Divorce settlements can be complicated situations to navigate. They can be especially difficult when it comes to the division of assets. Stock options are probably not the first assets that come to mind when deciding to separate and divorce but they are an important aspect to consider. Stock options encompass stocks and options granted by an employer. Whether or not the stocks have vested yet (been earned by the employee over a designated amount of time) these stocks have value and need to be considered when discussing the division of assets in a divorce. Consider reaching out to a Sparta Divorce Attorney to aid in the legal process of your divorce.
Are Employee Stocks Marital Property or Separate Property?
New Jersey is an equitable distribution state. This means that any assets earned during a marriage are subject to equitable distribution between the parties. Assets will not necessarily be evenly divided and awarded to each spouse, the assets will be allocated in a way that provides each spouse with fair compensation to the best of the court’s ability. Before stocks can be divided it must be determined if they are marital assets.
Marital
- A stock option was granted to an employee during their marriage
- A stock option was vested before or during the marriage and was originally granted as an incentive for future services
- A stock option was granted after the separation as compensation for previous work
Separate
- A stock option was granted after the separation as an incentive for future work
- A stock option was granted shortly after the marriage took place as compensation for work done before the marriage
Stocks can be tricky to navigate so it is helpful to have an experienced attorney on your side to discover the details of your specific case.
How Do You Distribute Stocks in a Divorce?
The way in which you distribute stocks between spouses will vary from case to case. There are many options to choose from so it will depend on what works best for your situation.
After the value of the stocks is determined and the amount is equitably distributed, the non-employee spouse can receive the amount by retaining other marital assets of equal value.
If the stocks are vested then it may be possible to liquidate the funds and distribute the money to each spouse.
If the stocks are not vested then the spouses may agree to deferred distribution, where the non-employee spouse will receive their share when/if the stock option is exercised.
It may also be possible for the company to agree to transfer some of the stock options to the non-employee spouse.
Stock options can be complicated to make sense of during the division of assets, so hiring a divorce attorney to help navigate the legal process is in your best interest.
