How are stocks split in a divorce?

Under Maryland law, assets during divorce are divided equitably between spouses, which can include stocks. However, there are some exceptions that may come into play, where stocks owned by a spouse prior to marriage are returned to them. These types of complex divorce cases require expertise, skill, and the assistance of specialists in various fields to protect your rights and help you obtain what you deserve.

To understand this question in detail, a Howard County divorce lawyer from Coover Law Firm, LLC, discusses how stocks are split in a divorce.

Maryland divorce law divides property equitably, not equally

Under Maryland Code, Family Law, Article 7-103, all marital property must be divided equitably and fairly during a divorce. However, equitable distribution does not mean a 50/50 split, as is often seen in community property states. The Court will examine each spouse’s financial, living, and earning arrangements to determine the most appropriate division of property.

Marital property usually applies to any assets and funds a couple acquired during their marriage, even if the item only has one person’s name on it. This can even apply to a home one spouse brought into the union if they used marital funds to pay the mortgage, taxes, or other expenses.

Along with homes and other real estate, marital assets may include retirement accounts, vehicles, bank accounts, jewelry, artwork, and furniture. There are some exceptions, including inherited property or gifts, although you will need to provide evidence showing how you acquired the asset. Your divorce attorney can help you understand how to protect your assets.

You can also use a Maryland alimony calculator to understand potential financial outcomes better.

Stocks and stock options are usually marital property

Stocks acquired during the marriage are typically subject to division according to marital property rules. During the divorce proceedings, each spouse will provide an accounting of their holdings, including stocks, bonds, and stock options. Stocks and bonds have a paper value, but the Judge will also consider the current value and any appreciation (increase) of the asset since its purchase.

Once the Court determines a value, it can decide on an equitable distribution. It may order actions such as dividing stocks between the spouses as part of the settlement. If the Judge’s order requires selling the stocks, it should discuss dividing any capital gains taxes or long-term capital gains.

Dividing stock options is more complicated since the owner may not have fully realized the stock’s value. In Maryland, stock options or restricted stock units (RSUs) are typically considered marital property only to the extent they were earned during the marriage, even if they vest later. Divorce attorneys often work with forensic accountants to determine a fair valuation for equitable distribution.

The circumstances of your Maryland divorce may determine how stocks are split

For couples with fewer holdings, a family law attorney will generally have the knowledge and skills needed to value marital assets and negotiate an equitable settlement agreement. They will help you prepare to appear before the Judge, who makes the final decision regarding the split. Unless there are significant financial instruments and businesses involved, these divisions are fairly simple and don’t take very long.

However, suppose one spouse owes the other for “sweat equity” in a business or needs to pay off marital debts before the divorce can be finalized. They may find that selling assets or dividing stocks allows them to address any imbalance in the final order. If a sale is necessary, both spouses should consult with their accountants to understand the tax implications.

When it comes to stock options or retirement accounts, the spouse whose name isn’t on the asset may receive payment at the time of sale or divestiture by petitioning for a qualified domestic relations order (QDRO). This order allows the spouse to qualify as a third-party payee, provided the asset was deemed marital property.

Coover Law Firm can guide you through divorce and asset division in Maryland

During divorce, you and your spouse will split assets equitably, but this division also includes liabilities. Without legal representation from a skilled Howard County, MD, divorce lawyer, you may end up getting less than you deserve or having to pay taxes you did not anticipate. Emotions can run high and potentially cloud your judgment, or you may not have the background that allows you to make decisions for financial instruments like stocks and other holdings.

Instead, contact Coover Law Firm, LLC, to discuss your concerns and goals to limit costly mistakes. We can also collaborate with forensic specialists to uncover hidden assets and appropriately value both marital and separate property for a fair division. Arrange a consultation today by calling (410) 553-5042 or contact us online to put experienced Maryland divorce attorneys on your side.