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How does a California divorce divide portfolio investments?

On Behalf of | Oct 18, 2022 | Divorce |

California’s statutes require divorce courts to divide the assets acquired while married equally in half. As noted by SmartAsset.com, the court may divide contributions made during your marriage to a retirement fund as part of your settlement.

You may discuss selling your portfolio’s contents and splitting the proceeds if you and your soon-to-be ex-spouse have joint investment accounts. Some divorcing couples agree to open individual accounts. Each spouse may then transfer half of the stocks from their joint account to their single account.

Employer-sponsored retirement funds

Finra.org notes that opting for cash from a spouse’s retirement plan could trigger tax liabilities or early-withdrawal penalties. Funds such as a pension or 401(k) plan may require obtaining a Qualified Domestic Relations Order.

Each plan’s administrator has a different procedure for requesting one so that a non-working spouse may cash out of the fund. Some plans allow a non-working spouse to roll over funds from the working spouse’s account to an individual retirement account without penalties.

Restricted stock units or options

The value of stock options or bonuses offered by a spouse’s employer may also divide as part of your divorce settlement. As noted by Forbes, incentives include restricted stock options or securities tied to a company’s performance.

Spouses generally have rights to half of the portion of the stocks or bonuses earned during their marriage. Your divorce may include showing when you or your spouse started working at a company and the timeframe for vesting in a company’s stock rewards. If the start date preceded your marriage, the court may only divide the stock’s value earned between your wedding date and your divorce date.