Law Offices of David M. Lederman: Family Law Dispute Resolution Experts

Your Family Law Dispute Resolution Experts

How to divide stock options in a divorce

by | Apr 12, 2022 | Property Division

In California, stock options granted to a spouse during a marriage are community property. The options are part of the marital property that gets divided between the parties in a divorce.

The valuation of stock options is a complex process. You want to make sure any property settlement involving this type of asset is equitable.

Determining the number of options available

The first step to figuring out the value of the stock options is determining how many options the spouse earned during the marriage. Courts generally apply one of two formulas to determine how many stock options are includable as community property.

If the options are part of the incentives offered to an employee to take a job, the calculation uses the date of hire as the starting value. It then subtracts the date of separation in the numerator and the date of vesting in the denominator to determine the percentage to apply to the total number of options available. If the options are part of an incentive package for an existing employee, the calculation uses the grant date of the options as the starting value instead of the date of hire.

Deciding on value

The value of stock options can depend on many factors. The company granting the options may agree to a direct transfer into the nonemployee spouse’s name. This is the most equitable way to transfer options that do not have a set market value.

Some employees have stock options as part of their compensation package and the options must get accounted for in a divorce.

Recent Posts

Categories

ARCHIVES

Skip to content