You’ve worked hard to make the right investment moves for yourself and your family, but suddenly, your marriage is ending. In the midst of all the heartache and stress divorce brings – you suddenly realize your financial future is at risk, too. Are there ways you can make it easier to navigate divorce and investments with confidence? Yes. So, if you are nervous about how to divide assets in a divorce, here are three tips:
Get Access to Investment Accounts
In your family, do you control the information regarding your financial accounts, assets, and investments? This could include usernames, passwords, and information about renewals and using investment management resources. If so, you might be in a good strategic position as you enter the divorce process. If not, take steps to gain access to essential financial management information. Take inventory of all known financial assets and investment accounts. If you aren’t sure you have a complete list with all necessary access information, do some research. To start, it is important to understand how each account is set up (for example, as individual or joint assets). Then, asset by asset, make sure you have login credentials, passwords, contact information for account managers, recent account balances, and renewal dates, if applicable. If accounts are connected to credit cards with expiration dates, make sure those stay current if the accounts will remain open. This is often the case with monthly bills that are paid by autopay debits.
Update Account Beneficiaries
In addition to keeping financial account access data current, it is important to keep beneficiary information up to date. Especially during divorce, it can be crucial to review and perhaps even change beneficiary designations. If you wouldn’t want your spouse to be your beneficiary after the divorce, it’s usually wise to change the beneficiary designation before the divorce is final.
Divide Up Accounts
Dividing investments in divorce often entails separating and distributing account assets as part of the final settlement. This is because Indiana is an equitable distribution law state, which means that all marital property is to be divided in a “just and equal” manner. Normally, this follows a presumptive 50/50 split, although achieving this level of equality can be complicated, especially when it comes to investment assets. It is important to know when dividing investments in divorce that even property that is not jointly titled is presumed to be marital property subject to fair and equitable distribution.
Due to the varying designs, characteristics, and legal requirements of investment accounts, knowing how to divide assets in divorce can depend on the type of investment account. When dividing taxable investment accounts such as a jointly owned brokerage account, for example, you’ll most likely need to provide a letter to the managing financial institution requesting the joint account be closed. From that point, you’ll want to open separate accounts in each spouse’s name. If you have a reasonable concern regarding actions your spouse might take with investment accounts, check into having your financial institution freeze your account until an agreement on division is reached. Because legal and reporting requirements may vary based on account type, and because taxes, financial penalties, or other fees may apply in certain circumstances, it is important to work with trusted financial and legal advisory resources.
IRA and pension accounts must be “vested” to be considered a marital property asset. A plan is considered vested if there is a present right to withdraw benefits; there is a right to receive pension or retirement benefits that are not forfeited upon termination of employment but are payable after the divorce; and there is a right to receive pay acquired during the marriage that is, or may be, payable after the dissolution of marriage. For vested plans meeting this standard, the court can typically put in place a Qualified Domestic Relations Order (QDRO) granting one spouse half of the other’s pension or retirement account, in accordance with all state and federal laws.
For the court to achieve equitable distribution of assets when dividing investments in divorce, it has certain latitude and might decree that one spouse retains most or all these vested benefits while the other spouse receives an offsetting share of other property or liquid assets. What’s more, regarding division of pension assets, Indiana divorce law permits the court to apply a “coverture fraction” which values and divides only the pension amount acquired during the marriage.
Note that withdrawals and distributions from vested interests in investment accounts, IRAs, and pensions, will often trigger penalties and taxes.
Key Takeaways:
Knowing how to divide investments in divorce can help provide peace of mind during this challenging time. Here are some important factors:
- In Indiana divorce cases, all “marital property,” including vested investments and retirement accounts, goes into the marital pot for division
- Indiana is an “equitable distribution” law state with a presumptive 50/50 split of this marital property in most cases.
- It is critical to be able to access investment accounts; therefore, you must know essential information such as login usernames, passwords, account numbers, renewal dates, account management contacts, and more
- It can be crucial to review and perhaps even change beneficiary designations before the divorce is final
- Investment accounts can have varying designs, characteristics, legal requirements, and tax implications that affect how they are divided in divorce
- The court can put in place a Qualified Domestic Relations Order (QDRO) granting one spouse half of the other’s pension or retirement account
- Indiana divorce law permits applying a “coverture fraction” which only values and divides the pension amount acquired during the marriage
- Because dividing investments in divorce can be complicated, it is wise to engage the services of a qualified and experienced divorce attorney legal firm such as Dixon & Moseley, P.C.
At Dixon & Moseley, P.C., our attorneys serve clients based on decades of collective experience handling divorce and investments, including how to divide assets in a divorce. To learn more, contact us today at 317-972-8000.
We believe that being an educated legal consumer can help you make the most of the legal experience in meeting your legal objectives. This blog post, for example, provides general educational material regarding dividing investments in divorce. This information is presented by attorneys at Dixon & Moseley, P.C. who practice throughout the State Indiana. It is not a solicitation, nor is it intended to provide specific legal advice. Information contained herein is subject to change. This is an advertisement.