What are factors to consider when dividing investments?

Your divorce will likely require splitting up assets between you and your spouse. Your assets may include retirement accounts or different kinds of investments. Dividing up these investments, however, is probably not as simple as divvying them up on the spot. You and your spouse may have a few reasons to hold off on dividing certain assets.

According to The Motley Fool, rushing into division of your investments might cause you to pay out money in certain fees. You might also lose money for other reasons. If you understand what pitfalls to watch out for, you and your spouse might come out of the divorce with more money than you may have first thought.

Taxes

If your divorce requires you to sell investments so that your spouse may reap a share, consider first if you may have to pay taxes for selling your investments at the present moment. For instance, you may need to pay capital gains taxes for selling securities. If you have not owned an investment for more than a year, you might have to pay more in capital gains than if you held onto it for a longer period.

Penalties

Some investments and retirement accounts require you to stay in the investment for a specific period of time. If you withdraw the assets or liquidate the account too early, you may have to pay penalties. This might happen if you liquidate some proprietary investment funds or insurance policies. Still, you may have a chance to avoid penalties and taxes if you follow certain rules before selling or dividing an investment, but keep in mind that rules will vary depending on the account you hold.

Market downturns

Even if you meet all the requirements by law to divide an account without incurring taxes or penalties, you and your spouse might lose money anyway if you sell an investment during a downturn in the market. One question you may want to consider is whether to delay selling your investment until economic circumstances improve. This condition may become part of your final agreement for dividing your assets.