How are Stock Awards Divided in a Divorce? - Divorce Legal Blogs Posted by Philip Smith Burnham II - Lawyers.com

How are Stock Awards Divided in a Divorce?

Divorce tends to be an emotional and stressful experience, accompanied by important tasks, such as the distribution of assets. Spouses divide assets such as houses, vehicles, and stocks. Typically, stock awards are more difficult to divide. Determining what each spouse is entitled to varies from case to case. However, one can examine certain factors, such as whether the award is granted for services occurring during the marriage, or as incentive for future work to determine whether the stock awards are considered marital.What are Stock Options?Stock options are essentially a stock purchasing opportunity provided by an employer as a benefit to an employee. Stock options provide employees an opportunity to purchase company stock at a discounted price. To determine whether a stock option is considered marital or separate, one must determine whether the award was granted for services occurring during the marriage, or if it was granted as an incentive for future work.Typically, stock awards tend to be vested. Vested awards further blur the line of whether the option is considered marital or separate. This is because the spouse may have been issued an option while married, but divorced before the end of the vesting period. Under New Jersey law, assets obtained prior to divorce filings are typically subject to equitable distribution.Division of Stock AwardsFor most spouses, it is difficult to gauge whether stock options are considered marital. This is because stock options may be rewarded for past work, indicating that their partner may be entitled to a portion of the award. However, one case further explores the division of stock options in divorce cases. In the particular court case, the question being examined was whether a spouse was entitled to stock awards that were vested after the divorce was filed, but awarded prior. The plaintiff had several stock awards, with some being fully vested and subject to equitable distribution. However, the plaintiff argued against the distribution of the remaining unvested awards.Ultimately, the court made its decision in favor of the plaintiff. Their decision relied on the fact that the plaintiff’s awards were dependent upon future performance at the company. Plan documents proved that if the plaintiff did not perform proficiently, then the stocks would not be secured.This case opened doors for many spouses protecting their assets. In the future, the spouse who is attempting to protect their stock awards must prove that the award was distributed for future services that were not associated with the marriage.

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Philip Smith Burnham II

Licensed since 1990

Member at firm Burnham Law Group, LLC

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Member at firm Burnham Law Group, LLC

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