Life Events: Divorce
Articles (Jump to FAQs)
Linda Olup
UPDATED! When you and your spouse decide to split, your stock options will probably be divided too. Become familiar with the crucial issues related to stock options in divorce, including the treatment of vested and unvested stock grants, approaches to valuation, and the division of options in the property settlement.
Linda Olup
Understand how the courts approach stock option valuation in divorce cases and their division as marital property.
Linda Olup
Part 3 explores how some courts have regarded stock options as income for consideration in child support and alimony.
James Fitzgerald
Divorce is a roller coaster of uncertainty, stress, and emotion. To ease the pain, the IRS offers ways to minimize the tax burden on optionholders.
Marlene Browne
Forbes, 11/28/06
Stock options can be a source of tremendous wealth, so don't overlook them in a divorce.
Larry Maples and Melanie James Earles
Tax Advisor, March 2005
Undoing a marriage is complex enough on its own. It can be even more complex when you factor in retirement accounts, stock options, and stock redemptions.
Sue Stevens
Morningstar.com, 10/14/04
Educate yourself about the many financial- and retirement-planning issues divorce is likely to throw at you beyond stock options. (Registration is required.)
Larry Maples
Journal of Accountancy, 9/04
Although not specific to stock compensation, this article discusses the tax treatment of alimony payments and how to ensure they are tax-deductible.
Diya Gullapalli
The Wall Street Journal (CareerJournal.com)
Once a hot property in divorce negotiations, options became less desirable during the down market. But don't lose sight of their long-term value, especially with recovery on the horizon.
SmartMoney.com
Options have become the trophy of many divorce negotiations. Learn about the issues and tax treatment, including some planning techniques.
Joanna Glasner
Wired News, 8/5/99
Unvested stock options might also be a golden handcuff in marriage. The treatment of how to divvy up stock options in divorce is getting a lot more attention.
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FAQs (Jump to articles)
While there are some general trends, the treatment of stock options and other stock grants in divorce is far from similar in all states. In general, the outcome depends on four factors...
After a court has decided which options and restricted shares are marital property, these grants need to be valued in some way. No uniformity exists among American courts in addressing the valuation of options for the property settlement. Rather, approaches...
Under the concept of community property, each spouse...
In virtually all non-community-property states, property acquired during the marriage is subject to equitable division...
First a court must decide (under the relevant state's laws) whether the property subject to division includes...
Some courts have ruled that options are acquired at the date of grant...
The answer depends on the laws of your state. A Connecticut court answered the question affirmatively in...
Some plans let options be transferred to or exercised by former spouses...
A qualified domestic relations order (QDRO) is a judgment, decree, or order by a court that assigns all or a portion of an individual's company benefits to...
If options were granted for future performance, an employee can argue to the court that...
To calculate the portion of divisible options that were earned or acquired during a marriage, courts often use...
The Internal Revenue Code and IRS regulations prohibit transfers, so grant agreements cannot allow ISOs to be transferred in divorce. When divorce occurs, under the property settlement either...
When the net intrinsic value of the stock is zero, the attorney for the nonemployee-spouse has two ways to obtain...
If legal title to stock options is not being transferred under the divorce decree, the options are valued so that other property (e.g., cash or a house) can be awarded to the nonemployee-spouse...
This can be a way to handle, in the divorce property settlement, any transferability restrictions in your stock plan (unless this procedure is also prohibited). You assign your ex-spouse the economic benefits of the stock options you cannot...
If stock grants are merely property, the ex-spouse has no future claim to them, other than as part of the...
For the transfer of stock options to a former spouse as part of a divorce settlement, the IRS has issued revenue rulings that clarify the taxes and reporting. You do not realize...
The IRS has issued revenue rulings that clarify the withholding and tax reporting. The nonemployee-spouse would be responsible for those taxes at exercise. All tax payments (income and employment taxes) are withheld from...
The basic principles that apply to options transferred in a divorce settlement also should apply to the transfer of restricted stock...
Generally, incentive stock options (ISOs) are not transferable in connection with a divorce. The IRS...
The transfer of shares incident to divorce will not be a disqualifying disposition. But...
ESPPs almost never allow the option/purchase rights to be transferred during...
"Garnishment" is a legal process in which a debtor pays an obligation with property and/or goods that are owed to or belong to the debtor but are in the hands of a third party. Whether this remedy applies to stock options depends...
It is unresolved whether in-the-money stock options that the bankrupt individual holds (1) constitute assets of the bankrupt party that are reachable by the creditors or (2) are...
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