Appreciation of Stock Portfolio Assets Related to Family Law in California/Community Property State

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schrute
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Appreciation of Stock Portfolio Assets Related to Family Law in California/Community Property State

Post by schrute » Sun Jan 21, 2018 5:08 pm

I've been married for over a year now and things are going fine, never asked my spouse to sign a pre-nup. I never did much research on Family Law or Divorces in California, but started reading a lot about community property states. My understanding is that separate property (defined here as assets acquired pre-marriage) remains separate property. What about for a stock portfolio?

So I have stock in a company acquired pre-marriage. If I sell it, I understand that all the gains would still be separate property (in California). If I use those proceeds to buy another stock (or maybe the same one if it dips), the stock continues to be mine. Basically treated as passive income.

However, if I were to day trade, I would be using marital effort and it would introduce a community interest in the account.

I'm wondering what the fine line is between keeping such property separate where too much effort would transmute gains into community. Does anyone know? If I buy/sell 3x a year? If I buy/sell 1x a year?

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BolderBoy
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Re: Appreciation of Stock Portfolio Assets Related to Family Law in California/Community Property State

Post by BolderBoy » Sun Jan 21, 2018 5:46 pm

schrute wrote:
Sun Jan 21, 2018 5:08 pm
So I have stock in a company acquired pre-marriage. If I sell it, I understand that all the gains would still be separate property (in California).
IANAL.

I wonder if the gains that occurred from the date of the marriage to the date of sale would be "community property." The stock would still be yours alone, of course.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

schrute
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Re: Appreciation of Stock Portfolio Assets Related to Family Law in California/Community Property State

Post by schrute » Sun Jan 21, 2018 5:52 pm

BolderBoy wrote:
Sun Jan 21, 2018 5:46 pm
schrute wrote:
Sun Jan 21, 2018 5:08 pm
So I have stock in a company acquired pre-marriage. If I sell it, I understand that all the gains would still be separate property (in California).
IANAL.

I wonder if the gains that occurred from the date of the marriage to the date of sale would be "community property." The stock would still be yours alone, of course.
My understanding is that it is. All gains from separate property are separate property due to passive appreciation, in the state of California. Same thing for dividends. If I were to move to another state, I suppose that's different. In some states, I understand that all gains post-marital are community property and subject to equitable distribution in a divorce.

scifilover
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Re: Appreciation of Stock Portfolio Assets Related to Family Law in California/Community Property State

Post by scifilover » Mon Jan 22, 2018 10:24 am

The devil can be in the details. With your trading business, how will you file taxes? I think you will have to file separately and not co-mingle your trading funds with community funds.

Have you discussed with your spouse?

schrute
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Re: Appreciation of Stock Portfolio Assets Related to Family Law in California/Community Property State

Post by schrute » Mon Jan 22, 2018 1:00 pm

scifilover wrote:
Mon Jan 22, 2018 10:24 am
The devil can be in the details. With your trading business, how will you file taxes? I think you will have to file separately and not co-mingle your trading funds with community funds.

Have you discussed with your spouse?
I don't have to file separately, at least according to this viewtopic.php?f=2&t=238834&sid=e3e7ec93 ... f0ff6b3417. Taxes are being paid, but the accounts are separate. I would file as joint.

Have not discussed with my spouse yet.

schrute
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Re: Appreciation of Stock Portfolio Assets Related to Family Law in California/Community Property State

Post by schrute » Mon Feb 12, 2018 9:34 am

Some case law states two things may be of factor: 1) skills or abilities in the stock market and 2) whether or not the performance beats a benchmark like the Dow Jones.

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