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Fort Myers Florida Family Law Legal Blog

How are stock options divided in divorce?

On Behalf of | Mar 1, 2022 | High Asset Divorce |

The most time-consuming and technically challenging part of many Florida divorces is the division of property. This process requires the parties to disclose all their assets and liabilities. divide any separate property from the marital property, and then divide the marital property between them in accordance with state law.

Dividing some types of assets is relatively straightforward. For example, the spouses can close a typical joint checking account and split the money 50-50, or according to whatever percentage they agree upon in their divorce settlement.

Other types of assets present much greater challenges when it’s time to divide property. Stock options are particularly tricky.

Stock options may be part of the marital property

Generally, a stock option is a certificate allowing a person to purchase shares in a company at a set price at a later date. Some companies provide stock options as benefits to employees, setting the price relatively low and tying the selling date to some company milestone, such as the day the shares become available to the public. Under the right conditions, these options can be highly valuable.

While stock options may be in the name of only one spouse, it’s quite possible that they will be considered part of the marital property in a divorce. This means they must be divided between the parties according to Florida law and the parties’ settlement.

Here’s where the difficulty comes in: If the employee has not yet exercised the option to buy the stocks — either because they have chosen not to, or because options have not yet become mature — it can be difficult to say how much the shares are worth.

The parties must agree upon the value of the options before they can divide the assets. To do this, people going through a divorce typically hire valuation experts to estimate a dollar value of the stock options. With this price tag in hand, the parties can begin dividing the value, which presents other challenges.

Three solutions

The three most common ways to divide stock options in such a situation are as follows:

  • Divide the value: Once the parties have a dollar figure to work with, they can use other assets to make up the difference. If they determine that the options are worth $100,000, and that the value should be split 50-50, then the employee who keeps the stock options will provide their ex with $50,000 through other means in the final divorce settlement.
  • Defer distribution: The parties may agree that the value will be divided only if and when the options are actually exercised. In other words, they agree that if the employee spouse ever purchases the shares and makes money from the deal, they will share an agreed-upon percentage with their ex-spouse.
  • Transfer the options: In some situations, the employee spouse can transfer ownership of some or all of the options to their ex as part of the divorce settlement. This approach is available only for certain types of stock options  It can also have important tax consequences.

Each of these approaches has its own technical difficulties and risks. Those who are going through a divorce should thoroughly research their legal options for complex property division with the help of a skilled attorney.

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