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Dividing unvested stock options in a California divorce

Having multiple assets to divide in a divorce can be overwhelming for all parties. With the way California divorcees must split their properties, it is important to find property that is solely yours, so there is not a 50 percent chance you would lose it.

Stocks are one of the most complicated areas to divide given their impact on the financial future of each spouse. While regular stocks can be tricky to figure out, having an established value does make it easier to separate in the courtroom. However, many couples lack knowledge about dividing unvested stocks in the proceedings. It is important to know the factors that determine how to do so.

What are unvested stocks?

Many San Francisco employees can purchase unvested stocks at the company they work at to have a set time in the future to vest in. By vesting, they can buy the share at the price that was in the original agreement despite the economic changes.

Sometimes, companies reward their employees with unvested stock to encourage them to continue working at the establishment. Unvested stocks can be erased if the employee leaves the company, but most allow a maximum of 90 days for employees to make the most out of their stock options.

How is it split?

Unvested stocks have always been a confusing subject in divorce because clients do not know if they should technically count. They feel unvested stocks would not have any value during their divorce (as it would vest afterwards) and would likely classify as separate property. It is especially important to identify whether it is separate or not given that California is a community property state, meaning that most of the assets will have a near 50/50 division.

However, like all other job bonuses, California can still count unvested stocks and divide between the two spouses. Even if it vests after the separation, anything acquired during the marriage still counts as community property. If you received this before the marriage, then it can count as separate property even if some of your job income will not.

The stocks are often divided with formulas based upon the employee’s hire date, separation date, amount of shares and when the stocks can be vested. The spouse with the employee stock can obtain more of the share if there is significantly more time between the separation and vesting dates. If it is closer to the separation date, the better chances it has to count as community property.

There are many areas to consider when dividing stock in California, so you might want to minimize some of the stress by seeking professional assistance to help you understand what is subject to community property classification and how to handle your stock options in the proceedings.

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