divorce - stocks, funds, etc

It's all negotiable, so long as basis is preserved. i.e. a stock owned at $10, worth $20, still has that basis and acquisition date. In some cases, one partner gets the house, the other, stocks. It would be a rare case where sales are forced for all assets, maybe the home(s), but not stocks. 401(k) can be split and remain pre-tax on order of the court.

JOE

I was financial advisor for my sisters divorce about 3 years ago.......assets were divided up between parties.....on joint accounts...asset was retitled (or ownership changed from joint to individual).

One interesting twist under Illinois law (every state has their own twists on divorce law).......the 2 parties can not be forced to use net present value to value retirement plans. If one party has a significantly better retirement plan, it would have a higher net present value than the poorer retirement plan. In Illinois, the law.....and appeals cases......support any method of splitting up the assets that is equitable or agreeable between the 2 parties.....but the law does not force net present value upon the parties. Judges perceive net present value as too complicated.......and general practice is to let each of the 2 parties keep their respective retirement plans to keep it simple. This is a little frustrating if you have a poor retirement plan......and your spouse has a rich retirement plan......that may be worth several hundred thousand more in net present value.

And as they say, the only parties that do well in a divorce are the attorneys :)

Dale

P.Schuman wrote:

I could see that a re-title would work for entire accounts, just like with physical assets (cars, house, boat, etc)

But - what if they just have a single joint brokerage account ? How is that handled ? Are they forced to sell everything to be able to split, just like with any other single physical asset (cars, house, boat, etc) I mean, if the investment account is worth $500k, and the car + house + boat is not equal... then I guess you have to "sell" some stocks to get the account down to match the other assets.

or just transfer the proper amount of the assets to a new account?

And, of course, don't forget to consider the tax basis and thus the tax liability for any assets as they are split up.

oh, what a tangled web we weave, when first we practice to conceive . . .

The implications of basis for tax purposes aside for the moment, why would you have to 'sell' anything? If the stock is the last thing which would even out the split, just split the shares. That's the easy part, if neither, or both, wanted the house, that could be an issue. Part of the house assignment would ride on the ability to remortgage the balance into the name of the remaining, single, owner. It's certainly possible that neither party would qualify as an individual.

JOE

I guess that was my basic question ? Can a Joint brokerage account with 100 shares of Cisco be split into TWO NEW individual accounts with 50 shares each and therefore not require selling of any stocks and no cap gains to contend with... Just didn't know if the brokerage firms will split things like that ?

The only issue a broker has is they need authorization to move assets to a differently titled account. When moving shares from my employer's stock purchase plan to my joint account I needed to sign "I understand this transfer will make my wife a joint owner". If the two parties of the divorce make the request in writing, the broker will oblige. No half shares though. In the big picture, that will be the least of anybody's issues. JOE