How to Divide Investments in High Net Worth Divorce in North Carolina?

Divorces where couples have high-value assets can be complicated, and the process of valuing and dividing assets can require many more resources. Investment portfolios, stock options, dividends, mutual funds, and other investments are a complicated type of asset that must be considered. Many divorcing couples may wonder how to divide investments in high-net-worth divorces in North Carolina.

Investment assets will not always be divided in a divorce, but they often are. Dividing these assets equitably can be difficult, and it is crucial that you protect your financial interests.

The division of assets is present in nearly every divorce. The divorce rate in North Carolina was 2.7 per 1,000 population in 2022, compared to the U.S. rate of 2.4 per 1,000 for reporting states, according to the Centers for Disease Control. While any divorce can have complex financial issues with investments, it is especially common in high-net-worth marriages. These assets are also generally much higher in value.

Classifying Investments and Property for Equitable Division

The first step to dividing assets like investments is to determine the classification of all assets. There are three categories that property may fit into, including:

1. Marital property, which is generally the property acquired during the marriage. These assets and debts are divided between spouses during divorce.
2. Separate property, which includes assets and debts that each spouse gained prior to marriage, and gifts and inheritance given to one spouse during the marriage. However, some separate assets may have gained value during the marriage, and that increase in value would likely be considered marital property. This property is not divided in a divorce.
3. Divisible property, which includes assets and debts gained by parties between separation and divorce. This property could be divided between spouses or not.

Investments are categorized in the same way as other types of assets and debts. If you secured any investment during your marriage, it is considered marital property and is, therefore, up for division.

If you obtained the investment prior to your marriage, the initial investment may be separate, but its increase in value during your marriage may be considered marital. Value increases are more likely to be considered marital property when the other spouse contributed to the investment.

The Division of Investments as Marital Property

Property that is divided in a divorce in North Carolina is divided by equitable distribution laws. This means that each spouse has an equal claim to their marital assets, but the division of those assets may not be equal. Depending on the factors of a couple’s marriage, it may be fairer to divide assets unequally, and this affects the amount of property each spouse receives in the division. This also impacts investments.

The court considers some of the following factors to determine fair division of property:

1. The income, assets, and debts of each party after a given division of property
2. Existing support obligations to prior marriages
3. The marriage duration
4. Each spouse’s age and health
5. The contributions of a spouse to the education and employment of the other
6. The liquidity of marital and divisible property
7. Tax consequences to each party
8. The act of either spouse to waste marital property

Depending on your divorce’s unique circumstances, you may be entitled to a greater or lower percentage of marital assets. This not only includes investments, but the value of assets is important when negotiating a fair division and determining the value of property that each spouse receives. The value of your separate investments is also important, because that is one factor considered for fair division.

Tax Implications of Dividing Investment Assets

When dividing high-value investment assets, the tax implications can be significant, so it is important that this is considered. You want to plan to avoid needless costs and expenses. For example, it’s important to plan the withdrawal of funds from investments based on the market to mitigate the taxes you must pay on those funds.

You also want to consider how early withdrawals from certain retirement accounts can come with significant tax penalties. Other investment accounts may not have these implications. There are options for avoiding these penalties, such as a Qualified Domestic Relations Order. It’s crucial that you work with a high-net-worth divorce attorney who has the resources to navigate these complex financial and tax implications.

FAQs

How Are Assets Split in a Divorce in North Carolina?

Assets in a North Carolina divorce are split by equitable distribution laws. Spouses are assumed to have equal claim to marital assets and debts. The division of that property may also be equal, but it could not be. The court considers several factors to determine an equitable and fair division of assets. This includes the income and liabilities of each spouse, the length of their marriage, each spouse’s separate property, the age and health of each spouse, and more.

What Is Considered High-Net-Worth for Divorce?

There is no set definition for what is considered a high-net-worth divorce, although marriages where couples have combined liquid assets totaling over $1 million are often considered to be high-net-worth marriages. This means that non-liquid assets like homes or other real estate are not included. These divorces are unique because they involve many high-value and complex assets, like investments.

How Do You Decide What Assets to Divide in a Divorce?

State laws will list the type of assets to be divided in a divorce, which typically include the assets obtained during the course of the marriage. The specific way that these marital assets are divided will depend on your circumstances. When you and your spouse get a divorce, you have the option to negotiate the division of property, and an attorney can support a spouse in securing the assets they want. Otherwise, the court decides the division of marital assets.

Is My Ex-Wife Entitled to My Investments?

During a divorce, your spouse may be entitled to investments, depending on whether they are separate or marital assets, and whether they increased in value during your marriage. Property division may address the future growth of assets. Generally, ex-spouses are not entitled to the future value of investments after the divorce is finalized. It is important to talk with an attorney who understands the specific laws that apply to you and your investments.

Protect Your Investment Assets During the Division of Property in North Carolina

When you are in a high-stakes situation like a high-net-worth division of property, you need to hire a high-net-worth divorce lawyer. An attorney can help you professionally evaluate investment assets and work with accountants for tax implications. Contact the Law Office of Charles T. Brooks III today.