Dividing Stock Options in Divorce

Stock Options

When dividing stock options in divorce, it is important to properly value, classify and distribute them to maximize the money for your client.

What are Stock Options?

Stock options are a salary substitute or a deferred compensation benefit. They are contracts that grant the right, but not the obligation, to buy or sell an underlying asset at a set price on or before a certain date. Stock options are classified as “vested” or “non-vested” and “restricted” or “unrestricted.”

Equitable Distribution

When two individuals separate with the intent to divorce in North Carolina, all of their marital property is subject to property division (also called Equitable Distribution). This includes stock options.

Are Stock Options Marital Property?

Stock options are marital property subject to property division depending on when they were received

Stock options are marital property if received during the marriage and before the date of separation and acquired as a result of the efforts of either spouse during the marriage. This is true even if they cannot be exercised until a date after the parties divorce. Stock options received after the spouses separate may be divisible property subject to equitable distribution if they were acquired as a result of the efforts of either spouse during the marriage.

Both Vested and Nonvested Stock Options Are Divisible

Marital property includes vested and nonvested stock options. See Fountain v. Fountain, 148 N.C. App. 329, 337–38, 559 S.E.2d 25, 31–32 (2002).

How to Value Stock Options

North Carolina has not mandated any specific approach for valuing stock options. The true value of the stock options cannot be known until they are exercised.

Dividing Stock Options in Divorce

Some attorneys may advise that you offset the value of the stock options with another asset as being the easiest method to divide stock options. While this may be the easiest approach, it may not be the best approach. As a result of the difficulty in valuing stock options, the preferred approach is to order the owning spouse to pay the non-owning spouse a certain percentage of any future profit from exercising the stock options under the belief that the true value can not be ascertained until the stock options are actually exercised.