Property settlement with employee stock options in a divorce

When some people are going through a divorce, they automatically start to think about how certain property will be divided. In most cases, people think of vehicles and real estate. It is important to think beyond just those basic assets. It is also important to divide stocks, even if they aren't necessarily performing at the time of the divorce.

It is important to try to balance the distribution so that you know you will be taken care of after the divorce is finalized. If the stocks you are dealing with are employee stock options, it might take some work to decide how to divide those. You would have to find out how many stock options the employee has. How many have been granted, the vesting schedule and how many have already been vested are also considerations.

One current issue is that the economy is still rebounding. A stock market rally last year increased the value of options for some companies in the technology sector. Because of the risk that any industry or company will lose value in the stock market, couples who are divorcing should agree that the divided employee stock options will be exercised as soon as the current vesting period ends.

It is equally as important to consider the tax implications of employee stock options. For "nonqualified" options, ordinary income tax applies based on the difference between the fair market value of the stock on the date it is exercised and the grant price. For "qualified" options, which are only granted to employees, the capital gains tax or alternative minimum tax applies when the stock is sold.

Dividing up assets in a divorce can be rather tricky. If you are in the midst of a divorce, the advice of a Virginia divorce attorney can you learn the best way to protect your interests.

The attorneys at HALE BALL MURPHY, PLC can also assist with other needed changes that come with divorce (including name change). Contact our experienced divorce attorneys today for legal assistance.

Source:  Wall Street Journal, "Splitting Up Stock Options in a Divorce" Liz Moyer, Feb. 28, 2014