Dividing assets in a divorce can get complex, especially when it comes to stock options. If you or your spouse hold stock options as part of your compensation, you must understand how these can affect your divorce settlement.
What are stock options?
Stock options allow you to buy company stock at a predetermined price. In divorce, stock options may count as marital property if earned during the marriage. However, determining their value and dividing them can be challenging, especially if the options haven’t vested yet.
How are stock options treated in New Jersey?
New Jersey typically applies equitable distribution to assets acquired during the marriage, meaning they’ll divide the assets in a fair manner, but not necessarily equally. In the case of stock options, the court looks at the date the options were granted and when they vested. If granted during the marriage, stock options might still belong to the marital estate, even if unvested.
Valuing stock options
Valuing stock options can prove tricky. Courts often rely on financial analysts or expert testimony to assess the value, especially if the options have not vested. The value can depend on factors like the company’s current stock price, the exercise price, and potential for growth. You should consult with a financial professional to figure out how much the stock options are worth.
How are stock options divided?
After determining the value, stock options typically divide in one of two ways: a lump sum settlement or allowing the non-owning spouse to keep a portion of the options when they vest. The court will decide the right method based on case specifics and the stock options’ nature.
In some situations, one spouse might buy out the other’s portion. Alternatively, the non-owning spouse may receive a percentage of the options as they vest. While this process is more complex, it can allow a fairer distribution over time.
Stock options represent valuable assets, so understanding how they’re divided in a divorce is essential for securing a fair settlement. You’ll need to work with financial professionals to ensure an accurate valuation and division of all assets.