Handling Reinv Divs from Separate Property Stock

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astrohip
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Location: Houston TX

Handling Reinv Divs from Separate Property Stock

Post by astrohip » Tue Nov 14, 2017 1:45 pm

Situation: Married person in a community property state gets a gift* of mutual fund shares from a grandfather. Person sets up a Vanguard account called "Married Person Special Account", to hold the shares, and to make it easy for the transfer to be made (VG to VG account). It will be separate property, and held in this sep property account.

I know the dividends are comm property. The question is, does it muddy the sep property to have the divs reinvested into the same account? It would be easy with records to show, if necessary at some point in the future, that XX shares were the core, and that XXX shares were dividends.

Related question: Are capital gains, at some point in the future, sep or comm property? How about the taxes paid on cap gains? Do those taxes muddy anything?

Thanks.


* For the sake of this thread, let's ignore both the gifting/estate concerns, and the tax liability/cap gain concerns of the shares. I am only concerned with the reinv divs issue.
"Happiness is not about doing, it’s about being." - R Branson

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CaliJim
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Re: Handling Reinv Divs from Separate Property Stock

Post by CaliJim » Wed Nov 15, 2017 11:37 pm

I'm no expert... but according to the interwebs it seems to vary by state.

Looks like you're in Texas.....I just did a brief googleing and found this: http://www.ondafamilylaw.com/property-d ... ts/stocks/

IMHO.... I would think it would be better to keep it as simple as you can and not have to rely on spreadsheets and records that get lost and clouded over the years. So... I suggest not automatically reinvesting the dividends (which are joint community property), but let them accumulate in cash, then periodically transfer them out to a community property account and reinvest them there.

That would keep her separate property from ever becoming commingled and confused.

OTOH: you perhaps could disclaim your interest in the dividends, tell her they are hers to keep, and if you ever divorce, promise to keep your hands off anything in this separate account. And this approach may be best in terms of acting in ways that avoid divorce. Continue to be good like that and you may find those separate dividends coming back to you as some rather nice loot under the Christmas Tree. 8-)
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astrohip
Posts: 427
Joined: Tue Dec 21, 2010 4:29 pm
Location: Houston TX

Re: Handling Reinv Divs from Separate Property Stock

Post by astrohip » Thu Nov 16, 2017 12:13 am

CaliJim wrote:
Wed Nov 15, 2017 11:37 pm
I'm no expert... but according to the interwebs it seems to vary by state.

Looks like you're in Texas.....I just did a brief googleing and found this: http://www.ondafamilylaw.com/property-d ... ts/stocks/

IMHO.... I would think it would be better to keep it as simple as you can and not have to rely on spreadsheets and records that get lost and clouded over the years. So... I suggest not automatically reinvesting the dividends (which are joint community property), but let them accumulate in cash, then periodically transfer them out to a community property account and reinvest them there.

That would keep her separate property from ever becoming commingled and confused.

OTOH: you perhaps could disclaim your interest in the dividends, tell her they are hers to keep, and if you ever divorce, promise to keep your hands off anything in this separate account. And this approach may be best in terms of acting in ways that avoid divorce. Continue to be good like that and you may find those separate dividends coming back to you as some rather nice loot under the Christmas Tree. 8-)
Thanks for the feedback. It's not me, it's for a group of family members. And I like the "take the divs out in cash" to keep it clean & simple idea.
"Happiness is not about doing, it’s about being." - R Branson

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