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Are stocks purchased before the marriage part of community property if they gained in value?

Stocks are often one of the largest assets held by American couples today. The most recent Gallup poll reveals that about 55 percent of Americans own stock. A stock represents a percentage share in the ownership of a company. The value of a stock will typically increase as the business performs well, and may decrease on underperformance by the company. At times, employees of certain companies are given a stock option. This option may be vested or granted at some future time. With so many families purchasing stock assets and many companies offering stock options, stocks are often the subject of division during a divorce. Dividing stocks can be different from dividing a house or car, and bring with them a unique set of concerns. Our Midland, Texas divorce lawyers discuss how stocks and stock options are divided during a divorce below.

Stocks as Separate vs. Community Property

In the state of Texas, property acquired before the marriage is deemed separate property, while property acquired during the marriage is community property subject to division. When it comes to determining whether a stock is separate or community property, the matter can be either simple or complex. If you purchased the stock before marriage and it increased in value, that stock and the value it holds will be your separate property. For example, if you owned 100 shares of Procter and Gamble stock prior to the marriage and it went through some stock splits to become 150 shares, these 150 shares are still your separate property.

The situation changes, however, with a stock that provides dividends. Dividends are considered income. Income from a separate property generated during the marriage will generally be considered community property. Often, these dividends will be reinvested into the stock market. As you can see, this is where the division of stock assets can become complicated. Couples with significant stock options will need the help of an experienced divorce attorney to untangle precisely what should be deemed separate versus what is community property.

Stock options can be even more complex. Generally, when a stock option is earned during the marriage, it will be community property, even if it does not vest until after the divorce. However, certain stock agreements might have different terms. Your divorce attorney will closely review all stock options to ascertain your rights.