As an investment, stock represents a percentage share in the ownership of a business. When the business does well the value of the stock will typically increase and when the business does poorly or underperforms the value of the stock will typically decrease.
There are online brokerages where a person can buy and sell stocks themselves and the brokerage exacts a fee for the service. People also hire financial advisors who can essentially do the same things as an online brokerage but are available to consult with in person and ask questions of.
For most of you reading this blog post this is not new information, nor is it intended to be. What may be new to some of you is the question of what happens when married persons who own stock together get divorced.
What is the difference between Community and Separate Property
Dividing up stock is different from dividing a car or even a house. The rules of community vs. separate property are (for the most part) well known and straightforward to apply when the time comes to allocate the property between the spouses.
Separate property is, not surprisingly, the property owned by one spouse and not the other. Typically this is property that is owned by the one spouse prior to the marriage or property that was inherited by the spouse during the marriage.
Community property is a much broader category of property. It encompasses all property that is not separate property. The default rule is that a piece of property is community property, and the burden is on the party who seeks to claim it as his or her separate property.
Within the general category of community property there exist three sub-categories: sole management, joint management and quasi community property. Let’s go through each one by one:
This category takes into consideration each spouse’s income earned from their job, income earned from any of their separate property and any revenue earned from any other solely managed property.
Any property that a spouse manages solely that is mixed with the property of the other spouse qualifies as jointly managed property.
Quasi Community Property
If a spouse acquired property as his or her sole property while not a resident of Texas then it falls under the heading of Quasi Community Property.
Where do Stock Options fall in the separate vs. community property discussion?
Stocks, while not the same as any property that you can actually hold in your hands, can still be divided up in a divorce. If a spouse came into the marriage with those stocks then the ownership should be continued as separate property.
If the stocks were purchased during the marriage and bear the names of both spouses on them then the parties will have to determine between themselves how they should be divided or a judge will have to step in.
A former client of the Law Office of Bryan Fagan, PLLC had a situation that can illustrate this scenario very well in my opinion. This client was given stock the company that he works for on a yearly basis.
Basically if he met a sales goal or landed a new client he would be eligible for an end of year bonus in the form of these stock options in the company. While the income that he earned from his job counts as community property (solely managed community property) the stock options belonged to him as his separate property as he was actually the employee of the company who gave the stock as an end of year bonus.
Despite this neat and tidy example, there is no set rule that can be applied to the dividing up of stocks. Factors such as why the stock was purchased, the date the stock became fully vested and the actual purchase date itself will go a long way towards determining which party to a divorce winds up with the stock when the dust settles in their case.
The Texas Family Code in Section 3.007 goes through these sort of factors in much greater detail than I am able to in this relatively short blog post. If you are interested in learning how stock options are treated when the stock was granted to a party before they were married but required continued employment through the date the party married their spouse or how options are treated when they’re granted during a marriage but become fully vested at date after the divorce will have been finalized, take a look at the Code.
Retirement Assets- Questions to ask when considering divorce
More generally than stocks, retirement assets bring about a whole different set of questions that need to be thoroughly considered and discussed at the outset of a divorce. What are the tax implications for an early withdrawal of a 401(K) or IRA?
How much money have you contributed to your retirement account during your marriage and how much does it stand to be worth after you’ve retired? When do you become vested in your pension fund and does your spouse qualify for any portion of those benefits in the divorce?
In some instances, dividing up retirement assets can be straightforward and without much headache. Yours will not be the first divorce where retirement assets will be an issue, but your divorce is specific to you and your family and needs to be taken seriously.
Having some knowledge of the law and the sort of questions to ask at the outset of a divorce can make a huge difference to determining the course your divorce will take
Questions about how stocks and retirement accounts are handled in a divorce? Contact the Law Office of Bryan Fagan, PLLC
Divorce is hard enough without having to understand minute details associated with already difficult to understand policies and procedures surrounding investments and retirement accounts. The attorneys with the Law Office of Bryan Fagan, PLLC are equipped to handle your situation due to our years of handling family law cases across Southeast Texas.
We are ready and willing to speak to you about your case. Please do not hesitate to contact us today in order to set up a free of charge consultation with one of our licensed family law attorneys.
If you want to know more about what you can do, CLICK the button below to get your FREE E-book: “16 Steps to Help You Plan & Prepare for Your Texas Divorce”
Other Articles you may be interested on regarding retirement accounts
- Why are Retirement Funds Important in a Texas Divorce?
- Can I Keep My Retirement in a Texas Divorce?
- Texas Divorce and Retirement & Employment Benefits by the Numbers
- Is Social Security Considered Separate Property in a Texas Divorce?
- Will My Spouse Get Part of My Retirement in Our Texas Divorce?
- Dividing Property in a Texas Divorce - The Just and Right Division
- Why is Separate Property Important and How to Keep it Separate in a Texas Divorce?
- What Wikipedia Can’t Tell you About Texas Divorce and Marital Property Division
- Texas Divorce Property Division Enforcement
- Separate Property in a Texas Divorce?
Law Office of Bryan Fagan, PLLC | Kingwood Divorce Lawyer
The Law Office of Bryan Fagan, PLLC routinely handles matters that affect children and families. If you have questions regarding divorce, it's important to speak with ar Kingwood, TX Divorce Lawyer right away to protect your rights.
A divorce lawyer in Kingwood TX is skilled at listening to your goals during this trying process and developing a strategy to meet those goals. Contact Law Office of Bryan Fagan, PLLC by calling (281) 810-9760 or submit your contact information in our online form. The Law Office of Bryan Fagan, PLLC handles Divorce cases in Spring, Texas, Cypress, Spring, Klein, Humble, Kingwood, Tomball, The Woodlands, Houston, the FM 1960 area, or surrounding areas, including Harris County, Montgomery County, Liberty County, Chambers County, Galveston County, Brazoria County, Fort Bend County and Waller County.