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2 divorce challenges when marital income has been invested

On Behalf of | Feb 21, 2023 | Asset Division

When you no longer live paycheck-to-paycheck and instead want to develop your financial independence, investing some of your income is a key step. Diversifying how you hold your resources means that a slump in one area of the economy, like employment or stock values, won’t leave you with totally diminished personal resources.

Your investments in stocks, digital assets and even real property help protect your financial solvency and reduce the strain you experience due to economic fluctuations. Unfortunately, those investments will also create two challenges that can complicate your upcoming divorce proceedings.

How do investments create unique challenges for divorcing spouses?

1. They may not agree on what they must share

The property division approach in Tennessee prioritizes a fair or equitable outcome. Assets acquired during the marriage are often treated as marital property that you will need to divide. (At least, you’ll need to divide the total value of the sum of your marital assets.)

However, teasing out your separate property from marital property can be difficult when you used the same account after marriage as you did before marriage. Determining which investments are subject to division and which are not will be a big part of the property division process.

2. They may not agree on the value of their investments

Whether you purchased stock or unimproved land, the goal of investing is to increase wealth and protect it from economic downturns. Often, the best investments involve a long-term perspective.

You may have bought vacant real property last year expecting that suburban sprawl will reach that area in 20 to 30 years when you are ready to retire.

If you sell the property at the time of your divorce, it may not yet have reached the price that you believe it could. In fact, depending on the economy at the time you file for divorce, you might have to take a loss on certain investments.

Spouses may have a hard time negotiating what is the appropriate value for an investment if neither the price that they paid originally nor the current fair market value truly represents what the investment is worth. It may take lengthy negotiations for you and your spouse to agree on what investments you need to share in your divorce and also what they are worth as you decide how to fairly share them.

Identifying potential sources of dispute and challenge in your upcoming divorce proceedings will help you and your spouse more effectively address property division challenges and other concerns.

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