When a couple divorces, few topics are as controversial as the division of assets. Both parties often feel entitled to the assets acquired during the course of the marriage, leading to expensive and time-consuming legal battles. Before you get locked into a battle of wills with your ex-partner, understand how stock options are treated in divorce.
As you work through your divorce, having the right legal team on your side can make a huge difference. Find out why our clients choose us. Call Coumanis & York at 251-990-3083 to schedule a consultation now.
Why One Spouse Received Stock Options
To start, you have to understand why the individual received the stock options. Companies use stock options in a variety of ways to entice potential hires, reward current employees, or retain current employees.
If someone is given stock options as a new employee, it’s likely that they are not being paid what they would receive from another employer in a similar role. Start-ups often do this to bring on new employees and encourage them to be part of the company’s coming growth, even if it means not getting such a large paycheck every two weeks. In this case, the stock options are given for current work.
If a company gives a current employee stock options in order to keep them onboard, it may be considered payment for future services and work. Finally, a company might give employees stock options as a bonus for work that is already completed. This is payment for services rendered.
These distinctions are important because they may affect how stock options are split up in a divorce. If the stock options are compensation for work completed during the course of the marriage, the court may consider them marital property. If they are compensation for work completed outside the course of the marriage, the court may consider them separate property.
When You Can Exercise Stock Options
You also have to look at when an individual can exercise their stock options. Remember, getting stock options does not obligate an employee to purchase them.
If they are given stock options and choose to purchase them after the marriage has ended, those stock options may be considered separate property—even if they were for work done during the marriage. If an employee exercises them during the course of the marriage, the stocks will likely be considered marital property.
You also need to look at the vesting schedule. Consider 500 shares that vest over a period of five years. The employee will earn 100 of those shares each year. The amount vested by the time a divorce happens may be subject to division, while the amount that is not yet vested may be considered separate property.
Determining the Value of Stock Options
Beyond figuring out whether or not stocks are even marital property, you also have to consider how the stocks are valuated during the divorce process. The parties might choose to hire an expert to assign an accurate value to the stocks, either by determining the value gained by the stock during the course of the marriage or by using a different stock valuation model. Different valuation models can produce significantly different outcomes, so it is crucial to discuss this with your attorney.
What This Means for You
While dividing assets is always a tricky part of divorce, stock options are easily one of the most complicated types of assets to split up. That’s why you need to talk to your attorney if there are stock options on the table. Trying to handle this type of issue on your own can lead to unnecessary battles, delays, and issues with your divorce. Your attorney can look at your situation, determine what kind of expert input is needed, and fight for you to get what you deserve.
Call Coumanis & York Today
No matter where you are in the divorce process, the team at Coumanis & York is here to help you. We know that this is a challenging and draining time but having dependable legal representation can help you get through it with minimal stress. Get started now by calling us at 251-990-3083 or .