Dividing Stocks in a Divorce
May 24, 2019
The Law Office of Karen S. Brown is here to help people with their family law issues. Karen Brown has years of experience handling disputes in a divorce, such as division of property and child custody arrangements. She helps men and women in the greater Los Angeles, CA area achieve a greater sense of clarity and control during divorce proceedings.
Dividing property in a divorce can be the source of major disagreements, especially when investments are involved. Let’s take a moment to consider the division of stocks and stock options during a divorce.
Is the Stock Marital Property or Separate Property?
Generally speaking, something is considered separate property if it was acquired before marriage or after divorce proceedings have begun. An item is considered marital property if it was acquired during the time of marriage.
While this seems pretty straightforward, there are numerous disputes about what classifies as marital and separate property. This is especially true about investments that have contributed to a marriage in some way.
Determining the Value of the Stock
When dividing stocks, it’s important to find the value of the stock during the marriage. Stocks will be divided in half based on the price of the stock when the couple was still together. Here there may be additional disputes over the true value of the stock during the marriage and what amount should be used when dividing these assets.
Dividing Shares vs. Giving Cash Value of the Shares
When splitting the stock itself, there are two options to consider. The spouses can divide the shares themselves equally, or a spouse can retain the shares currently in the market but pay the former spouse cash value of half of the shares that would have been split.
One option may be preferable to another, though it can vary from couple to couple. The team at our Los Angeles divorce law firm can help determine the ideal option for you and help negotiate an arrangement during divorce disputes as they arise.
What About Stock Options?
Stock options are a different matter to consider, and they are quite popular today in the world of start-ups and tech companies. Stock options grant an employee the ability to buy a certain amount of stock in a company at a set time at lower than the market value. Employees must stay with a company for a while to exercise their stock options. This means that stick options are future assets rather than current ones.
Vested and Unvested Stock Options
Vested stock options are stock options that have already been used to purchase stock. Unvested stock options mean that the timeframe to exercise the option has not yet been fulfilled. For example, a stock option may be granted to an employee in 2009 but it cannot be exercised until 2019.
You may already foresee problems arising based on this information. If a person going through a divorce has not had the opportunity to exercise their stock options, what is the value of that unvested stock? Their former spouse may a fair claim to a share in these future assets, but disputes arise over the value of unvested stock.
Contact a Skilled Divorce Lawyer
For more information about your legal options during a divorce, we encourage you to contact a skilled divorce and family law attorney. The Law Office of Karen S. Brown can be reached in Los Angeles by phone at (323) 766-6426.