So you own stocks and are getting divorced in Minnesota? Figuring out who gets what can get confusing fast.
Unlike community property states where all assets are automatically fifty-fifty, Minnesota uses “equitable distribution“—aiming for fair but not necessarily equal. More wiggle room…and more room for disagreements.
Stocks present special challenges, too. Even if they’re solely in your name, if marital money helped them grow, your ex still may have a claim to part—or cash equal to the value. But other rules and factors come into play, too. It’s tricky!
The good news is that stocks can be divided fairly, avoiding lengthy court battles. This guide walks through the key laws and steps around categorizing, valuing, and finally splitting stock investments in a Minnesota divorce. You’ll get the insider advice needed to make informed, money-saving decisions.
How Are Stocks Classified in a Divorce?
In Minnesota, all assets in divorce fall into two categories: real property like homes and personal property, which encompasses stocks, bank accounts, vehicles, retirement plans, and so on. State law mandates the equitable division of both real and personal property, including stock interests.
The first step is determining whether a stock asset is considered marital property or non-marital property. Marital property includes all assets acquired during the marriage, while non-marital property consists of assets brought into or inherited during the union. The default presumption is that stocks purchased within the marriage are deemed marital assets.
To claim a stock holding as non-marital property not subject to division, proof must be provided to the judge to overcome the marital presumption. This may involve showing the stocks were acquired before marriage, purchased with inherited funds, or acquired completely independently of marital contributions. Proper documentation is crucial.
Dividing Investment Assets in Divorce
When dividing stocks in divorce, factors considered may include the source of funds used to purchase them, stock appreciation during the marriage due to joint efforts, and the guidelines for equitable division unique to Minnesota.
The division of stocks is usually accomplished by:
- Sell-Off Method – Liquidate all saleable stock and split net sale proceeds. For unvested RSUs, owning spouse provides buyout compensation to other spouse based on present value.
- Spousal Buyout – Stock holding spouse retains ownership but pays lump sum or installments to ex-spouse equivalent to predetermined fair market buyout value of shares.
- Deferred Distribution – Postpone division until a certain date or milestone, then sell stocks and split sale revenue according to ratios established in mediation.
For retirement accounts holding stocks, a qualified domestic relations order (QDRO) can divide the assets between spouses without immediate taxation.
Your divorce lawyer can help you determine the fairest and most tax-advantaged way to split stock assets based on your situation.
Tax Consequences of Dividing Stocks in Divorce
Dividing stocks and other investments comes with tax considerations. Your divorce lawyer will aim to split assets in the most tax-efficient manner possible.
Some key tax consequences to keep in mind:
- Transferring appreciated stocks between spouses is not a taxable event. However, if the receiving spouse later sells the stocks, they may owe capital gains taxes.
- Dividing retirement accounts like 401(k)s via QDRO allows tax-free transfers between spouses. However, withdrawals will be taxed as ordinary income when money is taken out of the account.
- Selling jointly owned stocks and splitting proceeds incurs capital gains taxes.
Your divorce attorney can help analyze tax impacts and project future tax liability arising from the property division.
Getting Experienced Legal Help with Splitting Stocks
Dividing stock assets in divorce is rarely straightforward. The assistance of an attorney experienced in classifying, valuing, and dividing stocks and equity compensation is vital.
At Martine Law, our Minnesota divorce attorneys have helped many clients navigate the complexities of splitting stocks and options. We take an assertive yet strategic approach to secure our clients’ fair share of these marital assets.
Schedule a consultation today to discuss your stock assets. We can devise a property division strategy to achieve the best possible outcome while minimizing taxes and other costs. With seasoned legal guidance, you can move forward with confidence, knowing your financial interests are protected.
