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Upon divorce, you and your spouse are selling everything you own to (a) each other, or (b) a third party. The first objective is to determine what is "separate property" - property acquired before marriage or after separation or by gift or inheritance; "community property," – all property acquired during marriage and before separation including all forms of compensation such as stocks in lieu of salary, gifts from employer or vacation pay; or "quasi-community property" - real estate and personal property acquired by a spouse while living out of state that would have been community property.
In regard to the Investment Portfolio, you should determine all cash and receivables by your bank statements and any money pending such as a personal loan. Next, determine the value of stocks and bonds by contacting your investment advisor, a brokerage firm, the business section of a newspaper, or a financial website. In addition, any insurance policy and its current and surrender value should be investigated.
Next, you should check business stocks by perusing databases on comparable sales. When an option is exercised, its payoff rises by one dollar for each dollar the stock price is above the exercise price. If the stock price is below the exercise price when the option matures, the option is not exercised and it has zero payoff.
If a spouse's stock options have vested during the marriage, the options are community property and are subject to equal division. Unvested options, though they have no present value, are subject to division depending on the company’s plan.
A retirement account is considered community property if it was earned during marriage. In a Defined benefits plan (pension plans), an employer pays the employee a monthly sum until the employee dies. The value depends on the rate of inflation and the life expectancy of the beneficiaries. A defined contribution plan or an IRA or 401(K) is easier to value because the administrator will report the current value to the holder in regular statements.
A calculation is used to determine how much of a defined benefit plan the community property is. First, the total number of months of participation and the number of months between the date of marriage and the date of separation is determined. Finally, the first number is divided by the second to obtain the percentage of community ownership.
Separate property is property acquired before marriage, property received after the date of separation, inheritances, and gifts. Separate property is not divided in the divorce. Debts incurred before getting married or incurred after separating are separate property debts. Spouses are required to file proof of community and separate property on a Preliminary Declaration of Disclosure.
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