Posted by Ramos Law Group, PLLC | Uncategorized
At first glance, dealing with stocks in the Texas divorce process might seem relatively straightforward. They have a definite dollar value, so you probably assume one party could buy the other out – or you could sell and split the proceeds. However, there are different ownership attributes and tax implications that pertain to stocks, particularly when it comes to stock options and restricted stock. Even if you and your spouse can agree on how to handle them in the divorce process, stocks present unique challenges. When the issue is in dispute, your situation is infinitely more complicated.
Fortunately, Texas divorce lawyers address these issues on a regular basis, since stocks are often a key asset as part of the property division component of the process. You can trust your attorney for advice and counsel, but you might want to learn what to expect with stocks in divorce.
Default Rules on Property Division: Texas is a community property state, which means that any asset acquired by either spouse during their marriage is presumed to be equally owned by both of them. Separate property is that which is owned before the wedding date or is acquired by gift or inheritance.
When parties file for divorce, the default rules work as follows:
- Separate property belongs to the spouse who acquired it. These assets are not subject to distribution between the parties.
- All community property is divided between the parties, which may not result in a perfectly equal distribution. The statute requires the court to divide these assets according to what is just and right, so a judge is guided by the principles of equity.
Options for Handling Stocks in Divorce: Applying the Texas property division statute to stocks can be tricky, since you could be dealing with shares that both parties own OR shares that one spouse owns but are community property. Plus, stocks are a taxable investment, which means you could incur tax liability when selling. What you see on your statement is the value before you pay taxes on the income.
With these considerations in mind, there are a few options for how to deal with stocks in divorce:
- You could sell the stocks and split the proceeds, just like you would with a bank account. One issue with this route is the tax implications mentioned above. Another is the fact that many people prefer to keep stocks for investment purposes.
- You might choose to split your stock holdings, but keep them as your own individual investments. In other words, you’d change ownership to achieve an equitable split according to property division laws. You might opt to divide the number shares in one company in half, or split holdings in different companies. The key is that the value should be as close as possible to 50-50.
Special Considerations Regarding Stock: The biggest complication in handling stock as part of a Texas divorce is that some types carry restrictions or represent a future ownership interest in a company. You should note a few factors that can make property division very challenging.
- When one spouse holds stock that was earned as part of a work benefit during the marriage, it’s still a community property asset subject to distribution. In this situation, that person probably doesn’t want to sell when he or she remains employed with the company; they may also be non-transferable, so a non-employee cannot own them. One solution might be giving the other party half the value of the stock, which requires establishing its value.
- Stock options are a unique type of asset because they don’t have a current cash value. Basically, the value lies in the fact that you have the option to purchase them at a certain price in the future. The perk of holding stock options is that they could increase in value if the company is successful in the future. Stock options are also common in the employment environment as a benefit, and they can also be non-transferable.
A Texas Divorce Attorney Can Advise You On Handling Stocks In Divorce
Our lawyers at The Ramos Law Group, PLLC have extensive experience handling stocks in any divorce scenario, particularly in high-asset and complex divorce. We’re adept with all tasks associated with stocks, including identifying them, establishing value, tax matters, dividing them, and the tax implications. For more information on how we can assist with all aspects of your divorce, please contact us to set up a consultation with a member of our team. We can explain how Texas asset division laws apply to your unique situation once we learn more about your circumstances.