In New Jersey divorce proceedings, the division of marital assets often focuses heavily on items like the marital home, bank accounts, and retirement funds. However, an often-overlooked yet highly valuable asset is employee stock options. This type of compensation can represent a substantial portion of a couple’s net worth. Failing to properly identify, value, and include stock options in the equitable distribution process can significantly impact a spouse’s final settlement. To learn more about how stock options can be divided during your divorce, continue reading below and secure the help of a skilled Union County property division attorney.
What Are Stock Options?
A stock option is a form of compensation that employers may give to employees. The option grants the employee the right to purchase a certain number of company shares at a fixed value (known as the strike price) in the future. This means that the employee could profit if the company performs well.
Stock options can have significant financial value, depending on the company, so they must be considered when dividing property in a divorce.
Is New Jersey an Equitable Distribution State?
New Jersey operates under what is known as an equitable distribution system. This means that property is divided fairly during a divorce, not necessarily 50/50. When determining a fair and equitable split of marital property, courts will look at factors such as the length of the marriage, each spouse’s economic situation, earning capacity, contributions made to the marriage, and the lifestyle developed during the marriage. Courts may award more assets to the spouse with a lower income or earning capacity to balance the financial impact of the divorce.
How Are Stock Options Divided in an NJ Divorce?
When dividing stock options in a divorce, the court must first determine which assets are marital and which are separate. Marital property includes any assets earned or acquired during the marriage. If the stock options were granted during the marriage, they are typically considered at least partially jointly owned. Any increase in value that occurred during the marriage is also subject to division.
The stock options must then be valued. The court and economic experts will consider the current stock price, strike price, vesting schedule, employment stability, the market, and company performance, among other factors.
If the company permits transfers, the portion of stock options awarded to the other spouse can be transferred to their name. However, there are other options as well. The employee spouse could keep the options, and the other spouse could be awarded additional marital assets of equal value.
The divorce agreement could also stipulate that the non-employee spouse will receive their share if and when the stock options are exercised by the employee spouse in the future. This method requires careful consideration and drafting of the divorce agreement.
For more information and skilled legal counsel, reach out to an experienced family law attorney today.
