Stock options are often given to employees and allow them to purchase company stock in the future at a price determined when the option is issued. Because the value of the option is difficult to determine, the asset is often overlooked during a divorce. However, California residents may be interested in a pair of divorce cases that highlight the important role that stock options may play in divorce settlements, even if the options do not exist at the time of the divorce.
The first case, Baccanti v. Morton, ruled that stock options were divisible marital property and the party holding the option could exercise his or her ability to buy and sell the stock and share half the profits with his or her former spouse. If the holder of the options declined to exercise the options, then he or she could notify the other party and that person could then decide whether or not to exercise the option through the holder.
In another case, Wooters v. Wooters, no options existed at the time of the divorce, but the settlement awarded the ex-wife one-third of the ex-husband’s future income through alimony payments. After divorcing, the ex-husband began working for a firm that gave him stock options, which he then exercised 12 years after his divorce. His income was increased significantly and his ex-wife was entitled to one-third of that increase in income because it was documented on the man’s W-2 form.
Property division during a divorce may be complicated by stock options and other complex financial products. In order to reach an equitable division of assets, individuals involved in divorce proceedings may choose to work with a lawyer.
Source: Private Wealth, “Weighing Divorce ‘Options’“, Marc D. Bello, January 07, 2014