How To Divide Complex Assets such as Stock and Retirement Plans During A Divorce

When going through a divorce, you and your spouse will have to divide the property that you own together. The court will seek out the fairest option from the family home to stocks and retirement plans.

However, dividing up certain assets can be a little trickier than others. In what ways divorcing couples can divide up their assets fairly while they finalize a divorce?

Stock Options

Stock options are contracts between two parties that give the buyer the right to buy or sell at a preset price during a period. As a means of employee compensation, stocks have raised concerns about whether the stock options should consider marital property.

However, There are ways to solve stock valuation challenges during divorc.. if the stock is “vested,” it’s more likely to be categorized as property. Vested stocks are stocks that contribute to your 401K over time.

From this step, you’ll have to figure out whether it’s marital or separate property. If it is classified as marital, then the court will go on to determine the right process of valuing and distributing.

Three methods exist for valuing and dividing stock options:

Net present value
Deferred distribution
Reserve jurisdiction

The net present value method calls for the immediate division to the other spouse through a lump sum calculated by the value of other marital property.

On the other hand, the deferred distribution and reserve jurisdiction are not immediate. These methods allow the other spouse to not receive benefits until they’re paid to the employed spouse or becomes eligible to receive them.

Retirement Plans

Splitting retirement plans can be even trickier because of the potential tax consequences.
During a divorce, you or your spouse will qualify for part of the financial support if the employed spouse has a retirement plan sponsored by their employer like a 401K or pension plan (unless you’re working under a prenuptial agreement).

Here’s are options that can help you divide your retirement more fairly:
Qualified Domestic Relations Order
Defined Contributions Plan
Defined Benefits Plan

A QDRO is an order that outlines child support, alimony, and property rights to another. This decree allows you to receive the benefits you deserve while protecting your retirement funds.

With a defined contributions plan, you can roll overpayments to your retirement plan without tax penalties and are easy to value with its exact cash value.

On the other hand, defined benefit plans are harder to value as employer pays it at retirement

Divorce can be a lengthy process, but deciding your marital property doesn’t have to be. Knowing your options and getting an outside opinion are great ways to limit the stress of the process.

Ready to get the guidance you’ve been searching for when it comes to navigating divorce? Reach out to us today!