Assets and debt come with all sorts of complications when it comes to divorce. This is especially true if your investment portfolio includes stocks, bonds, mutual funds and various other assets. Dividing these kinds of assets can be difficult, and if it is not done correctly, it could cost you.
By avoiding some common mistakes, you can divide your investment portfolio successfully. Read further to find out what questions you should ask about dividing these assets.
Do you own any investments?
The first thing you need to figure out is if you or your spouse own any taxable investment accounts. If your husband was in charge of the finances, you may not know about the various accounts he has open in financial institutions. Next time you check the mail, look for envelops from investment firms like Morgan Stanley, Charles Schwab, or E*Trade. You can also examine your prior year tax returns that will show income from investments, such as interest, dividends and stock sales.
What kinds of investments are in your portfolio?
Once you have obtained a list of the various investment accounts you have a stake in, it is important to find out what kind of investments they contain. For example, does the Morgan Stanley account include municipal bonds, corporate stocks, or investments in emerging markets? You can meet with a financial advisor to learn about the different kinds of investments that you own and how best to divide them.
What do you want to do with the investments?
The next thing you should ask yourself is what you want to do with investments. Do you want to sell them and divide the proceeds, or do you want to keep your fair share of the investments with a financial institution? However, before you make such a decision, you need to find out what the potential consequences are of each option.
What tax issues are involved?
There are various tax consequences you should consider when making a decision for the future of your investments. For example, when you sell investments, you may end up owing a capital gains tax, which can be quite high depending on whether the gains are short-term or long-term. This could cause your federal or state tax liability to be much higher than you would otherwise owe based solely on employment wages. A tax professional or financial advisor can help you determine the best course of action for your specific situation.
If you are planning to divorce, it is important to determine what investments you own and what options are available for dividing them. Making the wrong move could cost you at the time of your settlement or later in the future.