One of the significant assets that a couple may need to address during divorce is their investment portfolio. The outcome of dividing these investments can have a profound impact on each spouse’s financial future. What should you know when approaching the division of your investments?
Who owns the investment portfolio?
The first step in dividing an investment portfolio is distinguishing between marital and non-marital assets. Generally, assets acquired during the marriage are marital property. The court will divide these assets during divorce.
However, other investments are likely the sole property of one spouse. This separate property includes investments made before the marriage as well as Inheritances or gifts specifically given to one spouse and kept separate from marital funds.
How much are your investments worth?
Once a couple have determined which of their investments are marital assets, the next step is valuation. Because the value of investments can fluctuate, valuation often involves hiring financial analysts or appraisers. This process can be especially if the portfolio includes complex assets like options and futures.
How might you divide your investments?
Illinois is an equitable distribution state, which means that the court divides property – including investments – in a way that is fair based on the couple’s situation. A fair division can look different based on each couple’s situation and wishes. When it comes to dividing the portfolio, there are several strategies that couples can explore:
- Liquidate the investments: The couple may decide to liquidate the portfolio and split the proceeds. This is straightforward but can have tax implications and might not be the best financial decision if the market conditions are not favorable.
- Split the portfolio: Another option is to divide the investment assets between the spouses. This requires careful consideration to ensure that each party receives a fair share, taking into account the type of investments and their potential for future growth or loss.
- Arrange a buy-out: One spouse may choose to buy out the other’s share of the portfolio. This might involve trading other assets or using personal funds to compensate the other party.
Given the complexities involved in dividing an investment portfolio, it is crucial for both parties to seek professional advice. A financial advisor can provide insights into the potential long-term consequences of different division strategies, while a divorce attorney will ensure that the legal aspects of the distribution comply with Illinois law.
Dividing an investment portfolio during a divorce can be complex. However, with the right resources and guidance, couples can make financially sound decisions and reach a fair outcome.