Employee stock options can potentially be considered marital property in a divorce, meaning that it is possible for stock options to be divided between you and your divorcing spouse. But stock options are not always a tangible, easily valued asset ”“ so how is it that the courts go about dividing them?
The key to dividing stock options lies with whether they are presently enforceable. This means that in order to have your employee stock options divided, the courts must look at the conditions required for you to have earned the vesting of the stock options.
Restricted Stock Options
Many employee stock options are what is known as restricted stock. These are stock options granted at no cost to the employee but with conditions that must be met before the employee is allowed to transfer them. It is a common part of benefits packages, especially for small businesses and startups. The idea is that, while the company is small, the stock options are easy to provide to employees with the promise of a big payoff when the company is worth much more in the future. The restrictions applied to these stocks vary ”“ one common one is that the employee must remain with the company for a set number of years before the stock options are transferable.
Typically speaking, restricted stock will be considered marital property if it is given to the spouse for services provided during the marriage. If the stock is given for future services that do not occur during the marriage, then typically, the stock will not be considered marital property. If the stock agreements are complex (as they often are) and involve several different conditions for the stock to be granted, then the courts will have to examine each condition to determine if any partial division of the stock options is appropriate.