In a divorce, identifying and dividing marital property can be challenging. It can be especially challenging with intangible assets in investment and brokerage accounts. The family law and divorce attorneys of Adams Law Firm have the experience to help guide you through the complex process of dividing investment assets.
What is Community Property?
Texas is a community property state. That means that each spouse equally owns all marital assets either party acquires during marriage. During a divorce, a court must divide those community assets must divide those assets in a just and equitable manner between the two spouses. All property acquired during the marriage is community property and subject to equitable division, regardless of whose name is on the property.
This principle also applies to all types of acquired property, including all financial accounts and income either spouse earned during a marriage, such as investment and brokerage accounts. Community property is the rule; the only exceptions are for assets that qualify as separate property.
What is Separate Property?
Separate property is any property a spouse owned before the marriage. It also includes property one spouse acquired during the marriage by inheritance, gift, or personal injury award (except for any recovery for loss of earning capacity during the marriage). Property is presumed to be community property, and a spouse who tries to prove it is separate must present clear and convincing evidence.
How to Determine the Nature of Investment or Brokerage Account Assets
Investment and brokerage accounts may be in the name of one or both spouses. Individual retirement accounts, 401(k)s, and pensions can only be in one spouse’s name. But the name on the account is irrelevant to whether the account is community or separate property.
Instead, the primary focus is on how and when the spouses obtained the assets. Most deposits to investment or brokerage accounts people make during a marriage are community property unless the parties have agreed otherwise in writing.
Determining the nature of an investment asset can be straightforward if it contains assets derived from income earned during the marriage. For example, if a couple is married for their entire working lives until their divorce, their investments and brokerage accounts will all be community property.
But it can be challenging to determine which investment and brokerage assets are community property and which are separate when both are blended.
For example, if a spouse had an existing brokerage account at the time of marriage, the money in the account on the wedding day is separate property. But any money added to the account after the marriage is community property. Further complicating that situation is that any interest earned on separate property during the marriage is probably community property.
Figuring out whether investment and brokerage assets are community or separate property can be complicated and may require the help of a financial expert. Obtaining comprehensive documentation about the investments is also very important. It is essential to obtain records showing deposits, withdrawals, and balance fluctuations to help your attorney and financial advisor suggest appropriate allocations of assets.
How Are Investment or Brokerage Accounts Divided in a Divorce?
When a divorce is amicable, the parties will often agree not to divide any investment or brokerage accounts and instead allocate the value of those funds to offset other more tangible assets the other party may retain. For example, suppose the parties share a savings account worth $20,000, and one spouse has an investment account worth $20,000. In that case, the parties may trade one for the other, with one spouse getting all the cash and the other getting the entire investment account.
Spouses also sometimes find it easier in amicable situations to close joint accounts and divide investment or brokerage assets without court involvement. But even then, it is wise to consult an experienced Texas divorce attorney to ensure you obtain an equitable share of the assets.
Consulting with a financial advisor is also a good idea before dividing investment or brokerage assets in a divorce because the sale or division could have tax implications.
A judge must review the evidence and make an equitable division when a divorce is not amicable. In this situation, it is essential to have an asset division attorney on your side and likely a financial expert, as well.
How to Protect Investment or Brokerage Assets in a Divorce in Texas
Suppose a divorce is particularly bitter or substantial investments are involved. In that case, a Texas divorce attorney can help you obtain a temporary restraining order (“TRO”) to prevent your spouse from taking or mishandling the assets. A TRO will likely be bilateral, meaning neither spouse can do anything with the account until a judge permits it. Your attorney can pursue and obtain a TRO as soon as you file your divorce petition. At a hearing shortly after, the judge can enter a restraining order that protects the assets during the entirety of the divorce.
Discuss Your Situation with a Katy, Texas, Asset Division Attorney
If you have assets in investment or brokerage accounts and are going through a divorce in Texas, you need to speak with an experienced asset division divorce attorney. Dividing those types of assets can be very complex. And this time in your life may already be more painful and confusing than you want it to be. Retaining the attorneys at Adams Law Firm to help you can reduce that burden.
Our Katy, Texas, divorce attorneys have been pursuing our clients’ best interests for 35 years, and in that time, Adams Law Firm has built a strong reputation for excellence in family law. Let us help you ensure an equitable division of your investment and brokerage accounts in your divorce. Call us today at (281) 391-9237 or fill out our contact form to speak with one of our Adams Law Firm divorce attorneys.