Montgomery County Stock Options Division Attorney
Dividing Stock Options During Divorce
If you are planning to divorce, asset division is a significant issue. Your future financial health is at stake, and every type of asset must be valued and divided fairly. When it comes to dividing stock options, the process can be even more challenging to resolve.
The veteran Montgomery County family law team at the Law Offices of Sheryl R. Rentz, P.C. can help you assess all your legal options. We have extensive experience handling high-asset, complex divorce cases. Let us put our skill behind you and your case, so you can get a divorce resolution you are satisfied with. Call us at (610) 645-0100.
Stock Options: The Basics
Stock options are granted to an employee, giving them the right to purchase company stock in the future at a discounted or fixed rate. The rate at which the stock can be purchased is far lower than the predicted future trading price, allowing an employee to buy the stock well below market value. Once the options are exercised, the employee may sell the stock, and turn a hefty profit. As the stock options may not have been exercised yet, but may become a significant asset for your partner, these options must be divided equitably, just as all other assets following a divorce.
How Do You Divide Stock Options in a Divorce?
Stock options can become a source of significant future wealth. Dividing this asset is a specialized process. The stock options may have been granted to your spouse as a reward for past work, to incentivize future work, or both.
The details must be thoroughly evaluated to divide this type of asset. For example, if the option was to benefit your former marriage partner for work performed during the term of your marriage, it is considered a marital asset. If the stock options were granted before your marriage for work performed both prior and during the term of your marriage, a portion of the value will be seen as marital property. The documentation regarding the vesting and granting of stock options must be thoroughly reviewed to determine whether the options were for past, current, future work, or a combination. How the options will be vested is also a consideration, as the options may have been granted during the term of your marriage but will not be exercised until years after your divorce is finalized.
What is the Value of a Stock Option?
Valuing stock options can be a very complicated process, requiring assistance from tax and financial experts. Pennsylvania is an “equitable distribution” state, and all assets must be divided fairly between the two partners. However, the value of a specific stock option may be uncertain at the time of a divorce. The division of stock options with an unknown value can be resolved with specific language in the agreement that allows for the asset to be divided once the options are exercised.
Dividing Stock Options: The Process
The process of dividing stock options requires a specific set of steps:
- Determine whether your former marriage partner owns stock options. Your divorce lawyer can request information about stock options, as they do not appear on tax returns or other documents. Identifying hidden assets is a critical point in asset division, as your former partner may not feel inclined to reveal that he or she may come into significant wealth in the future.
- Place a value on the stock options so they can be fairly divided in the divorce. If the value is unknown, your divorce agreement can be written to allow for the profits from the sale of stock to be split at a future date, when the stock options are exercised.
Why Choose Law Offices of Sheryl R. Rentz, P.C. for Divorce?
A divorce can be a complicated process, particularly in high net worth cases. Resolving asset division may include valuing stock options. The legal team at the Law Offices of Sheryl R. Rentz, P.C. will walk you through every aspect of asset division, along with child custody, support, and other matters, focusing on what is most important to you.
Sheryl R. Rentz has over 25 years of experience resolving family law matter for her clients. Before practicing law, she was an engineer for AT&T Bell Laboratories for 16 years and has an engineer’s precision when resolving the division of assets in a divorce. She offers a free initial consultation. Call our toll-free number, (866) 290-9292 to discuss your case further.