How to Protect Investments From a Plunging Market During Divorce

 Posted on March 18, 2020 in Divorce

On Monday, March 16, 2020, the Dow Jones saw its worst point drop in history. The coronavirus continues to stir up a volatile market, causing gains from the last three years to disappear completely in a matter of weeks. Especially in cases of complex divorce, this could mean significant losses to you and your former spouse’s investment and retirement accounts, which are tied to these plummeting markets. To help alleviate losses, there are some strategies you should consider when drawing up your divorce decree and figuring out how to divvy up these accounts.

Planning Your Divorce Around a Volatile Stock Market

There is no way to predict the future, and there is certainly no way to know for sure what will happen in the stock market in the days, weeks, and years to come. While the common belief is that everything tends to stabilize over time, it is difficult to see this when faced with market nosedives like those taking place lately. Regardless, here are some tips to consider during divorce when deciding how you will safeguard your investments and retirement accounts against these market downturns:

• Understand Cost Basis of Stocks—The original purchase price of a stock—that is, the amount of money originally paid to attain the stock—is considered the “cost basis.” Overall, when divorce attorneys and judges help you and your former spouse determine what is “equitable” in Illinois in terms of dividing up the investment accounts, they are looking at the cost basis of each investment. Due to this, you will want to take a closer look at which investments your partner wants to take or which investments are being assigned to you. In some cases, you could face a huge tax bill due to appreciation, or you might receive some stocks that are nowhere near their “cost basis” value anymore.

• See a Certified Financial Analyst—It is not easy to wade through all of these complex financial matters, so you should definitely have an accountant look at your and your former spouse’s investment and retirement accounts. They will be able to help you get the most from the equitable distribution of these accounts. Do not worry—your divorce lawyer will probably enlist the help of a certified divorce financial analyst right away if your divorce is particularly complex.

• Pay Close Attention to Wording in Your Divorce Decree—If the divorce agreement says you will get a specific dollar amount from the investments and retirement accounts, then you are in for a rude awakening when market fluctuations result in a different valuation later on. Aim for percentages and not specific amounts when it comes to these types of accounts in your divorce agreement.

• Prioritize Your Long-Term Goals When Investing—Compartmentalize each of your long-term financial goals, taking however large or small investment risks that you can manage depending on your objectives, timelines, and needs for that particular area. For instance, your strategy for retirement might be different if your former spouse split his/her account with you when you were younger versus when you were older.

Contact a DuPage County Complex Divorce Lawyer

As the markets continue to fall, it is easy to panic about your investment and retirement accounts. When dealing with a divorce at the same time as these market slumps, things can get even more complicated. To ensure your financial interests are protected, call a Wheaton IL investment and retirement account divorce attorney at 630-871-1002 for a free consultation. Andrew Cores Family Law Group’s knowledgeable professionals will give you the clarity and confidence you need to relieve you of the stress during these challenging times.

Sources:

https://www.cnn.com/2020/03/15/investing/stock-futures-global/index.html

https://www.forbes.com/sites/jefflanders/2011/08/16/what-a-volatile-stock-market-may-mean-for-a-womans-divorce-settlement-agreement/#795935fd6ce6

https://money.usnews.com/money/personal-finance/mutual-funds/articles/2015/11/16/how-to-handle-investments-when-you-divorce