Stock options significantly enhance a compensation package, especially in executive or high-income roles. When divorce proceedings begin, you may question whether stock options qualify as marital property. If granted during the marriage, they typically do.
Understanding stock options in divorce
Stock options provide the opportunity to purchase company shares at a predetermined price. Employers often attach stipulations, such as remaining employed for a set period before the options vest. Even if the options remain unexercisable, courts prioritize the date of issuance. When awarded during the marriage, courts frequently include them as part of the marital estate.
Why timing matters
The timing of the grant plays a pivotal role in the division of stock options. If issued during the marriage, courts generally include them in the divorce settlement—even if they vest at a later date. Judges examine the rationale behind the grant: whether it compensated prior work, current duties, or incentivized future performance. If the company intended the award to compensate work done during the marriage, the court typically deems it marital property.
What courts look at
Courts evaluate several key factors: the grant date, the intent behind the award, and the vesting structure. Judges may also assess any preexisting agreements between spouses, such as prenuptial arrangements. Many states allow the division of unvested options if they correlate with marital efforts. Accurate documentation of the grant’s timing and purpose can support your position.
To ensure equitable distribution, assess how much of the stock option value constitutes marital property. Financial professionals often assist with precise valuations. Maintain detailed pay records and documentation to substantiate your claims. Judges aim to distribute marital assets based on each spouse’s financial and non-financial contributions.