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Stock Options

Understanding How Stock Options Figure in Property Division During Divorce

Stock options and restricted stock grants are one of the most complex and misunderstood assets that must be considered in the division of marital property during divorce. Unlike real property, a stock option is a promise of an asset that may or may not yet be vested or is contingent on certain occurrences for it to have any value.

Although this asset is complicated¾with a number of formulas in use by the courts to decide when and how to divide it equitably between the partners¾the decision of how to divide stock options in divorce can be handled in the context of mediation link to mediation or the collaborative divorce process. It's is wise to use a law firm that understands complex financial assets and their tax consequences.

At the Wayne or Philadelphia, Pennsylvania law office of Elizabeth L. Bennett, Esq., has considerable financial and tax knowledge and regularly works with financial experts to help clients with significant estates and businesses reach agreement in property division.

I can help you understand how the case law analyzed the marital character this unique asset and how you can fairly distribute the value of stock options upon divorce.

Things You Should Know About the Division of Stock Options in Divorce

The first question to be decided in considering whether and how to distribute the value of stock options is the date the couple became legally "separated." This can make a significant difference in whether the stock options will be considered marital assets. We will help determine if you were "separate" under Pennsylvania law; one need not be living in a "separate" residence.

If the stock options were granted before the date of separation, even if they were not yet vested, they will be considered part of the marital estate.

Another question to be considered is whether the stock options were given for work to be performed in the future, or as a reward for accepting a position or for work already completed. The law in this area is somewhat unsettled.

The value of a future stock option may be unknown at the time of the divorce. This need not be a problem; you do not need to lock into a particular value. assist clients in the division of stock options by providing language in our agreements for holding options until exercised them when proceeds are received, retaining an amount in escrow to cover taxes.

To learn more about stock options and how they are treated in Pennsylvania family court during property division, contact Elizabeth Bennett to schedule an appointment.

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I conveniently represent clients in the Bucks, Chester, Delaware, Montgomery, and Philadelphia Counties, the towns of Wayne, Radnor, Philadelphia, King of Prussia, Paoli, Devon, Berwyn, Newtown Square, Villanova, Bryn Mawr, Haverford, Ardmore, Lower Merion, Media, Wallingford, and Swarthmore, and throughout Pennsylvania.

 

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