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Dividing unvested stock options in a high asset divorce

Any time a couple divorces in New York, they will have to divide their assets. If the couple does not have many assets, this can be a relatively easy process. However, if the couple has a large number of assets this can be a very complex process. The couple may own a significant amount of real estate, have retirement plans, businesses and other valuable assets. These types of assets are not always easily divided.

Some of the trickier assets that often show up in high asset divorce are stock options. These are given to many employees in high positions within companies as incentives or rewards. Typically, the employee must wait a certain period of time before the options are considered vested. Before they are vested, the employee can't buy or sell the stock.

If the stock options have not yet vested at the time of the divorce, they can be difficult to divide, since the value of the asset has not been guaranteed. The first step in dividing unvested stock options is to determine whether the stock option was granted as compensation for past services or whether it is an incentive for future work. Once this determination is made, one of two formulas will be used to determine the marital portion of the stock option.

If the stock option is for past services, the marital portion may be determined by the following formula: the numerator is the later of the beginning of the spouse's employment or the beginning of the marriage to the time the stock vests and the denominator is the beginning of the employment to the time the stock vests. If the stock is for incentives then use the following formula: the numerator is the time from the stock was granted to the spouse until the end of the marriage and the denominator is the time from the stock is granted until the time the stock vests.

Division of stock options is just one of the complex issues that can come up in a high asset divorce. This post cannot serve as a substitute for the advice of an attorney. Those who have questions about asset division and divorce may want to seek legal help from an attorney with experience in stock options and other difficult matters of high-asset divorce..

Source: Court of Appeals of the State of New York, "DeJesus v. DeJesus" accessed on Feb. 8, 2016

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