How Are Investments and Stocks Divided in a Divorce in California?

screen showing graph of stocks

While some assets, like the funds in your joint bank account or the debt on your credit cards, seem easy to split, other marital pose many more challenges. For example, you may find that dividing your investments and stocks is not as easy as splitting ownership. As such, it’s essential to enlist the assistance of Los Angeles high-net-worth divorce attorneys to help you navigate the complexities of this process. Keep reading to familiarize yourself with the challenges dividing stocks and investments pose.

How Does California Divide Investments and Stocks in a Divorce?

Generally, California follows the idea that any property obtained after a couple is married or that co-mingles with marital assets is community property. As such, each spouse is entitled to an even 50-50 split of assets upon their marriage. This includes retirement accounts, properties, stocks, and investments.

If your investments or stocks were obtained before you got married or after you are separated, they are considered separate property. As such, your spouse has no right to claim them.

Generally, you can receive a Qualified Domestic Relations Order to obtain funds from investment accounts like retirement accounts or pensions. This allows you to make a transfer from your spouse’s retirement accounts to your own without incurring the tax penalties you would usually endure.

What Will Happen to My Stock Options?

If you are an employee with stock options in the company you work for, such as in a package upon starting your employment, it will be divided based on one of two formulas. Essentially, stock options give an employee the right to purchase stock in the company at a later date for a predetermined price specified in the deal.

Generally, if the courts decide that your company rewarded you with stock, they will use the Marriage of Nelson formula. As such, they will multiply the value of your stock by the years you worked at the company before obtaining the asset compared to the amount of time you were married. This calculation will then be divided by two, with each spouse receiving half the funds.

The other method to determine how much your spouse can receive when dividing stocks is the Nelson formula. Generally, this is used when the courts determine the stocks were used to compensate a worker for future performance. To calculate this, the courts will take a fraction, which is the time when you received the stocks and the date of your separation, divided by when you were granted and the date the stocks were vested.

As you can see, dividing stocks and investments during a divorce can be exceptionally challenging if you are unfamiliar with the process. That’s why it’s in your best interest to contact the Zitser Family Law Group as soon as possible to learn more about how our dedicated legal team can assist you. We have the knowledge to help make this process as simple as possible while fighting for the assets you deserve. Reach out today to learn more about how we can help you.

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