Dividing stock is not the same as dividing business and marital assets in a divorce. Once determining that there is stock, the type must be clarified as well. It is important to know that there are two kinds of stock, options and restricted.
Stock options are purchased by the employee and cannot be sold to a third party. Restricted stock refers to stock of a company that is not fully transferable until certain conditions (restrictions) have been met.
Stock options and restricted stock do not have any real immediate value and can be difficult to value and divide. However, California courts have determined several ways to deal with the division of stock options in divorce.
Overall allocation of stock options upon divorce requires two steps: the court determining what portion of the stock constitutes marital property and then deciding the value to apply to this portion. Dividing stock during a divorce generally depends on the circumstances of each case and upon the “time rule.”
The time rule formula generally takes into account the following:
• Number of years the employee spouse has worked for the company
• The years of the marriage
• The time lapse between granting and vesting & the relation between those time periods
• The date of separation
Although there is no constant division of stock in a California divorce, having a team of professionals such as an expert California divorce and a forensics accountant can certainly place you on the right path when presenting stock information to the court.
Valuing and dividing employee stock options in a California divorce requires an experienced divorce and family law attorney. If you have questions about the division of stock options, contact Thorsteinson Law Group; your Los Angeles, Orange County, Long Beach, and Huntington Beach Divorce and Family Law Attorney.