Hi, my name is Daphna Schwartz and I am a lawyer with the Feldstein Family Law Group.
Today I’m going to talk to you about a decline in investments, after a separation.
When spouses are legally married and they separate, they are entitled to claim an equal division of their assets accumulated during the marriage. This division is termed equalization.
Equalization means that the spouse with the lesser of the two net worths is entitled to one half the differences between them.
You may question what to do with your investment portfolio when you separate.
If you have stocks – often referred to as equities — valued at $1,000,000 at the date of separation you should consider selling and liquidating your equities. This is because your spouse is entitled to one half the value of your stocks at the date of separation.
If you do not liquidate your equities at the date of separation and it takes months to settle your financial issues with your spouse, you run the risk of your stocks declining in value. When you and spouse finally settle your financial issues, and if your stocks unfortunately declined in value and are now worth as an example only $500,000, your spouse will still be entitled to receive his or her equalization payment based on the value of $1,000,000 as at the date of separation.
This date and value is because selling your stocks and preserving the value of the investment was in your control to do so.
If you own a business at the date of separation and the value of the business declines due circumstances beyond your control, such as poor market conditions, then you may possibly be successful in arguing that your spouse is not entitled to half the value as of the date of separation, but rather only entitled to half the value of the business months later when you and your spouse settle your financial issues. This is a very difficult argument to make even on good facts. Thus, you need to be very careful regarding a large investment portfolio that exists on the date of separation, regardless of the mix of investment types, such as stocks, bonds, mutual funds, real estate, and perhaps a business including a business.
If you would like to learn more about a decrease in assets post-separation, you can visit our Feldstein Family Law Group website.
If you need legal advice about your own situation, please call us at 905-581-7222 for a consultation. Thanks for watching.