How do you handle stocks in a Carlsbad divorce? Are stock vested or unvested stock options divisible as marital property?
The first question to answer is whether or not a given stock is community property or separate property. If a specific stock was acquired prior to the marriage or after the date of separation it is usually considered to be “separate” property. If the investment or purchase of stock was made after the date of the marriage and before the date of separation it will almost always be considered to be community property. Community property is usually divided equally between the parties in the State of California.
The next step as you handle stocks in a Carlsbad divorce is to establish the valuation of each holding. One must consider not only the present value of stock, but the “basis” in the investment for tax purposes. You might have two groups of stocks, each with the same value. However, the genuine value of the stocks after sale and taxes might be quite different. Generally speaking, the lower the “basis” in the stock the higher the taxable amount on the capital gain when it is sold.
Once valuation is established the spouses have basically three options for how to handle stocks in a Carlsbad divorce:
- Sell the stocks and divide the proceeds after tax equally between the parties
- Divide the stocks between the parties to dispose of as they please
- One party may purchase the community property interest of the other party in a stock they wish to keep for themselves
Stock options are a different matter altogether. Generally speaking, a stock option gives an employee the right to buy a specific amount of stock after a period of time at a price which is lower than the market value of that stock. In order to make the purchase, the employee is usually required to remain with the company for quite a while.
If the time required has passed and the employee exercises their option to purchase the stock it is considered to be “vested.” An “unvested” stock option means the appropriate time has not elapsed for the employee to complete the transaction.
From a divorce perspective, a stock option is an asset. If it is a community asset it should be divided between the parties equally. An unvested stock can present particular challenges during valuation which often result in disputes between the parties.
If you are concerned about how to handle stocks in a Carlsbad divorce you need the experienced, proven counsel of the Certified Family Law Specialists at Burke & Domercq. Protect your own interests and contact us or call 760-434-3330 to schedule an appointment for a remote or socially distanced consultation with one of our experienced Certified Family Law Specialists.