property
- Deciding how to divide the property
Certain investments may be classified as separate property if acquired before the marriage and passively held in separate accounts during the marriage. Investments acquired during the marriage will be subject to division in a divorce. These may include:
- Stocks: Couples may purchase stock in a company to earn a return on their investment.
- Bonds: With corporate or governmental borrowers, bonds are fixed income securities and one of the main asset classes.
- Pensions: A pension plan is an employee benefit by which an employer makes regular contributions to a fund during the employment years from which periodic payments are drawn for support during the employee’s retirement.
- 401(k)s: Many employees have the option to contribute to a 401(k) retirement plan. In many cases, employers make matching contributions.
- IRAs: An individual retirement account (IRA) allows an individual to save tax-deferred money for retirement.
- Stock options: Employees may receive stock options as part of their compensation package. These options convey the right, but not the obligation, to buy or sell a stock at an agreed-upon date and price.
- Cryptocurrencies: A cryptocurrency is a type of digital asset based on a large, often decentralized network using blockchain technology – organizational methods for ensuring integrity of transactional data. As they are not generally issued by any central authority, cryptocurrencies exist outside of governmental control.
- NFTs: Non-fungible tokens (NFTs) are digital assets representing real-life objects, such as art, music, and videos. NFTs are bought and sold online, often with cryptocurrency.
The value of many investments includes the income earned on them. Generally, if an investment has generated income during the marriage, the spouses will split the profit. However, division of an investment can get complicated, for example, if the asset was acquired by one of the spouses before the marriage but earnings on the investment occurred during the marriage. Some investments purchased before marriage may be considered separate property, while others may not be. Stock options can be particularly difficult to divide if they cannot be sold to a third party or do not have any real value. Divorcing couples may need a financial expert to determine how to divide investment income in a divorce.
At Mattis Law, A.P.C., we understand how difficult divorce can be. Our San Diego family law attorney can assist you with property division and every aspect of your divorce. Call us at (858) 328-4400 to schedule a free consultation.