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Is the value of your business stock divisible in divorce?

For some divorcing spouses, dividing marital property is the last thing they want to think about. In other cases, deciding who should get what is the first issue people address. New Jersey business owners may have questions about how their stock in a company might be divided in a divorce settlement. It is important in these cases to remember that state law presumes that marital property should be divided equitably.

What that means in terms of stock can be complicated. For example, let's consider one scenario involving a husband whose father gave him shares of stock in a company. Will the stockholder's ex-wife be entitled to a portion of the value of the stock?

If the stock was given as a gift only to the husband, then the asset can be put in the nonmarital property category. In other words, the nonmarital property doesn't have to be divided in the divorce settlement. It's a different story if the husband can't prove that the stock wasn't given to both him and his wife.

In terms of the appreciated value of the stock, the wife may have a claim to a portion of the value if the husband's business decisions caused the value to increase. This sort of value appreciation is called active appreciation. A stock's active appreciation in value can be categorized as marital property.

It's a different story if the value of the stock passively appreciated in value. Passive appreciation might happen as a result of inflation, which can't be controlled by the stockholder. In our given scenario, the wife would not be entitled to a share of passively appreciated value.

As with all disputes over property division in a divorce, evidence is necessary to show that disputed property should be divided in this or that way. New Jersey residents with questions about property division are encouraged to visit our divorce website.

Source: Rhino News, "Divorce Doesn't Mean Division of Family Business," Carolyn Woodruff, Feb. 6, 2014

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