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How Stocks Are Divided in a Texas Divorce

Dividing up property during a divorce settlement can be a difficult thing, even if the couple’s assets are straightforward. When a couple owns a complex stock portfolio that may include everything from individual stocks, they brought into the marriage to 401(k) accounts to vesting options with their employer, then the question of how stocks are divided in a Texas divorce becomes even more complicated.

Stocks, like all other assets from real estate to liquid cash, are divided under Texas’ community property law. This means identifying what assets are marital property—belonging to the marriage—and which assets are separate property—belonging exclusively to one spouse. Spouses keep all of their separate property. Marital property has to be divided equally under Texas law.

Therefore, one of the key issues in a divorce settlement with extensive stock holdings, can start with what type of property each stock is. Here are 3 factors the negotiators will have to consider, as will the judge if the settlement goes to court.

When Did the Stock Fund Start?

Couples, especially those who may marry later in life, are likely to have brought their own stock holdings into the marriage. Does that mean they are separate property, and thereby to go exclusively to that spouse? That’s a starting point, but it’s not a finishing point.

Presuming the stock continued to grow in value during the marriage, the value of the growth will be marital property. The value of the stock on the day of the marriage will be significant. It will also matter if the couple made any further investments while they were married—those funds would be marital funds, and the growth achieved would thereby be considered marital property.

When Did the 401(k) Fund Start?

The same principles apply to a 401(k) fund. This is important to point out, because it’s not uncommon for people to believe that their 401(k), because it is exclusively in their name, is thereby their separate property. That’s not the case. As with other stocks, the only issue that matters is what was owned on the day of the wedding and how much growth accrued thereafter.

Stock Option Ownership

Some employers offer their employees the opportunity to purchase stock in the company, or in other cases, simply award shares of ownership after the employee has achieved a certain tenure. Let’s consider an example where an employee will become eligible for ownership a year after the divorce is finalized. Does the other spouse have any right to that stock?

Every case has its own nuance, but it’s fair to start with the presumption that the other spouse will have at least some claim on the stock ownership. The reason? The spouse earned that stock by putting in the time at work during the marriage, thereby making it at least partially marital property.

Get experienced legal counsel at O’Neill Wysocki P.C. by calling (972) 852-8000 or by filling out our online contact form.

Getting Expert Valuation

The task of getting stocks valued properly during a divorce settlement can be considerably complicated. How much of a stock’s growth was just natural accrual of value that already existed on the wedding date, and how much value came from investment that was done with marital property? It takes a good forensic review of the stock, its history, and its growth to make sure a settlement is reached that will be fair to both spouses.

O’Neill Wysocki P.C. has extensive experience working on high-asset divorces. We understand what we’re looking for in the valuation of a stock portfolio, and we’re networked with the right expert witnesses, who can provide reliable and credible testimony in court if necessary. We also know that it’s important to combine our deep knowledge and connections with a real fighting spirit. Our clients’ have their financial futures on the line. Our dedicated team of attorneys and staff understand that, and we take pride in being able to fight for them.

Call O’Neill Wysocki P.C. today at (972) 852-8000 or contact us online to set up a consultation.