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Dividing stock options and restricted stock awards in divorce

In the tech boom of the early 2000s, many employees received stock options or stock awards as part of their compensation. And now as business try to build back from a tough 2020, they are likely to offer them again as a way to attract top talent or reward loyal employees who didn’t receive a bonus last year. However, tracking the value of these stock options and stock awards often is difficult when couples divorce.

Why valuing stock options or stock rewards is tough

First, stock options (where employees can buy shares of company stock at a set price) aren’t included on W-2 forms. The only time, people have an accounting for them is when an employee buys them or becomes vested to cash in the stock shares. The same is for stock awards, where employees receive a set amount of stock shares after a certain vesting period.

That means a stock option or stock award likely won’t appear on a W-2 each year, and sometimes, the value of those stock options may only show up every five or six years. When it comes to divorce, if you know your spouse received stock options or rewards, you may have to go back a way to see how much income they generated from them. If your spouse hasn’t been with their company long, they likely won’t receive the full value of their stock options until the future.

Also, it’s not uncommon for someone to be unaware their spouse has stock options or stock awards as part of their salary compensation package. Sometimes, spouses neglect to list those items among the property they will divide with their spouse in divorce.

Property division and divorce in the current economic climate

Dividing property in a divorce often is difficult. It can be complex for those couples have significant assets in different forms (for example, investments, multiple properties, business assets, stock options or country club memberships). Now that including stock options and stock rewards in employee compensation is becoming popular again, that will make property division in a divorce even more complicated.

Working with an experienced family law attorney can help. You want to ensure you receive your fair share of your marital assets in your divorce.