Stocks Options and Divorce
A stock option is the right of an employee to purchase a certain amount of shares of his or her employer’s company stock at a specific time and for a fixed price. The employee is not required to purchase the stock, but can do so whenever he or she chooses to do so. Many large corporations and business start-ups offer their employees stock options as part of their compensation and benefits package. Stock options are attractive because they allow the employer to provide an incentive for the employee to stay with the company for the long term, or to grant a deserving employee a bonus. Since stock options are based on the future growth of the company, they often become more valuable over time.
In terms of a Georgia divorce, stock options are often difficult to both value and divide between the parties. Therefore, it is essential that attorneys in a divorce case thoroughly analyze, negotiate, and litigate the division of stock options owned by either party. If an attorney fails to do so, then a valuable asset may go undivided, resulting in an inequitable division of marital assets.
First, the court must determine whether the stock options constitute marital property that is subject to
equitable distribution in the divorce. The court will consider several different factors in determining whether stock options are marital property, including the following:
- Whether marital or premarital funds were used to exercise the stock options
- The employer’s purpose for granting the options, i.e. compensation for past services, such as a bonus, or compensation for future services
- The methods that are available to distribute the stock options
- The tax obligations resulting from any distribution
- Whether the stock options are vested, or able to be transferred and sold by the employee
Once the court has decided how much of the stock options, if any, are marital property, then the court has to determine the value of the stock. Probably the most difficult task for attorneys and the court is placing a certain value on the stock options. The reality is that no one knows how much or how little the stock options will be worth when the employee spouse exercises the options. No future value is guaranteed. Plus, if the stock options are not vested, the value becomes even more uncertain and difficult to determine.
Finally, the court has to determine how to equitably divide the stock options based on all of the marital assets. Depending on the situation, the court may be able to order the employee spouse to cash out the stock options in order to compensation the other spouse, or other assets may be used to compensate the other spouse for the value of the stock options.
Atlanta property division can be difficult, particularly when questions arise about the distinction between marital property and non-marital property. A Georgia divorce lawyer can make all the difference in giving you the knowledge necessary to make informed decisions about your divorce and property division.
Contact us or call today to learn how Shaw Law can work with you to achieve the best outcome possible for you and your children.
Scott Shaw is founder and principle of Shaw Law Firm LLC, founded in 1995 and dedicated solely to divorce, family law and child custody matters that must be addressed and decided in the state of Georgia. Shaw Law Firm serves the greater Metro Atlanta area, particularly the counties of Fulton, Gwinnett, Cobb, Cherokee, Forsyth, Paulding, Henry, Fayette, Coweta, Newton, Walton, Bartow and Douglas. Schedule a consultation today at 770-594-8309.