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Your stock portfolio may complicate your divorce

Stocks have become an increasingly popular investment in recent years. In fact, according to 2020 survey from Gallup, about 55% of Americans report having a stock portfolio.

Because the stock market has soared recently, your portfolio may be one of your more valuable assets. Still, like other pieces of property, you likely must address your stocks during your divorce.

Are stocks marital or separate property?

For divorce purposes, Texas is a community property jurisdiction. This generally means you must split everything you and your spouse jointly own. You can usually keep separate property, though.

While there are certainly exceptions, stocks you acquired before walking down the aisle are probably separate from the marital estate. By contrast, stocks you purchased during your marriage may be community property you must split with your soon-to-be ex-spouse.

Do your stocks pay dividends?

Some stocks pay cash or stock dividends to shareholders. Regardless of whether your stocks are separate or marital property, the dividends they pay are probably income. Under Texas law, income from separate property usually becomes part of the marital estate.

Consequently, if your stocks pay dividends, you may have to split them with your husband or wife during your divorce proceedings. Of course, if you have used stock dividends to pay for new stock, your spouse may also have an ownership interest in the new stock.

Do you have stock options?

Stock options may further complicate your divorce. If you earn a stock option during your marriage, it is probably community property. This may be true even if the option vests in the future or comes from personal stock you own.

Because dividing stock options during a divorce can be challenging, you may need to work with an investment advisor or another professional to better advocate for your financial interests.

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