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Dividing stock options in a divorce

| Mar 4, 2020 | Firm News |

Asset division in a divorce can become complicated very quickly when company shares and stock portfolios represent significant portions of marital property. Depending on the status, type and vesting schedule of stocks, this could have important implications in how assets are divided.

Types of stock options

In a high asset divorce, the types of stock options that are part of your marital assets might include:

  1. Non-qualified stock options (NQSOs): The more prevalent stock option which allows employees to buy company stock at a predetermined value within a specific timeline.
  2. Incentive stock options (ISOs): These stocks allow an employee to buy a share at a predetermined price and can include significant tax benefits depending on how long the stock is held before selling.
  3. Restricted stock options (RSUs): These stocks vest on a schedule that may take into account employment length and performance goals.

What you need to consider when dividing stock options

Company stocks may come in the form of general stock options or restricted stocks. Whether these stock options will be considered marital property subject to division depends on several factors, including when the stock award date, its vesting schedule and whether the stock is transferrable. Here are some scenarios that could determine separate vs. marital property:

  • Stock options that remain restricted during the marriage until the end date of the marriage may be considered separate property.
  • Stocks awarded for a person’s work during the time they were married may be subject to division as marital property. Even if a stock’s award date occurs before a person was married, it may be marital property if it vested during the marriage.
  • Restricted stocks, granted on a vesting schedule for the deliverance of future company services or goals may be separate property if the vesting occurs after the marriage’s dissolution.
  • RSUs cannot transfer, but the selling value may be a consideration in asset division.

Navigating towards a better future

Georgia is an equitable distribution state for divorces, which means that though the marital property will not necessarily be ‘split down the middle,’ more assets may qualify as marital property. An attorney with in-depth experience in divorce law and asset division as it pertains to stock options can guide you through this complicated process.

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