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Stock options and divorce

New Jersey couples who have reached the end of a marriage may have many issues with property division, among other complications to deal with during divorce proceedings. One item that couples may have to address is the division of stock options in a property settlement incident to the divorce.

In divorces that are more financially complex, stocks options are often involved. These can be some of the most difficult assets to divide in a divorce settlement. Stock options give an employee the right to purchase company stock at a set price in the future. This gives the employee the opportunity to sell their stock at a price greater than what they paid for it. Restricted stock is company stock that employees receive at no cost, but is not transferable until certain conditions are met. Often the conditions involve a certain amount of time of employment.

Stock options and restricted stock are becoming more and more popular among companies and they are also becoming a valuable component of many corporate compensation packages. Because of their increase in popularity, they are also showing up in more divorce settlements. The first step in dividing these assets for women who are going through a divorce is knowing whether these stock options actually exist. They don't show up on W-2 forms, tax returns, or other financial documents until the options are actually exercised and the restricted stock has been vested. A legal professional can investigate whether the husband has these options and what the timetable is to exercise the options. The legal professional may have to subpoena the husband's human resource department in order to gather this information.

Once it is determined that stock options/restrictions are a part of the husband's compensation, the wife should consult with a legal professional and financial expert to determine what to do with the information. Some states don't allow these unexercised stock options as marital property, while others include their value as part of the divorce proceedings. Because of the legal complexity of stock options and restrictions, it is best to make sure the experts are consulted and involved with the divorce proceedings. Independent evaluations of the stock and the company's potential earnings also will need to be evaluated.

Source: Forbes, "Dividing stock options and restricted stock in divorce," Jeff Landers, Mar. 19, 2014

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