Washington law provides that when a couple divorces, all of their property is divided between the parties. Dividing some items of property is a relatively easy process, but some forms of property take more time and consideration than others. Property includes not only real estate and bank accounts, but also retirement plans, business interests, pensions, and stock options.
During the property division process, the parties must place a value on each item of property and determine whether it qualifies as community property or separate property. If the parties cannot agree on the value of a piece of property, then they often must enlist a professional to properly value it. Normally, any property acquired during the parties’ marriage is community property, whether the parties acquired the property jointly, or one of the parties acquired the property separately.
There are different types of stock options, so there is no one correct approach to dividing stock options in a divorce. Stock options give an employee the right to purchase company shares of stock at a certain price that is lower than the future trading price, at a certain point in time. Since stock options are not tangible assets, you may not be able to divide them immediately. As a result, you should be prepared to provide your attorney with a copy of the documents related to each stock option and vesting date and a copy of any agreements that reference the stock options. In order to value a stock option, you must determine the purpose of the stock option and whether it is vested. The valuation process is likely to involve a complex formula performed by a professional.
Next, you must determine how to divide the stock options. As a general rule, vested stock options are divided equally between the spouses. However, there are exceptions to this general rule. One way to divide stock options is for one party to buy out the other party’s shares. Alternatively, one party may collect a certain amount from the other party in the future based on a particular formula once he or she exercises the stock options. Some factors that might affect this formula could include the length of your marriage and the length of the party’s employment with the company that granted the stock options.
We know how difficult and complicated divorce cases can be, especially when they involve complex issues like stock options, retirement plans, and other aspects of property division. Contact Pacific Northwest Family Law today and we will show you how we can help with your divorce case. Our attorneys focus their practice primarily on family law, so we are sure to have the skills that you need for proper representation in your divorce case. We are here to answer all of your questions, calm your concerns, and help you through the often difficult process of contested divorce and family law cases.