How Are Stock Options Divided During Divorce?

The division of marital assets is often one of the most contentious issues couples face during divorce. Even if a divorcing couple only has a small estate such as a home or a few retirement accounts, determining who gets what can be a complicated endeavor. You can imagine, then, how challenging this process can be for couples with more complex or easily overlooked assets such as stock options and restricted stock. But what exactly are these assets, and what factors decide who gets them?

Stock Options vs. Restricted Stock

Stock options are a type of employee benefit which grant workers the right to purchase company stock at a set price at a future date, based on the idea that this price will be far lower than its future trading price. Restricted stock, on the other hand, are company shares that are given to employees at no cost but may not be transferred until specific conditions are met, such as having been employed by the company for a certain period of time.

While stock options and restricted stock have resulted in famously huge payoffs for some, the reality of the matter is that these types of compensation packages often do not yield the kind of wealth as initially hoped. Regardless, due to their high-value potential, these assets are often sources of contention during divorce settlements.

Steps to Dividing Stock During Divorce

If stock options or restricted stock are a part of your marital estate, the following steps will typically be involved in determining how they will be divided:

  1. Verifying their existence: It is not uncommon for spouses to not even know their spouse had stock options until they make the decision to divorce, as these assets are not visible on tax returns, W-2 forms, or other financial documents unless they are actually exercised or vested. An attorney may seek to uncover these assets through the use of a subpoena.
  2. Appraise their value: Placing a dollar amount on a stock option or restricted stock can be difficult, as they are offered as compensation based on their implied-yet-uncertain future worth. Stock options and restricted stock for businesses in volatile markets or startups with uncertain futures can often be all but impossible to value without the assistance of a forensic accountant, as their value largely depends upon when they are exercised or vested. Even stock options with an exercise price greater than the current market value can still be worth a considerable amount if market conditions should change.
  3. Get your fair share: You will need to work with an experienced attorney and divorce financial planner to determine what is “fair” and ensure your settlement reflects this. If you choose to forego receiving a share of your spouse’s stock options or restricted stock, you will want to make sure your portfolio includes assets that match this value without carrying worse tax consequences.

Ultimately, the safest way to ensure your financial interests are protected during divorce is to retain the services of a knowledgeable attorney. If you are approaching a divorce or are already knee-deep in the process, contact Ross Family Law, P.C. today. Having effectively handled numerous high-asset divorce cases, Our Pleasanton family lawyers can provide the compassionate and knowledgeable legal support you need to guard your rights and ensure your receive every bit of your entitled share of your marital estate.

Call (925) 308-9920 or complete an online form today to find out more about how we can assist you.