Stock Options divorce division

Sometimes, employers give their employees the option to buy company stock. This right is called a stock option. There are two basic types of employment-related stock option plans. The first is available to all employees as an employee benefit. The second type is a plan for the higher-up executives, which ends up being a type of compensation.

That leads to two ways that options might have to be addressed in a divorce. The first is when an option is granted before marriage, but does not vest until after the parties are married, and the second is when an option is granted during the marriage, but does not vest until after the divorce is finished.

In Texas, stock options earned during marriage are community property, meaning they are the property of both the husband and the wife. For example, a Dallas Court of Appeals case held that the wife’s stock options received from her employer were community property even though the value of the options depended in part on the wife’s post-divorce employment. The options were granted to the wife during the parties’ marriage, were available for purchase during the parties’ marriage, and included potentially valuable rights if purchased. Stock options acquired during the marriage constitute a contingent interest in property and are community assets, at least in part, even if they are not vested at the time of divorce.

In order to analyze what rights the employee spouse has, the attorney must read the stock option agreement first and foremost to see what it lays out. Under some agreements, stock purchased is subject to specific restrictions, such as forfeiture of the stock, or if the employee resigns or is terminated, so you want to make sure you have your ducks in a row.

In order to ensure your or your spouse’s stock options are divided fairly in a divorce, contact the skilled attorneys at Orsinger, Nelson, Downing & Anderson today.

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