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How Are Stock Options or Stock Units Divided in a Divorce?

June 13, 2024 | Asset Division, Divorce

Understanding which marital property is divisible in a divorce in Colorado or what you are entitled to can be confusing without the help of a knowledgeable divorce lawyer. Stock options, preferred stock, and stock units can be a particularly complex asset to divide. An experienced Boulder family lawyer from Stahly Mehrtens Miner LLC can review your situation and explain how these assets might be divided in your case.

Colorado Property Division Rules

Colorado is an equitable distribution state. Unlike community property states in which property is divided 50-50 between spouses, equitable distribution states allow courts to determine what is a fair or equitable division of property. This is not always 50-50.

The process begins by identifying property as separate or marital. Separate property is generally property that was:

  • Acquired before the marriage
  • Acquired with proceeds from separate property
  • Agreed by the parties to be separate
  • Acquired as a gift or inheritance

Marital property is generally everything else and is subject to division in the divorce.

The spouses can agree on how to divide marital property, or if they cannot reach a settlement, the court can decide.

Treatment of Stock Options

First, it’s important to understand that stock options are treated differently than stock units. Stock options are not vested. They give the right to buy or exercise a certain number of stocks at a fixed price at some point in the future. The stock options must vest before the person with the rights can purchase the shares, which usually requires working for a company for a certain amount of time. Rights become vested after the person is eligible to exercise the option.

Stock options are non-transferable. However, the value of the options can be considered when dividing other property between the spouses.

Treatment of Stock Units

Vested stocks acquired during the marriage are generally considered marital property and are subject to division during the divorce. Stocks can be divided in a number of ways during a divorce, including:

  • Selling the stocks – The spouses may agree to sell the stocks and split the proceeds.
  • Splitting the investments – The spouses could agree to divide the shares, leaving each with the choice of whether to sell or keep them. The stocks could be divided in different ways, such as by the number of shares or by company.
  • Buying the shares from the other spouse – Another option is for one spouse to pay fair value for the stocks to purchase the stocks from the spouse.

Determining the Value of Stocks and Stock Options

One of the complications of dividing stocks and stock options is determining their value. It can be difficult to determine a potential future value of a stock. A financial expert may need to be retained to help with this process.

Contact Our Colorado Divorce Lawyer for Help Today

If you have stock or stock options and need assistance in determining how to divide them in a divorce, reach out to a knowledgeable divorce lawyer from Stahly Mehrtens Miner LLC. Our team has years of experience helping clients through the complex property division process and will work hard to secure a fair resolution for your case. Call (855) 963-4968 or contact us online for a confidential consultation.

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