Marital Property in General

• Whether or not you have to cash in an investment in a divorce case is a moot point unless the asset in question is marital. While the specifics of family law vary from state to state, marital investment assets generally include those you purchased with money you earned during the marriage, or money generated from the sale or exchange of other marital assets. If you purchased a given asset during marriage with your inheritance money or other separate property, your ex generally can't get at it. Only marital property is divisible by the court.
  
  

Distribution of the Marital Estate in General

• Your state's definition of marital property applies to every marital asset regardless of whose name appears on it. That being the case, courts still prefer an in-kind division wherever possible. This means that if it is feasible to satisfy a desired division, equal or unequal, by distributing assets and debts intact to the party whose name appears on it, a court will do that. Selling marital assets to split the proceeds is time-consuming and economically inefficient. Judges prefer to leave your investments with you and compensate your ex by giving her more value somewhere else.
  
  

Concerns With Cashing In Investments

• There are a number of reasons why cashing in an investment pursuant to a divorce should be avoided if possible. You may find yourself getting out of a position before the full benefit of your investment has materialized. If there is a gain to be realized, you may incur this in a year where you're floating around in a higher tax bracket without any of the tax benefits of being married. If there is a loss due to depressed market conditions, you will be missing out on the opportunity to rebound. In bull and bear markets alike, divorce can wreak havoc on an investment strategy.
  
  

Why You Might Cash In

• Sometimes, you can't avoid cashing in due to divorce. Your marital estate may be such that an intended division cannot materialize without cashing in a given investment. Depending upon the type of asset, you and your ex may be able to roll all or part of it over without penalties or tax hits. Additionally, you may need the cash to pay for your divorce. While it may not be a wise investment decision to cash something in at the wrong time, the big picture may demand it in order for you to pay your lawyer.