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Dividing Stock Options in a San Diego Divorce

On Behalf of | Oct 23, 2021 | Community Property Division

One of the more legally and financially complex issues is dividing stock options in a San Diego divorce.  Most assets and debts which comprise community property are fairly easy to value and ultimately divide.  The value of assets such as cars and houses are fairly easy to quantify.  Stock options, by their very nature, cannot be simply sold to a third party and do not carry a “market value.”  This can make the process of valuation and division quite challenging.

One of the first questions regarding stock options is are they “vested” or “unvested.”  If a company has set aside shares for one of the soon-to-be former spouses they often set conditions, such as length of employment or a period of time, before ownership of the stock will be transferred to the receiving party.  These shares of stock are considered to be “unvested” until that time when the conditions of eligibility or transfer have been completed.  The term “vested” usually applies to stocks held by an employee which were initially granted through an Employee Stock Option (ESO) or Restricted Stock Units (RSU).  A stock is vested when the offer is completed, earned or gained by the recipient.

Dividing stock options in a San Diego divorce is usually accomplished based upon a formula often referred to as a “time rule.”  There are primarily two types of time formulas which apply separately to those options which are based upon future performance or an incentive to stay, and those options which are used to attract an employee or investor or reward services already performed.

The Court will usually order or require an expert opinion regarding the reasoning behind why the stock option was granted, the date they are to be vested, the present or a reasonable valuation of the stock as well as the date of hire and/or separation for the associated employee.

Unvested stock options which are community property are still subject to division in a divorce.  Dividing stock options in a San Diego divorce is a complex process requiring the experience and legal skill of the Certified Family Law Specialists at Burke & Domercq.

Protect your own interests and contact us or call 760-389-3927 to schedule an appointment for a remote or socially distanced consultation with one of our experienced Certified Family Law Specialists.