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How Does a Declining Stock Market Impact Your Divorce?

The COVID-19 pandemic continues to make waves around the world. A shared concern among many people has been the related economic fallout. While the US stock market plummeted at the beginning of the pandemic, it has since had several consecutive weeks of increases. As of June 2020, the US stock market was back to where it was at the beginning of the year. The historic plunge, however, may have had a major impact on your finances. Find out how changes in the stock market and economy might affect your divorce.

How Will Stocks Be Divided?

In Colorado, vested stocks will become part of marital, or community property, during a divorce case if the stockholder purchased them during the marriage. As part of community property, they will be subject to division during a divorce. The courts handle unvested stocks differently, however. In most cases, unvested restricted stocks will be part of marital property if it carries dividend and voting rights. The courts will also view unvested options as marital property, but only to the extent that the person has an enforceable right to the options through a contract.

The Colorado courts can view stocks as income or property depending on the situation. In a divorce case involving stocks, the courts in Colorado may give couples multiple options. The couple could sell their stocks and divide the profits as part of marital property, but this could have tax implications. They could also split the stock holdings as if it were property – down the middle, splitting the investments equally. Since the division of stocks during a divorce can be complicated, you may wish to hire a divorce attorney for assistance.

Will My Losses Impact Child Support and Alimony?

When determining child support and alimony payments during a divorce case, the Colorado courts will assess many factors specific to each spouse. These include the spouse’s current income. In general, the courts will not count earnings or losses related to the stock market as part of a parent’s income. Instead, the courts will only calculate a child support order based on both parents’ combined adjusted gross incomes.

The courts will use child support guidelines that calculate an award based on a mathematical formula. The courts take into account gross income and costs related to childcare. Then, they adjust the support award based on a child custody arrangement. To determine an alimony award, the courts will compare both spouses’ incomes and look at the quality of life each spouse had before the divorce.

Can Support Payments Be Modified According to My Losses?

During times of economic downfalls, such as recessions or the current pandemic, many parents may suffer financial losses that impact their ability to pay child support and/or spousal maintenance. If you lost your job or suffered another significant decrease in income, you could petition the courts to receive a temporary or permanent support modification. Unless a decline in the stock market directly impacts your income, however, you most likely cannot use your investment-related losses as a reason to reduce your support payments. Since the Colorado courts look at your income, not your earnings from investments, to calculate support amounts, a decline in the stock market most likely will not constitute a valid reason for a modification.

Should You Wait Until the Market Is Back to Normal to Get a Divorce?

If a decline in the stock market or the US’s economy impacts your ability to earn a living wage, this could affect your divorce. A change in the amount you or your spouse earns could change how much the court gives in child support and spousal maintenance. It could also be more difficult to afford the costs of divorce during a recession. In addition, property values can decrease. While it is ultimately up to you whether to postpone your divorce, it is generally not necessary to wait. You will always have the power to seek a support modification from the Colorado courts if you or your spouse’s financial situation changes in the future.

Author Photo

Stephen Plog, co-founder of Plog & Stein, P.C. in 1999, is a dedicated family law attorney with almost two decades of expertise in Denver. Focused exclusively on family law since 2001, he excels in both intricate legal writing and courtroom litigation, having navigated cases in all Denver metropolitan area District Courts. Steve’s comprehensive background, including a Bachelor’s Degree in Psychology and a law degree from Quinnipiac University School of Law, underscores his commitment to providing insightful and personalized representation in family law matters.