How divorce may affect a stock brokerage account

On Behalf of | Apr 23, 2022 | Asset Division, Divorce

The market value of stocks held in an investment account opened during a marriage may divide fairly in divorce. If a spouse inherited a stock brokerage account or received it as a gift, however, it generally classifies as separate property, as noted by SmartAsset.com.

Without proof of assets qualifying as a spouse’s separate property, the court may consider a brokerage account as marital property under Colorado’s statutes. A judge may require a brokerage account’s fair division as part of a couple’s divorce decree.

A divorce settlement may include stock sales or transfers

Joint account owners may find that selling stocks at their current market value and splitting the proceeds could serve as a quick way to divide an account. If both spouses agree the split reflects a fair division, the court may approve of the sale.

The Financial Industry Regulatory Authority reports that spouses may also transfer stocks between each other’s accounts. Joint account owners may request that a stock brokerage firm close the joint account and then open two separate accounts. A letter may describe the way spouses would like the brokerage firm to transfer stocks from their joint account to each spouse’s separate account.

Spouses may offer cash or other assets to keep their stocks

If one spouse wishes to keep a stock account, its current market value could determine an amount to pay the other spouse for his or her fair share. A spouse may also agree to exchange the stock account for other marital assets.

Trading other assets for brokerage accounts could allow a spouse to hang on to the stocks he or she wants to keep. Without a requirement to sell off stocks to divide them, a spouse could also avoid incurring a capital gains tax liability.