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Are my stock investments subject to division during divorce?

On Behalf of | Jun 3, 2024 | Property Division

Those who are preparing for divorce naturally worry about their finances. They want to ensure they can maintain a reasonable standard of living even after the end of the marriage. The more successful someone has been throughout their marriage, the more property they may have to talk about dividing if they divorce.

Successful professionals often qualify for very complex compensation packages. Their employers might provide them with not just paid leave and insurance coverage but also an interest in the company. Many others buy stock as a long-term investment. Stock options and personal investment holdings can quickly lead to confusion and frustration during divorce negotiations.

Does a higher-earning spouse have to share valuable assets like their stock during a Virginia divorce?

Stock may be part of the marital estate

Many people think of their stock and other job-acquired resources as separate property. After all, their spouse never contributed to those resources directly. However, the Virginia family courts are likely to view the situation differently.

When determining what assets are marital property and what assets are separate property, two main factors influence how the courts categorize resources. The first is whether or not the spouses have a written marital agreement. The terms of such agreements can theoretically protect high-value assets from division during a divorce.

Any assets not directly included in a prenuptial or postnuptial agreement between the spouses are typically marital assets that the spouses have to factor into property division decisions. More complex and valuable resources, like stock holdings, can lead to intense disputes between spouses.

The right approach for valuing and dividing stock is different depending on whether someone has stock options in their employment contract or has purchased from the stock exchange. Even then, there are unique strategies for different scenarios. Vested and unvested stock options have different implications in a divorce. The same is true for small-cap and large-cap stock holdings.

People could make mistakes regarding how they handle stock that could put them at risk of major taxes or a patently unfair property division decree. Spouses with complex compensation packages and personal stock holdings frequently require the support of attorneys familiar with more complicated divorce negotiations.

Divorcing spouses may need help to properly value their holdings and fight for reasonable terms when dividing their stocks and other high-value assets. Those who attempt to handle the process on their own can make costly mistakes, from improperly valuing their stock to giving away too much to their spouses. Understanding what assets are at risk of division can make a major difference for those with complex personal holdings in Virginia.