The Marital Estate: Stock Options and Restricted Stock

Stock options became a large part of many marital estates involved in marriage dissolution during the “bubble” of the late 1990s. As one would expect, the courts struggled with the issues this new situation presented, primarily what options were to be included in the marital estate. The following possible scenarios indicate the complexities:

• Stock options received prior to marriage and vesting during marriage;
• Stock options granted prior to marriage and vesting during marriage;
• Stock options granted during marriage and vesting during marriage;
• Stock options granted during marriage and vesting after marriage.

Other complicating factors created more issues. Courts were faced with situations where non-marital property was used to pay the strike price on community options. Most stock plans do not allow the non-employee spouse to own stock options. Consequently, terms of beneficial ownership of the options by the employee-spouse for the other spouse had to be created. Some stock options were granted as a reward for services performed in the past and in part to retain the employee in the future. This further complicated the determination of whether or not the stock options were marital property.