As a divorce lawyer, I tend to view many macro events through the lends of my profession. What impact will tax cuts have on my clients? What economic shifts or “black swan” events may be to the benefit, or the detriment, of those I represent? I have previously written about the impact of inflation, or about increased mortgage rates, for instance.
I am writing today at a time of increased stock volatility. As with most things, there is no guarantee it will continue. Stock volatility comes and goes. We have been in a bull market for quite some time, but things appear to be choppier at the time of this writing. Will it turn out that way, nobody really knows.
But there are certain steps one can take, or at the very least things to consider, when it comes to stock market volatility and divorce.
Stock Market Volatility and Divorce Considerations
A big portion of any divorce involves dividing marital assets. Most adults have some form of stock or mutual fund holdings, whether it be in retirement funds or taxable accounts. These types of funds are different from, say, monies held in a checking account, as they are constantly changing. Day to day, and often-times even second to second, the value of stocks are changing, which provides a moving goalpost in a divorce. What were to happen, for instance, if you are currently holding stock in the next Enron? Alternatively, what if your “penny stock” of yesterday is suddenly, today, worth 10x more because of market fluctuations. As you can see, these types of movements (and even far more subtle ones based upon the natural ebbs and flows of the market) can render it difficult to value divorce assets, and to finalize a Marital Settlement Agreement. You may be particularly vulnerable, if your partner is the one who often handles the finances for the relationship. So, what can you do?
Specific Steps to Combat Stock Market Volatility in a Divorce
First, you will want to gain a full understanding of all marital assets and debts. This will include current and past statements of all brokerage accounts, such as Fidelity or Vanguard, or any other entity holding marital funds. Only by understanding the complete picture of your assets, will you be able to set forth a workable plan for finalizing your divorce. As well as protecting your assets and protecting against downside risk.
Next, you will want to consider whether your are comfortable with the current holdings and the risk profile. Now may be a time to consider a more conservative bent regarding your assets. It is possible that you previously intended to hold funds for a long time, and were thus open to a more risky asset profile, but you will now need to use those funds sooner rather than later, such as for refinancing the marital home.
Agreeing to Minimize Risk
Thereafter, you will want to work with your attorney and the other side to determine if you can agree to how the funds will continue to be held. Perhaps a certain portion will be moved into treasury funds rather than Bitcoin. That is just an example, obviously, the potential moves are both varied and personal. Care should also be taken to consider the tax impact of any such moves. Care should also be taken to not unilaterally make any major changes to the investment profile that may impact marital funds. It may even make sense to agree to divvy up certain assets prior to the divorce being finalized, particularly if one partner is ok with a higher risk profile than the other.
By keeping in mind the above, you can take the appropriate steps to help protect against market volatility.
Partner with Carl Taylor, Esq.
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