December 10, 2024

Divorce will throw many challenges your way. There is the emotional fallout of an ending relationship and everything that had built up to this point. There is the logistical fallout of breaking one household into two, especially when children are involved. There is also potential for a significant financial fallout. You may have done everything right to build your wealth and plan for your future, but the asset division in a divorce process can threaten all that stability.

Understand Your Asset Classification

In your divorce process, you will be required to provide a thorough list of your assets and debts. One of the most crucial pieces of this process is classifying your assets as marital v. separate property. In Ohio, martial property is defined as any property that was acquired during the marriage by either spouse, even if the property is in one name only.

This includes income, retirement accounts, investment accounts, and any other financial assets. Separate property is usually limited to assets that one spouse owned prior to the marriage, or gifts or inheritances that were designated for only one spouse. This can be complicated for investment portfolios.

If one spouse had an investment portfolio prior to the marriage, this portfolio could be considered separate property. However, if the investment has grown considerably during the marriage, or if the other spouse has made contributions from joint accounts during the marriage, these investment portfolios may be classified as marital property, since their increased value accrued during the marriage.

If you are going through a divorce and are concerned about how your investment portfolio will be classified, it’s important to speak to a financial professional as well as a divorce attorney who has experience with high asset divorces like yours.

Document Your Investments Thoroughly

The best way to safeguard your financial assets during the divorce process is to make sure that you are documenting everything thoroughly and completely. You need to understand exactly what you own and how much it is worth. While there are some who have a solid grasp of their full portfolio, this isn’t always the case.

If you are going through a divorce, or even if you are just considering a divorce, it’s important to document your full financial portfolio and include all of your investments. During the divorce, you do not want to be accused of hiding or concealing assets, as even inadvertent omissions may be looked at unfavorably by a judge during asset division. Make sure everything is not only documented, but is documented correctly, including any and all contributions to joint accounts and investments.

Create a Strategic Plan for Managing Assets

Asset division is part of the divorce process, and this will usually include your full financial portfolio as marital property. This doesn’t, however, mean that you are destined to watch your investment portfolio crumble. Splitting investments isn’t necessarily as straightforward as splitting other assets or property.

If you have a significant investment portfolio, one of the smartest things you can do to safeguard that portfolio is to not only hire a financial advisor who can give you all of the potential drawbacks of different division plans, but an attorney who is effective at negotiating.

While Ohio is an equitable distribution state, that doesn’t mean every single asset is divided in half, and having an attorney who can look at the big picture and create a strategic plan for how to approach and negotiate the division of an investment portfolio like yours can go a long way toward protecting your financial future.

Seek Guidance From Financial Professionals

The dollar amount that defines the value in an account is one number, but with an investment account, that may not be the right number to look at. If you liquidate an investment for the purposes of asset division, there can be serious tax consequences that will harm both parties.

In other cases, certain retirement, savings, and brokerage accounts are taxed differently, so when looking at the overall value of the account, consideration of the tax implications of all divorce asset divisions is key.

A financial advisor can look at the big picture of how your divorce and the asset division will impact your overall financial portfolio. Short-term sacrifices may be better in the long run, both for tax time and overall growth and stability.

Revisit Your Portfolio When the Divorce is Finalized

Once you are in the divorce process, you need to see it through before you can make any changes to your investment strategy. During this time, you can work with your financial advisor and attorney to make the best decisions you can to try to keep the process from becoming contentious or hostile while you avoid any major moves.

Once the divorce is finalized, you can sit down with your financial advisor, revisit your new portfolio, and begin your strategy to rebuild and restructure where you need to.

This may include adjusting policies, making tax filing changes, and updating accounts with new beneficiary designations.

Divorce can be difficult on many fronts, but it doesn’t have to lead to destroying the portfolio you worked so hard to build. With the right team, you can safeguard your investments while still dividing assets fairly. If you are facing a divorce and want to ensure your financial portfolio won’t suffer unnecessarily, contact my office right away. I’m an experienced divorce attorney skilled in high-asset divorces, and I can help.