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How are Stock Options Treated in Divorce Settlements?

If you are going through a divorce, you probably already understand that you and your spouse’s assets are going to be split up. However, many people are often confused about exactly what kinds of assets can actually be divided up during divorce. What about stock options from your job? You earned them, but some could end up with your spouse when all is said and done. Our Morris County, NJ divorce lawyers can answer your questions and help you protect as many of your assets as possible.

Can Stock Options Be Subject to Equitable Distribution Rules?

Stocks and bonds are assets just like any other. They can be split up after a marriage ends, and this property distribution process also includes stock options. These are not stocks that you or your spouse bought, but stocks that are given to you as part of your compensation at a job.

New Jersey is an equitable distribution state, so property is not divided equally after a divorce. Instead, multiple factors are considered and the marital property is divided in a way that seems most “fair.” The court can look at:

  • The age and health of both spouses
  • The income of each spouse
  • The standard of living established during a marriage
  • The earning capacity of each spouse

So if the court decides that your spouse deserves more of the property after the marriage ends, a significant portion of your stocks could end up in their hands.

What Happens to Stock Options I Got From Working?

This includes stock options that you got from working. Stocks that have vested and even ones that have not vested yet could be on the negotiating table. If you want to protect the bulk of your stock options, you’ll often have to make some kind of deal during the rest of the negotiation process.

You could agree to give up assets that are roughly equal to your stock options in value, gambling that the value of these stocks will continue to rise and leave you in a better financial position. You could also agree to sell off some vested stocks or wait for others to vest and sell them off in the future, splitting the proceeds. Just be aware of any tax implications before making a transaction.

Alternatively, people with stock options to protect could draw up a prenuptial agreement before getting married. A prenup outlines how property distribution would work in the event of a divorce, and it could be the best way to protect assets like these.

Schedule Your Consultation

The divorce and property distribution processes can be confusing and stressful, so do not go through them alone. Contact Townsend, Tomaio & Newmark today and schedule a consultation with our team. We’ll tell you more about what our attorneys can do to help you protect yourself and your assets in a divorce.