Divorce and Stock Options

Hi there,

Dealing with stock options in divorce can be akin to solving a Rubik’s cube puzzle.  There are lots of moving parts and you need to understand how they fit together, both legally and financially, in order to get it right.

Stock options come in a variety of flavors.  While there has been no definitive legal ruling on how to handle them, there are two cases (Baccanti is one and Wooters is the other) that come close.

Your lawyer will need to read and understand the plan documents, as well as to understand the purpose for which the options are awarded.  There may be several different purposes for which a company is awarding options, and each category of option may require a different divorce treatment.

Taxation is also a critical issue.  Stock options have a set  purchase price at which the owner can purchase the stock.  The idea being that the set price is lower than the market price when the owner exercises the options.  When the stock is sold, the gain on the sale is taxed as ordinary income.

If you are getting divorced and one or the other of you has stock options, please consult a good divorce attorney.