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The influence of stock options in high-asset divorce

On Behalf of | Mar 21, 2022 | High-Asset Divorce

Technically, stock options get similar treatment as all other marital assets in California when a couple is divorcing. That boils down to determining if the portfolio qualifies as “marital” or “separate” property.

Divorce considerations of stock options

All decisions for these assets come down to when the assets were acquired. That entails if assets happened before the union, during the marriage or after the date of separation. Those are the fundamentals, but the court also reviews appreciation, vesting and other circumstances that can affect outcomes.

One condition that can alter the rules is if there’s a legally enforceable prenuptial or postnuptial agreement. The document has to follow California law and directly address stock option ownership. In that case, conditions and terms of the agreement take precedent.

Vesting and stock option in divorce decrees

Vesting dates are important variables when making decisions about stock options before marriage, late in the marriage or after the split. Options not vesting immediately or high-level employers getting compensation packages will prompt a review of vesting dates.

Child and spousal support

The court views stock options when considering a spouse’s compensation package and child support calculation. In high-asset divorces, determining the impact of spousal and child support may require a closer review of stock.

Knowing the conditions

Stock options are commonplace in high-level employee negotiations, particularly with early-stage organizations. Many corporations use them to draw in talent, providing a little leeway on final salaries and benefits, so it’s not unusual for high-end divorces to entangle these portfolios.

It’s important to address all stock options acquired before and after the union. It’s a delicate topic but one that needs doing. This is a proactive process that helps everyone develop and agree on an informed strategy for securing rights if the union breaks.