Which Marital Assets to Opt for During Divorce

Challenge: How to make wise financial choices about marital assets during divorce

A couple is divorcing. The husband has been primarily dealing with the couple’s investment portfolio. The wife has limited insight into the couple’s finances. Now the couple is deliberating how to divide the marital assets, with input from their attorneys.

The husband informs the wife and her attorney that the portfolio has $2 million in real estate and $2 million in publicly traded stocks. The easiest split would be for one spouse to take the real estate and the other to take the stocks. Which investments should the wife take? Following are two possible scenarios.

Scenario 1

Since the stock market is volatile and the wife is not experienced at picking stocks, the husband suggests that she take the real estate. After all, real estate is a solid investment; there will always be a limited supply of land. The wife and her attorney agree, and the couple reaches a settlement.

The wife is excited to own various pieces of real estate. It doesn’t concern her that the real estate comes with debt, since the net equity is valued at $2 million. However, she soon learns that servicing the debt requires regular payments. The wife is struggling to cover her own expenses. Soon, she can’t make the required payments. She learns quickly that real estate is an illiquid investment. It’s a bad time to sell real estate. She doesn’t have time to wait for a good price. She is able to sell some of the properties at a discount, and the lender forecloses on the remaining properties.

Two years after the settlement, the husband’s stock positions have increased to a value of $2.3 million. Although the wife no longer has a liquidity crisis, she is only left with $1 million after her properties are liquidated. The husband is $1.3 million richer, because he was savvy at picking and managing the investment pieces in the couple’s portfolio.

Scenario 2

The couple’s real estate assets are located throughout the United States. The wife agrees to take the stock positions because they are liquid and require less ongoing management. Her attorney agrees. Eager to end negotiations, the couple signs a settlement agreement.

Nobody questioned the husband’s valuations of the real estate because he presented recent purchase prices. The wife was unaware that the husband had purchased all real estate properties from distressed sellers within a year, at great discounts. The actual fair market value of the real estate was closer to $3 million. But the wife and her attorney did not realize that the purchase prices did not reflect fair market value. At the same time, the stock market experiences a difficult two years. The wife’s stock positions drop in value from $2 million to $1.8 million.

Two years after the settlement, the husband is sitting on real estate valued at $3 million, while the wife is holding on to stock valued at $1.8 million. The husband is $1.2 million richer than the wife.

Strategy and Solution

Now turn the clock back. Before any decisions are made, the wife’s attorney refers her to Cornerstone Wealth Management. Cornerstone analyzes the investments in the portfolio, helps the wife decide which investments appear more promising, and helps her understand her risk tolerance. In addition, Cornerstone recognizes the significance of diversification. Cornerstone advises the wife to spread her risk by taking half of the stock assets and real estate properties. Cornerstone then allocates the stock portfolio appropriately, while assigning the properties to some of its top real estate managers.


The wife’s equal shares of both the securities and real estate are enabling her to respond and benefit from market fluctuations and opportunities. With Cornerstone’s expertise and management, she maintains the original value of her assets while positioning it for future growth.

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Disclaimer: Information provided is for illustrative purposes only and should not be considered investment advice. The information provided is hypothetical in nature, does not reflect actual investment results, and is not a guarantee of future results. No reliance should be placed on any such information when making an investment decision. Nothing herein is intended as an endorsement by any person of Cornerstone nor should the information be construed as a statement of a typical client’s experience with Cornerstone. No guarantee of investment performance is being provided and no inference to the contrary should be made.