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Dividing stock options and restricted stock in a divorce

On Behalf of | Jan 5, 2021 | Divorce |

Dividing marital assets is often one of the most frustrating and time-consuming aspects of divorce. This is particularly true if the parties own assets such as stock options or restricted stocks. 

On one hand, it may be difficult for parties or courts to determine the value of these types of assets. On the other hand, overlooking or neglecting these complex assets could be a terrible mistake for one or both divorcing spouses. 

Understanding these assets

The first step in dividing these assets is understanding what the terms mean. “Restricted stock” means company shares which an employee receives at no cost, as part of a benefit package. The employee cannot transfer or sell these shares until he or she meets a certain condition, such as a certain length of employment. 

Employee benefit packages may also include “stock options.” Stock options give the employee the right to buy company stock at a fixed, typically below-market price, after a future date. 

Valuing these shares

To determine an estimated value for stock options and restricted stocks, the parties may use the discovery process to gather information about the specific assets and the award language, any key dates or conditions, the terms of any restrictions, the current and predicted value of company stock. Often, these stocks are not assignable to any other person. Consequently, the court must award the other spouse an amount of money or other property that is roughly equal in value to the estimated stock value. 

Calculating the future value of restricted stocks and stock options is no easy task. However, doing so is important for a fair property division.