Determining an equitable distribution of property during a divorce can be complex, and even more so when the spouses have equity-based assets that may not yet be exercisable or come with strings attached. While stock options and RSUs can be valuable benefits to employees, they can be confusing to divide during a divorce. It is important to understand how New Jersey courts handle these assets to ensure that your rights are protected. Continue reading and consult with an experienced New Jersey complex property division lawyer for more information today.
What Are Stock Options?
Stock options are a benefit awarded to employees by employers that allow them to purchase stock at a fixed price in the future. The strike price (the price the employee can buy the stock for) remains the same, though the market value will fluctuate. The idea is that once the options vest, you legally gain the right to exercise the option. If the market value is higher than the strike price, you can buy low and either hold onto the stock or gain a profit by selling. Stock options can be awarded as compensation for past work or as an incentive for future performance.
What Are RSUs?
RSUs (restricted stock units) are essentially promises to grant shares or the cash value of shares once the unit vests. While stock options give the employee the right to purchase shares, RSUs do not have a purchase price and are automatically given to the holder once the vesting period has expired. These benefits can also be granted for work performed or to reward future employment.
How Do NJ Courts Divide Stock Options and RSUs in a Divorce?
To divide stock options and RSUs in a divorce, New Jersey courts must first determine what portion of the asset is considered marital property and what portion is separate property. This can be decided based on the date the award was granted, the length of the vesting period, whether the asset was granted for past or future work, and how much of this occurred during the marriage.
Once the court has assessed the marital portion of the asset, it will determine how much each spouse is entitled to based on equitable distribution. This is largely handled in the same way as any other asset.
Actual division of the property can occur in several ways. It may be possible for the non-employee spouse to be transferred their share of the stock directly, but employer policies often prevent this from happening. Instead, the distribution can be deferred until the asset vests in the future. Alternatively, the court could facilitate negotiations for a buyout or trade the equity asset for other property of the same value.
These equity-based assets can be extremely valuable, so it is crucial that you work to protect your legal rights during this time. Contact a skilled attorney for more information and legal representation today.
