When should you divide your investments in divorce?

On Behalf of | Apr 16, 2021 | High Asset Divorce |

As someone that owns securities or other investments, you know you could lose a lot in your upcoming divorce by dividing or selling them. One of the keys to holding on to as much of your investments as possible is to figure out the best time to split them or sell them off.

Given the variety of investments that exist, you can expect different rules for dividing or selling them. The Motley Fool provides some information that may help you avoid selling your investments too early or dividing them in a manner that costs you more than necessary.

The state of the economy

You may be so focused on your divorce that you do not notice the state of the economy. If you sell off one or more of your accounts during an economic downturn, you may reap a much smaller amount than you expect. Keeping a close eye on the economy may help you determine whether it is a good time to sell an investment.

Taxes and penalties

Selling or dividing investments can also trigger taxes. If you sell a security or another taxable account, you will likely have to pay capital gains taxes. If you have an annuity, leaving the investment early may cause you to pay high penalties. You might also have to pay penalties for getting out of a retirement account or liquidating it before meeting a particular date or threshold.

Depending on the investment, you may set up a way to divide your account without incurring taxes and penalties. If you and your spouse share a brokerage account, you might have your spouse set up a separate account and then move assets into that account while observing rules that let you avoid taxes.

Protecting your account

You might fear that your spouse will take reckless actions with a jointly owned brokerage account like withdrawing a lot of money from it or making an unwise investment. While you may want to sell the account off quickly, you could also protect your account by calling your financial institution to see if you can freeze the account. This can give you time to work out an agreement to divide the account without incurring loss.

These are just a few examples of what to look for when dividing accounts. If you do not understand your situation, you may benefit from professional assistance before making any important financial decisions.



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