Are Stock Options Considered Marital Property in a Divorce?

Stock options are a form of equity compensation that allows the employee to buy shares at a pre-set price. They have become increasingly prevalent ways of employee compensation with the start of the tech and startup boom. Whether or not these options can be divided in a divorce depends on if they are considered marital property. Unfortunately, this can vary from state to state, and also depends on why an employee has received the options in the first place. This makes having an experienced attorney in your corner the best way to understand the division of property and assets.

Because Nevada is not an equitable distribution state, property and assets are often divided 50/50, unless it is separate property or property laid out in a premarital agreement. If you or your ex have stock options, there are a few questions to ask in order to determine if they are considered marital property.

Questions to Ask About Your Stock Options

4 Questions to Answer to Determine if Stock Options Are Community Property:

1. When were the stock options obtained? If your options were obtained after the dissolution of the marriage, or before your marriage, but added to a prenuptial agreement, they are often considered separate property.
2. When were the stock options exercisable or vested? In many cases, if your or your ex’s stock options are exercisable at the time of your divorce, they will be considered marital property and will likely be divided equally.
3. Are the stock options being shared as compensation for past, present, or future work? Some companies issue stock options as a way to balance below-market pay or as a way to thank employees for past, high-quality work. This is considered compensation for present and past work respectively and both can fall under the guidelines of marital property. However, other companies use stock options as a loyalty incentive and might be considered compensation for future work. If this is the case, it is possible for these to be considered separate property.
4. If the stock options are considered marital property, how are they being valued? Once it is decided whether or not your or your ex’s stock options are marital property, it is important to understand how these options will be valued. The two most common methods are the intrinsic value method and the Black-Scholes model. As the name suggests, the intrinsic value method subtracts the buy price from the current stock price and multiplying that number by the shares given. The Black-Scholes model is more complicated, factoring in a variety of variables, including time, the volatility of the asset, interest rate, and more.

While this is a good place to start, this is by no means a comprehensive list, because unfortunately, matters of stock options are often evaluated on a case-by-case basis. This is especially true in instances of high asset divorces where there are a number of items to consider.

The division of assets and property can be daunting on your own. If you are looking for an experienced attorney to help you through the process, reach out to our team at Ford & Friedman. Call us at (702) 904-9898 to schedule a consultation.