How Are Employee Stocks Divided in Property Division During Divorce?

 Posted on May 29, 2017 in Divorce

In high-asset divorces, one issue that parties can run into is the division of uncommon assets. Company stocks are a type of asset that some couples will have to divide.

Stock division can be complicated, which is why you may wish to gain an understanding of this issue at the outset of your divorce.

There are two types of stock that may be at issue in your divorce: stock options and restricted stock.

1. Stock Options. A stock option is the right to purchase stock at a certain price for a certain period of time (usually years). Many employees are given stock options as part of a compensation package. The idea is that in several years the employee can purchase stock at the agreed-upon rate, which would be lower than the current valuation.

2. Restricted Stock. This is company stock given to employees; however, the employees are restricted from selling it until certain conditions are met. Conditions include working for a set number of years at the company, for example.

How Stocks Are Valued

The issue with stocks is that at the time of the divorce the stocks do not have a set worth. Stocks only have a set worth when they are sold.

It may be possible to value the stocks, and the spouse that receives the stocks in the settlement can buy-out the other spouse’s interest. Some spouses may wish to agree to deferred distribution. Under this “wait-and-see” method, the parties would divide the stocks’ worth when the stock is ultimately sold. Typically, the employee spouse will retain the right to determine when to sell the stocks.

Issues with Hiding Stock

Sometimes spouses will attempt to hide stock ownership. While this is illegal, it can happen in contentious cases.

Stocks can be easily concealed because they often do not show up on pay stubs or W-2 forms. A skilled lawyer will be able to find stock ownership, however, by using all mechanisms allowed under discovery law. If necessary, a forensic accountant may be brought in to review your spouse’s finances and look for assets that may not be initially reported.

Contact a Skokie Property Division Attorney

Property division requires special attention to detail as well as keeping in mind the broader picture of settlement negotiations. Many divorcing spouses are surprised to find out what types of property they are entitled to as part of divorce proceedings.

If you are going through a divorce, we advise you to speak to a lawyer so you can understand what rights and obligations a court may determine you have. In many cases, it is foreseeable what a property division may entail.

Call the experienced Elmhurst, IL divorce lawyers of Weiss-Kunz & Oliver, LLC at 312-605-4041 to set up your initial meeting today.

Source:

https://www.forbes.com/sites/jefflanders/2014/03/19/dividing-stock-options-and-restricted-stock-in-divorce/#111679a131c8