In a high-asset divorce, stock options rank among the most valuable assets. While dividing real estate and savings accounts tends to be more straightforward, stock options introduce complexity. These financial tools demand careful attention, especially when determining their value and dividing them between spouses.
What are stock options and how do they work?
Stock options grant employees the right to buy company stock at a set price in the future. Their value depends on the stock price when exercised. If acquired during the marriage, stock options count as marital property in divorce.
How are stock options divided in a high-asset divorce?
In Colorado, stock options count as part of the marital estate. The division depends on factors such as when the options were granted, whether they are vested, and how long the spouses held them. Courts typically divide stock options based on the portion of the marriage during which the spouses owned them.
Courts may either allocate stock options directly between the spouses or award the non-employee spouse a portion of their value. This could involve selling the options when exercised or finding another arrangement that ensures fair asset division.
Valuing stock options in a divorce
Valuing stock options can prove challenging since their worth depends on future stock performance. Professionals use methods like the “Henkel method” to estimate their value based on the divorce date and expected stock price.
Can you exclude stock options from the division of assets?
Stock options may exclude from asset division if granted after separation or if classified as separate property. If acquired before the marriage or received as inheritance, they may also exclude. However, if granted during the marriage, courts generally treat them as marital property.
Stock options present complexity in a high-asset divorce. Understanding how to divide and value them is crucial when handling these assets.