How could divorce affect a spouse’s investments?
Ohio’s divorce statutes require dividing marital assets fairly between both spouses. Ending your marriage could result in dividing an investment or a retirement account that a spouse may not have contributed money to.
You may need to share the value of a stock portfolio acquired and grown during your marriage with your soon-to-be ex-spouse. Forbes suggests liquidating accounts based on potential tax liabilities and how much cash each spouse may need after the divorce.
How may retirement accounts divide?
If you or your spouse has a 401(k) or pension plan earned from working while married, your divorce may require splitting it. If you request a Qualified Domestic Relations Order from the account’s administrator, the court may order a fair division of its value.
As noted by the CPA Practice Advisor, a spouse who did not contribute money may request a dollar amount or a percentage of the retirement plan’s value. The payment may come as a one-time lump sum or as scheduled distributions. If you or your spouse has not yet reached the age of 59 and 6 months, the early withdrawal may lead to a 10% tax penalty. By reinvesting the proceeds into an IRA, however, you may have an option to avoid penalties by keeping the account past age 59.5.
When may spouses keep their stock accounts?
FINRA.org notes how couples with joint investment accounts may face tax consequences by selling and dividing the proceeds. You may, however, discuss dividing your accounts without liquidating them. By opening two new individual accounts, you may consider transferring stocks from a joint account to each spouse’s new individual account.
Divorcing couples may need to negotiate how to divide their investments. A fair division could involve cash payouts or trading an account’s value for other marital property.