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During this time of social distancing, the Law Office of Marla Zide, LLC is offering both phone and video conferencing options for meetings and consultations. You will be able to contact us via phone during regular business hours to schedule.

How to divide stocks and stock options in divorce

On Behalf of | Jan 10, 2022 | divorce

Dividing up assets in a divorce becomes a more complicated matter if your spouse is wealthy and receives executive compensation. This type of compensation includes a variety of highly valued assets like stock options or restricted stock. You may have an entitlement to a share of these assets in your final divorce settlement.

Once you are aware of your spouse’s stocks or stock options, you may work with your legal counsel to figure out how to receive your share of them. Kiplinger describes some aspects of dividing stock options that you should know going forward.

Dividing up the stock options

An important step is to figure out how to divide up the stock options or restricted stock so you receive your share. It is possible your spouse’s employer will transfer some of the options or stock to you. However, most employers do not allow for this to happen. Even if you divorce your spouse, your employer may require all of the stock or the stock options to remain with your former wife or husband.

Holding the stock in a trust

In the event the employer does not allow division of your spouse’s stock, your divorce settlement may establish a way to hold the stocks until they vest. Wealthy couples may set up a constructive trust to hold the stock options or the restricted stock. If you choose this option, your divorce settlement must describe the trust and make sure that you receive your fair share of the stocks or stock options it contains.

Handling who pays the taxes

Keep in mind that the employee spouse has to pay all the taxes on the stock proceeds even if a divorce decree splits them up. So if your spouse is the employee spouse, he or she will likely seek to divide up the taxes between the two of you. Be sure that your tax burden turns out to be fair and equitable.

Finally, remember that since stocks and stock options have vesting periods, you probably will not receive your share right away. Make sure you have a good idea of when you may benefit from your spouse’s stocks.