Stocks often represent years of saving and long-term financial planning. Whether purchased through a brokerage account or received as part of an employer compensation package, they can make up a significant portion of a couple’s wealth. It is important for couples in Michigan to understand that during divorce, dividing stocks may involve more than simply splitting the number of shares.
How are stocks divided?
Michigan follows the principle of equitable distribution when dividing marital property. Courts might classify stocks acquired during the marriage as marital assets and divide those investments in several ways, including:
- Transferring some or all shares from one spouse to the other
- Allowing one spouse to keep the stock while offsetting its value with other marital assets
- Selling the shares and dividing the proceeds between the spouses
The approach depends on the circumstances of the case and the overall division of the marital estate.
What can affect a stock portfolio’s value?
Unlike many other assets, stock values can change from day to day. A portfolio that has one value when divorce proceedings begin may be worth more or less by the time it comes to dividing marital property. Market fluctuations are only a part of the picture. Other factors may also affect how stocks are classified and valued during property division, including:
- Whether the shares were acquired before or during the marriage
- Dividend reinvestments that increased the number of shares
- Whether separate stock holdings became mixed with marital investments over time
These details can affect how courts classify and value stock assets during the property division process.
Do all stock-related assets require the same review?
Employees receive some stock-related assets directly from their employers rather than through a brokerage account. Some employees receive stock options or restricted stock units (RSUs) as part of their compensation. Because these awards may be subject to vesting schedules or future employment requirements, they often require additional analysis during a divorce.
Tax consequences may also become part of the discussion. For example, selling appreciated stock can create different financial consequences than transferring ownership as part of a divorce settlement.
Why can dividing stocks become more complicated?
When stocks make up a significant portion of the marital estate, dividing them often involves more than determining the number of shares each spouse receives. Knowing how stock assets are classified, valued and transferred can help spouses make informed decisions during the property division process.