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What happens to stocks and bonds during divorce?

On Behalf of | Jun 11, 2024 | Divorce

Property division in a high-asset North Carolina divorce is often complex. Even if you and your spouse agree on how property will be split, when you add complicated financial investments, such as stocks and bonds, into the mix, figuring out the numbers can be challenging.

Getting accurate values is important because you want a fair split of your marital property. Property division is called equitable distribution in North Carolina. Equitable does not always mean equal.

Separate, marital and divisible property

While marital property is divided through equitable distribution, separate property is not. Separate property includes assets or debts you or your spouse owned prior to the marriage.

When separate property increases in value during the marriage, the value accrued during the marriage may become marital property. That portion is then subject to division like any other piece of marital property.

To make matters even more complicated, there is a third type of property called divisible property. This refers to property acquired between the date you and your spouse separate and the date your divorce is finalized. This property can also be subject to equitable distribution, depending on your situation.

Assets that regularly change in value, such as stocks and bonds, must be scrutinized during a divorce. Although you or your spouse may have purchased the stocks or bonds prior to marriage, there is little chance their values stayed the same throughout your marriage.

Therefore, some portions of stocks and bonds are likely to be treated as marital property. If you purchase stocks or bonds after separation but before your divorce is final, there is a chance they could be treated as marital property.

Analyzing changes in the value of stocks and bonds

How the values change may impact whether any increase in value is treated as marital property.

For example, if you owned stock worth $200,000 prior to marriage, and 10 years into marriage when you file for divorce the stock has now appreciated in value to $300,000, the $100,000 might not be considered marital property since the stock itself did not mix with marital property.

However, most people do not purchase stocks and bonds to let them sit without being touched. Stocks and bonds are regularly bought and sold.

This buying and selling can increase the value of stock shares or bonds over time. If you actively buy or sell stocks and bonds during marriage, there is a stronger chance some portion of each will be considered marital property.

Although this may sound confusing, overall, stocks and bonds are treated just as any other piece of property. If the stocks and bonds, or a portion of them, are marital property, they must be equitably divided.

Does ownership matter?

As with any other marital asset, it does not matter who owns the investment account or whose name is on the stock certificate. If the stocks or bonds were obtained or increased in value during the marriage, they will get added into the mix with other marital assets, such as homes, vehicles or other financial accounts.

You might not be sure which, if any, portion of stocks and bonds are considered marital property. Regardless, you should still disclose the stocks and bonds as assets even if you believe they should be separate property. Failure to disclose assets can cause you major problems in a divorce.