Daytrading & Divorce.....

[nooby_mcnoob]

Ah my area of expertise. The question you have to ask yourself is: are you principled or do you not care what happens so long as you get out?

If it is that you are principled and you don't want to give her anything for the principle of it, then you're going to be miserable and you'll still lose most of your money. If you don't care what happens so long as you get out: give her 60% (which is better than she'll ever get, ever - esp if she's working) with the contingency that if she does not accept you will lose 100% going to court and you will go all the way, with all the experts, etc. You also get her to agree that you owe her nothing going forward.

You also need to assess your stbx: does she want to "get you back" for anything, or is she happy to move on? If so, the above is likely to work.

With day trading, you can make as much or as little as you want. This matters. I bet you're going out on a year following a very good year aren't you?

If it goes to court because she or her lawyer are idiots, make it go really, really, really long. Set it up so that you need 100% of the capital to generate $100K/year. Do not agree to any intermediate agreement. That's how lawyers ensure a cash flow.

Make sure her lawyer understands that she doesn't have any money and you will spend 100% of your money on your own lawyer, and that her lawyer will get nothing. Of course, you should do this in a way that isn't confrontational. They can do the probability calculations in their heads very well. $20K now, or $0K later + time spent, no brainer and they move on to the next sucker(s). Something like: "you know, if this goes on for much longer, all of the money is going to $MYLAWYER."

Divorce and marriage are the biggest legal crock ever invented. Don't get married. Waste of time. I have 3 women I see regularly, all younger than 26, working on adding a 20 year old.

Edit: and to answer your actual question: yes, it will be considered a business, but you can definitely make a case for keeping the capital in the business as you need it to generate income. The case you can make to her is: you can get half the capital appreciation since marriage, or alimony for 5 years based on my trading income of $X.

Also: move on as quick as you can.

 

[jinxu]

I am talking about half of the future profits of the "business", even though it isnt filed as a business. Could she be considered half owner of the business, therefore half the future profits of it, even after the money split?

If it was a retail business that was opened, lets say a drug store, she would be entitled to half the business including half the future profits. Would that be the case with being an independent daytrader who doesnt file as a separate business, just Sched D & Form 8949?

It's a possibility. In divorce court, anything can go and they are very bias. Like someone said, best to get a real lawyer and ask. If her lawyer is any good, he'll use your most profitable year as the basis for future income in determining alimony. You best hope you were never very profitable. j/k....half kidding.

 

[rvsw]

Well I just registered on this forum but I have quite a bit of experience in this so I'm venturing forth to put my views.

manonfire, volente and nooby_mcnoob all have valid points.

It will depend on your state of domicile, how long you are married, whether she works or not and how much do you want to litigate. For example, if you're in California, you are in a community property state. So if the source your trading account is from a joint account where even $1 of community property was commingled, she can put a claim on part of the funds in your account. To figure all of this out, you will have to hire a forensic accountant.

The main issue is that as far as I know, day trading is not a clear-cut issue and therefore you will haveto refer to case law and previous rulings in order to understand all of this.

If you are going to lawyers in order to figure this out, they will usually also have conflicting opinions and unless you are only talking to them during their first 20 or 30 minutes which is for free, you will be paying a good amount of money without reaching any clear conclusion. Unless of course you can find a case law or a ruling which is specific to your state and to your situation.

There are two separate issues here. Is she entitled to the capital / debt which is lying in your trading account? The answer is most probably yes-to some part of it. Also, is she entitled to some part of your business - the answer is far as I can see is that it probably does not better because your entire business valuation is in your trading account and as I mentioned, she's probably entitled to some part of it.

As for the profits or losses going forward, it is a grey area again. But I can tell you that statistically speaking, most parties would not like to be engaged with their ex business because - not only do they share the profit but they also share any kind of problem in the business for which they will also have to control some part of the business. So it is kind of impractical for her to have anything to do with the business going forward. She can definitely have some part of the long-term positions

 

[jinxu]

Divorce and marriage are the biggest legal crock ever invented. Don't get married. Waste of time. I have 3 women I see regularly, all younger than 26, working on adding a 20 year old.

Edit: and to answer your actual question: yes, it will be considered a business, but you can definitely make a case for keeping the capital in the business as you need it to generate income. The case you can make to her is: you can get half the capital appreciation since marriage, or alimony for 5 years based on my trading income of $X.

Interesting that there is data to back up your statement:

Marriage hurts a hedge fund manager more than divorce
by Mark Fahey @CNNMoneyInvest

A fund manager's divorce can tank a hedge fund's performance. The only thing that's worse for it is a wedding.
A fund's alpha -- the measure of how much it beats the market -- falls by an annualized 8.5% around the time of a manager's marriage, according to a study released this month by University of Florida economists. The alpha dips 7.4% during a divorce.


It's surprising that marriage actually does more damage to a fund manager's performance, according Dr. Sugata Ray, one of the paper's authors.

Divorce has always been a red flag for savvy investors. Hedge fund manager Paul Tudor Jones II, said he withdraws his money from a fund when a manager's marriage breaks up.

"You can automatically subtract 10% to 20% from any manager when he is going through a divorce," he told a conference in 2013.

 

[JSOP]

Hello,

Going thru a divorce.

Traded part time before getting married, went full time during marriage.

Only traded my own money & didnt work for anyone else.

That has become my sole source of income.

During a divorce, could my daytrading be considered a business in which the spouse would be entitled to a chunk of the "business"?

I only file on sched D and form 8949. I dont have it set up as a business. But would a court consider it a business?

Thanks

I would say it all depends on the divorce law in the states that the case would be adjudicated, how amicable your relationship is to your soon-to-be-your-ex (whether she's willing to get a quick divorce or prepared for a long drawn-out one to get as much as she can), and most importantly the negotiation skill and experience of BOTH of your lawyers.

In some states of what is called the "community property states" any money that you have pre-marriage in accounts that you have opened and kept completely separate can be converted into marriage property and up to division upon a divorce. You should read this article: https://www.forbes.com/sites/janetn...ried-got-assets-read-this-first/#1fb5e2bd4053 So even though you have traded with your own money, if you live in those states, your trading capital could still be considered be marriage property so any trading profit that you have made using your own money that is now considered marriage property could be up for grabs by her especially if her lawyer is a really shrewd one, regardless how you filed your trading venture UNLESS you have a pre-nup (which I assume you don't if you are starting this thread) or your trading money was completely inherited and has ALWAYS been kept in your accounts and your accounts and never touched any of her or joint account(s) in any shape or form at any time among other exceptions. And especially if her lawyer can show that your soon-to-be-ex has contributed to your trading venture in any minuscule way, giving you emotional support by bringing you coffee everyday, providing you more than her share of childcare services by taking care of your mutual kids, spending HER money buying you ANY equipment used for your trading, a computer screen, a computer chair, a mouse, a keyboard, anything. Trust me ANY TINY little thing that you wouldn't think of would be blown up 100X in a divorce court, you will be surprised unless you know how amicable you and your soon-to-be-your-ex are.

Bottom line: Get yourself the BEST lawyer, the most experienced, the most astute, the most knowledgeable, the most dedicated lawyer your money can buy (I trust your daytrading business is successful). You don't have to find somebody who's a hound dog but somebody or a Gloria Allred (although somebody like her would certainly do) but that person has to be an OUTSTANDING negotiator, somebody who is able to see the big picture and grab the the largest chunk of it but at the same time not feel ashamed of fighting over 1 cent for you. Find a lawyer who's represented financial managers, hedge fund managers and traders in a divorce before so they would have an understanding of how trading funds/profit are treated in a divorce and how to work with the various issues regarding them. Just like @rvsw said, maybe look through old case filings to find these lawyers and also get yourself familiar with how the divorce court perceive trading venture.

Divorce is all about negotiation, nothing else. Just like trading, leave your emotion out of the door. ONE wrong move, one give-in, you will be paying for it for the rest of your life and there is NO stop-loss.

Good luck!

 

[JSOP]

Ah my area of expertise. The question you have to ask yourself is: are you principled or do you not care what happens so long as you get out?

If it is that you are principled and you don't want to give her anything for the principle of it, then you're going to be miserable and you'll still lose most of your money. If you don't care what happens so long as you get out: give her 60% (which is better than she'll ever get, ever - esp if she's working) with the contingency that if she does not accept you will lose 100% going to court and you will go all the way, with all the experts, etc. You also get her to agree that you owe her nothing going forward.

You also need to assess your stbx: does she want to "get you back" for anything, or is she happy to move on? If so, the above is likely to work.

With day trading, you can make as much or as little as you want. This matters. I bet you're going out on a year following a very good year aren't you?

If it goes to court because she or her lawyer are idiots, make it go really, really, really long. Set it up so that you need 100% of the capital to generate $100K/year. Do not agree to any intermediate agreement. That's how lawyers ensure a cash flow.

Make sure her lawyer understands that she doesn't have any money and you will spend 100% of your money on your own lawyer, and that her lawyer will get nothing. Of course, you should do this in a way that isn't confrontational. They can do the probability calculations in their heads very well. $20K now, or $0K later + time spent, no brainer and they move on to the next sucker(s). Something like: "you know, if this goes on for much longer, all of the money is going to $MYLAWYER."

Divorce and marriage are the biggest legal crock ever invented. Don't get married. Waste of time. I have 3 women I see regularly, all younger than 26, working on adding a 20 year old.

Edit: and to answer your actual question: yes, it will be considered a business, but you can definitely make a case for keeping the capital in the business as you need it to generate income. The case you can make to her is: you can get half the capital appreciation since marriage, or alimony for 5 years based on my trading income of $X.

Sounds like you should recommend your lawyer to @David Donner. Still 60% of everything??!!! That is STEEP!!

One thing though the dragging it out is not going to work as well as before for the alimony-paying spouse with the new Trump law that's taking effect next January that alimony can't be tax-deductible for the alimony-paying spouse and won't be taxable as income by the receiving ex.

 

[nooby_mcnoob]

One thing though the dragging it out is not going to work as well as before for the alimony-paying spouse with the new Trump law that's taking effect this Dec. that alimony can't be tax-deductible and won't be taxable as income by the receiving ex.

That's horrific.

 

[JSOP]

That's horrific.

Yup part of the Trump tax package that's actually taking effect next January, my mistake in my previous post. Trump Jr. is divorcing himself now so let's see if Trump Sr. is willing to extend the deadline if Jr. is gonna be stuck in a dragging-out situation himself.

 

[Bobbybax]

If I recall right, she most likely be entitled to half the funds in the account, if that is all the funds you have in the marriage, but best to ask your attorney.

If she takes half your funds it will be easy for your lawyer to argue that logically you will make half your previous income going forward which will slash her spousal support.

 

[nooby_mcnoob]

If she takes half your funds it will be easy for your lawyer to argue that logically you will make half your previous income going forward which will slash her spousal support.

Exactly. That's why I said, she can get one or the other but not both. And tell her the clock is ticking. If she doesn't make a decision you will drag it out so one gets anything. Lawyers are smart, they know the signal when they hear it.