One of the most common, and often most contentious issues in divorce is dividing finances, particularly investment portfolios. For many couples, stocks make up a significant share of their overall wealth. Understanding how divorce and stocks are handled in an Austin divorce is important for protecting both your financial interests and the overall outcome of your case.
Understanding Divorce and Stocks in Austin
Texas is a community property state, meaning that most assets acquired during the marriage belong equally to both spouses. This principle extends to investment portfolios, including stocks, bonds, and mutual funds.
When dealing with divorce and stocks in Austin, it’s important to distinguish between community property and separate property:
- Community Property: Assets acquired during the marriage, including investments purchased with marital income.
- Separate Property: Assets owned before marriage or acquired through gift or inheritance.
If stocks were bought during the marriage, even if only in one spouse’s name, they are typically considered community property meaning they could be divided in the divorce.
How Are Stocks Valued During Divorce?
In cases involving divorce and stocks, the court must first determine the current value of the investments. This valuation can be difficult, especially if:
- The stock price fluctuates.
- The portfolio includes private stocks or restricted shares.
- There are tax implications for selling certain assets.
Courts in Austin generally value the portfolio as close as possible to the date of trial or settlement. Expert financial analysts are often brought in to help with valuing more complex holdings.
Stock Options and Restricted Stocks
When talking about divorce and stocks in Austin, it’s important not to overlook stock options and restricted stock units (RSUs). These are usually part of employee compensation packages and can complicate the property division process:
- Vested Options: If stock options are acquired during the marriage and vest during the marriage, meaning the employee has the right to exercise them, they are typically treated as community property in an Austin divorce. The court will generally view vested options like other marital assets, regardless of whose name they are in, and will divide them based on what is just and right. If the stock options are acquired prior to the marriage, but vest during the marriage, a portion of the stock options will be separate and a portion community.
- Unvested Options: Unvested stock options are more complicated because the employee doesn’t yet have the right to exercise them. However, just because the options are unvested does not mean they are not subject to division. Instead, a portion of the stock options will be separate and a portion community, if, as, and when they vest (even after the divorce). An experienced family law attorney can calculate what the separate and community percentages are so that you can be better prepared for this.
If your spouse has stock options through their employer, it’s important to know whether they are vested or unvested, as this will impact how they are divided during divorce.
Factors the Court Considers When Dividing Stocks
While Texas law starts with the presumption that community property should be divided equally, the court can adjust the division based on what it deems “just and right.” Several factors are considered in divorce and stocks cases, such as:
- Length of the Marriage: Longer marriages often result in a more equal split.
- Income and Earning Capacity: If one spouse has greater earning potential, the other may receive a larger share of the stocks.
- Fault in the Divorce: Infidelity or misconduct can influence the division.
- Health and Age of Each Spouse: If one spouse is older or in poor health, they may be awarded a larger share to secure their financial future.
- Tax Consequences: The court may consider the capital gains tax that would result from selling stocks.
Ultimately, the courts in Austin aim to ensure the division of stocks and other investments is just and right, not necessarily equal.
Can Stocks Be Used for Settlement?
In some divorce and stocks cases in Austin, one party may use their share of the investment portfolio as part of a settlement. For example, one spouse might agree to give up a portion of the stock portfolio in exchange for other assets like the family home or retirement accounts.
It’s important to think long-term when negotiating a settlement. While stocks can fluctuate in value, real estate and retirement accounts have their own pros and cons. An experienced Austin divorce attorney can help you weigh these options.
Protect Your Investments with Experienced Austin Divorce Attorneys
Divorce and stocks are a complicated combination, but with the right legal and financial guidance, you can navigate the process more smoothly. Understanding how Austin courts view investment portfolios, what factors impact division, and how to protect your interests can make a significant difference in the outcome of your case.
If you are going through a divorce and have questions about your investment portfolio or other financial matters, contact Deyerle Silva Smith, PLLC today. Our team of experienced Austin divorce and family law attorneys is ready to help you protect your financial well-being.