How does stock work in a divorce

Stoic_Dad · 2021-10-21T00:58:17+00:00

The first and most obvious response: talk to a lawyer. A lot of this will vary by state as well. As you will see below, it can be a complicated and nuanced topic.

The general rule I have seen in other places is that what is earned during the marriage is considered marital. The question is how do you define “earned”. Usually, if it vests during the marriage, it is considered marital (there are edge cases where the marriage is short and the vesting period is long, so you could do a type of coverture fraction calculation which calculates how long the marriage was relative to the vesting period for each tranche of stock / options).

On stock / options that are granted but not vested, how much is marital will depend heavily on your specific company plan. Is the intent to recognize past performance (while you were married), like a deferred bonus? Then it is likely all marital. Is the intent clearly to incentivize future performance (e.g. you need to hit future performance goals, and stay with the company)? Then one could argue it is earned outside/after the marriage (or again, if it was granted during the marriage but partially earned outside / after the marriage, you could calculate a coverture). Check your company plans’ literature.

Also, some companies have limits on whether you can transfer stock/options. A lot of places grant these as restricted stock or options, so you have to go back to the fine print of the company plan.

If you cannot transfer the stock/options, then there are other ways it could be settled, like buying out her portion. Valuing the invested stock/options can be done by a forensic / financial accountant (for example, unvested options can be valued via Black-Scholes, unvested stock can be valued vis some combination of call/put options as a collar and some marketability discount). However, you’d only hire an expert if the value of the stock is really significant.

Apologies if this isn’t a very definite answer, but I am not a financial expert, and as I said, a lot will depend on your state’s handling of stock/options, and your specific company plan’s language. I tried to call out what I’ve seen, so hopefully that is helpful.

hombredelgato · 2021-10-21T13:06:19+00:00

You need to have your attorney look at the share agreement to see what limitation (if any) are placed on the stock transfer. You may end up having no choice but to pay her out the current value of the vested shares.

I worked for a startup as one of the founders and we limited the ability of the principle members to sell/transfer stock on purpose.

sunny0ne · 2021-10-21T20:38:45+00:00

This is for dividing all your properties efficiently (much better than a spreadsheet). Our site, SquareFairy.com provides a tool (called SplitFairy - https://squarefairy.com/divorce-property-split) that helps you try various scenarios to split your property. You will need to register. There are no fees. If you have any questions - reach out on the website.

research002019 · 2021-10-21T00:25:49+00:00

You are in CA. Consider all funds and holdings gone. It's ok, it stings, horribly at first, but in 6 months, maybe a year you will have been happy to have paid that. And probably willing to pay over a thousand times, Lord knows I am.

HelixFish · 2021-10-21T00:40:23+00:00

In my divorce in CA I divided my ssars’s and rsu’s. You can determine the percent of each grant that your ex will get based on vesting dates, etc. For vested options that have value and can be cashed out you can give her cash equivalent to the value minus YOUR withholding as it has to be charged to you. For unvested in a non-public company you can also determine what % she would own. But they may never be worth anything. I may have an excel spreadsheet if you want a copy that can help with that. DM me.

You are going to need an agreed upon separation date. Can be the initial filing date, the date the divorce was asked for, or any date you agree on. This can be contentious as this date determines a lot of things.

holyshit_idkwigo · 2021-10-21T00:50:17+00:00

Definitely not the route you want to go. But does she know about the stock? i assume she does.

You can buy her out of whatever the value of it is if she agrees to do that. to use you example, she is owed 5k but you guys have equity in the house that needs to be split, you take 5k off of your half and add it to hers. You two can agree to whatever you want to, if its amicable. However most of us aren't here because of an amicable divorce.

WartimeDad · 2021-10-21T00:54:20+00:00

She gets half and the terms are negotiable or a judge may decide. A or C is most likely.

Chip512 · 2021-10-21T02:27:20+00:00

It’s all to be negotiated.

lkjaioi22jlkak23 · 2021-10-24T18:08:59+00:00

I'm curious about this as well. What about in situations where say the husband has like 500k of stock in a separate account (prior to marriage). Then he gets married but doesn't put anymore money into this account. Instead he opens a different account and puts investment money in there instead.

Then assume the 500k account turns into 2M. Then they get divorced. How much claim will she have to the 2M? half? half of 1.5m? None of it?

Specifically talking about CA here. I've read up on this and the answers are vague at best. I've read that she will have no claim to the 2M because the 1.5M of appreciation is "passive" and the other 500k is pre-martial to begin with.

Title	How does stock work in a divorce
Author	tanotsurewhattodo12
Upvotes	4
Comments	19
Date	October 21, 2021 12:02 AM UTC (4 years ago)
Subreddit	Posted in /r/Divorce_Men
Original Link	https://old.reddit.com/r/Divorce_Men/comments/qcemj7/how_does_stock_work_in_a_divorce/
Archive Link	https://theredarchive.com/r/Divorce_Men/how-does-stock-work-in-a-divorce.1082712 https://theredarchive.com/post/1082712

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