June 20, 2014 By Paul Wallin
Divorce Stock Options
How are your stock options divided during divorce?

You probably know how most of your basic assets are going to get divided if you are going through a divorce. Since California is a community property state, it is fair to assume that your assets may get divided equally between you and your spouse.

Your divorce is likely not going to be as simple as dividing your community property, 50/50. All of your house and retirement assets need to legally divided, and valuing these assets can become complicated. Making matters more difficult is the division of your stock options and restricted stock.

Stock options are basically your right as an employee to buy company stock at a set price, at a future date.1 The assumption with stock options is that the employee will be able to sell their stock at a future date for a profit.

Restricted stock refers to shares given to you by your employer that cannot be sold until certain conditions are met. For example, your company may not allow you to sell your stock until you have worked for them for a certain period of time.2

Companies are giving their employees a major incentive with the hopes of cashing out on these stock options when they are worth a great amount. These payoffs can be huge. Regardless of the value of your stock options, there are several important considerations to make when dividing them during your divorce.

  1. Does the stock actually exist?

This may seem like the obvious question. However, too many times spouses do not truly know the finances of their soon-to-be ex-spouse. Does he or she have stock options? Neither stock options nor restricted stock will show up on any tax return or other financial documents until they have been sold.

Your spouse would not be likely to share this information with you during a divorce. This is why having an experienced Wallin and Klarich attorney to investigate the matter will be extremely vital to your case.

  1. What are the stock options or restricted stock worth?

The next difficult question you need to answer is how much the stock option or restricted stock is worth. This can be very difficult because nobody knows the value of the stock of a privately-held company until it is sold or exercised. Stock is an incentive for employees, but by no means a guarantee.3

Your attorney can help you value the stock options and determine the worth of restricted stock that has not been vested yet. Many factors will establish the stock’s current value. If the market is relatively unstable as it has been recently, it can be very difficult to pinpoint the exact value of the stock.4

Your divorce attorney will help you determine the worth of your spouse’s stock based on the company’s performance. Sometimes it can be helpful to use a forensic accountant or economist to find out the company’s potential. Even though it is difficult to predict, a knowledgeable attorney will use all of the resources available to value these assets and get you the best possible legal result in your case.5

  1. Know the date of separation.

The date of separation can be very important in determining separate or community property rights in your divorce. If you or your spouse received the stock options during the marriage before the date of separation, it is considered community property. This means that it will be divided equally in the divorce proceedings. Any stock options or restricted stock received after the date of separation is considered the separate property of the spouse that received them.6

  1. How can you get your fair share?

Your final divorce decree must include all of the relevant stock details. This means your attorney will help you value all of your spouse’s stock options and restricted stock. After determining this value, a skilled attorney will negotiate for you to receive a fair share of these assets. It is very important that you bear in mind the tax consequences that may come along with receiving a share of your spouse’s stock.7

Call the Divorce Lawyers at Wallin & Klarich Today

You or your spouse’s stock options are just one of the many complicated facets of divorce. Having an experienced and capable family law attorney is vital to helping you value these assets and negotiate the best legal outcome for you. The attorneys at Wallin and Klarich have been successfully handling all divorce matters for over 30 years.

With offices located in Orange County, San Bernardino, Los Angeles, Torrance, Riverside, West Covina, Victorville, Ventura, San Diego and Sherman Oaks, one of our knowledgeable attorneys is available to help you no matter where you work or live.

Call us today at (888) 749-7428 for a free phone consultation. We will get through this together.

1. http://www.forbes.com/sites/jefflanders/2014/03/19/dividing-stock-options-and-restricted-stock-in-divorce/

2. Id.

3. http://www.forbes.com/sites/jefflanders/2014/03/19/dividing-stock-options-and-restricted-stock-in-divorce/

4. Id.

5. Id.

6. http://www.divorcenet.com/states/california/ca_art32

7. http://www.forbes.com/sites/jefflanders/2014/03/19/dividing-stock-options-and-restricted-stock-in-divorce/

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