What happens to stock options in a divorce?

On Behalf of | Aug 22, 2022 | High Asset Divorce |

Tennessee law dictates that parties divide assets in a divorce in a way that meet standards of fairness. Many assets are relatively simple to divide, such as a joint savings account. If both parties agree to a settlement, the parties will divide and close the account. A home is potentially a more difficult asset to divide. What if one person wants to keep the home?  Retirement accounts and stock options also represent assets that are more complex. What if the retirement account stands to mature greatly in the future? What if the stock options are hidden from you? Many complicated assets require professional assistance to split fairly.

What are stock options?

Employee stock options are common now in compensation packages. Typically, these options give an employee the ability to buy stock at a given price within a defined time. Like any investment, the dream scenario is that the value will increase, thereby creating a high return on investment, if the employer sets the option price low enough.

What makes stock options more difficult to divide?

Stock options present more complications than basic liquid joint accounts for several reasons. They are often set with a future date to exercise the option, so you may not be able to sell them immediately or by the settlement date. Other stocks and accounts are simpler to convert into cash.

Options are also not as easily discoverable because they are not always immediately viewable on traditional financial documents by the non-holding spouse. Further, assessment of the value can be difficult, even if the option is exercisable. Placing a value on stock options often requires professional support as it calls for speculation about the future value, in addition to the various tax considerations.

What if I need counsel?

Divorce can present challenges for property division, with stock options representing one of the more complex assets to divide. You do not have to navigate the complicated web of option periods, future vesting dates and the federal tax code alone. A divorce attorney can help guide you to ensure you receive a fair and equitable divorce settlement even if your spouse is attempting to hide assets.