이혼 스톡 옵션은 수확되지 않았다

MA 이혼의 스톡 옵션 및 RSUs 소득 또는 자산입니까?

MA 이혼의 스톡 옵션 및 RSUs 소득 또는 자산입니까?

메사추세츠의 이혼 변호사 인 Jason V. Owens는 스톡 옵션과 RSU를 소득과 자산으로 제시 한 최근의 항소 법원 판결을 분석합니다.

변호사 Jason V. Owens.

Ludwig v. Lamee-Ludwig (2017)의 경우 메사추세츠 항소 법원의 의견은 매사추세츠 이혼 소송에서 스톡 옵션의 취급에 관한 중요한 지침을 제공했습니다. 결정은 소위 & ldquo; Baccanti 방법 & rdquo; 또는 & ldquo; Baccanti Formula & rdquo; 이혼시 자산 분배에 따라 미확인 주식 옵션을 나누는 경우, 자산으로 분류되지 않은 스톡 옵션 (또는 RSU)은 위자료 계산 목적으로 소득으로 계산되어야합니다. 잘 쓰여진 견해는 점점 더 심판관, 변호사 및 이혼 소송 원을 괴롭 히고있는 매사추세츠 법률 분야에서 필요한 명확성을 제공합니다.

스톡 옵션과 그 밀접한 관계가있는 사촌 인 RSU (Restricted Stock Units)는 지난 30 년 동안 고소득 전문가 및 기업 관리자에게 보상 방법으로 인기를 얻었습니다. 여러 방면에서 RSU는 스톡 옵션을 & nbsp; 준 보너스 & rdquo; 상장 기업 및 직원을위한 선택 보상. 이 블로그에서는 RSUs와 스톡 옵션, 매사추세츠 법원이 미확인 RSU와 스톡 옵션을 역사적으로 어떻게 나누 었는지, 그리고 루드비히 사례가 매사추세츠의 이혼에서 스톡 옵션과 RSU를 처리하는 방법을 업데이트하고 명확하게 설명하는 방법을 비교해 보겠습니다.

이 블로그의 목차.

스톡 옵션에 대한 간략한 개요 : 어떻게 작동 하는가?

스톡 옵션은 1980 년대와 90 년대에 회사의 주식 실적을 기준으로 회사에 직원 보상을위한 명확한 방법을 마련했기 때문에 스톡 옵션은 보편적 인 보상 형태였습니다. 그러나 스톡 옵션에는 몇 가지 제한이 있습니다. 우선이 제한 사항 중 하나는 주식 옵션이 회사 주식의 가치가 증가하면 직원에게만 지불한다는 사실입니다. 주식 가격이 하락하면 스톡 옵션은 아무 가치가 없다. 세계화 된 경제에서 이러한 한계로 인해 다우 존스 산업 평균 지수에 따라 스톡 옵션을 보유한 직원들의 재정적 인 부담이 사라졌습니다.

RSU와는 달리 판매하는 & nbsp; & rdquo; 스톡 옵션은 매각시 전체 주식 가격을받지 못합니다. 예를 들어, 개인이 3 년의 가득 기간으로 500 개의 스톡 옵션을받는 경우, 이는 3 년 후에 소유주가 & nbsp; 주식. 판매 대금은 3 년 동안의 주식 가치 상승 (즉, 1 일 주식과 3 년말 가치의 차이)으로 제한됩니다. 주가가 3 일째의 주가보다 낮 으면 1 일째보다 스톡 옵션이 유효하지 않습니다. 그러나 대부분의 직원은 스톡 옵션을 7 년에서 10 년 동안 보유 할 수 있으므로 (회사의 직원으로 남아있는 한) 3 년차에 쓸모가없는 스톡 옵션은 리바운드가되고 나중에 가치를 가질 수 있습니다.

스톡 옵션은 직원뿐 아니라 고용주를위한 혼합 가방입니다. 직원은 & ldquo; 옵션 & rdquo; 주식 가격 하락을 겪는 회사는 갑자기 종업원들이 수천 가지 스톡 옵션을 매도하고있어 어떤 문제로 인해 가격 하락을 초래할 수 있습니다. 또한 직원들은 수년 동안 스톡 옵션을 비축하는 경향이 있으므로 고용주는 회사를 떠나는 종업원이 스톡 옵션으로 수십만 달러를 현금으로 즉시 현금화하는 상황에 직면합니다. 이것은 대기업에게조차도 현금 흐름 문제를 야기 할 수 있습니다.

RSU는 어떻게 작동합니까? 스톡 옵션과 마찬가지로 더 예측 가능합니다.

약 십 년 전에 RSUs는 주식 보상 제도를 대중 보상 형태의 기업 보상으로 대체하기 시작했습니다. RSUs는 스톡 옵션에 비해 RSU의 단순성 때문에 스톡 옵션보다 몇 가지 장점을 가지고 있습니다. RSU를 수여받은 직원은 회사에서 실제 주식을 보유하고 있습니다. 회사 주식이 주당 65 달러에서 거래되는 경우 직원이 보유한 RSU는 65 달러 상당의 가치가있다. RSU에 대한 유일한 제한은 타이밍입니다. 대부분의 RSU는 자동으로 1-5 년의 일정으로 자동으로 가득 찼습니다. 가득 조건 날짜가 도착하면 RSU는 자동으로 팔고 & rdquo; 직원은 소유하지 않은 RSU에 대해 전체 주가를받습니다.

직원의 경우 RSU는 회사의 주가가 하락하더라도 보류 가치가 있기 때문에 스톡 옵션보다 월등히 우수합니다. 예를 들어 회사의 주식이 주당 65 달러로 평가되고 향후 3 년 동안 주가가 주당 55 달러로 하락할 때 직원이 100 개의 RSU를받는다면 직원은 RSU가 가득되었을 때 여전히 $ 5500을 받는다. 주가가 상승하면 RSU 지불금이 증가하여 고용주에게 이익이됩니다. 직원 보상을 회사의 전반적인 성공에 연결함으로써 RSUs에 대한 예측 가능한 지불 일정은 직원과 고용주 모두에게 이익입니다. 직원은 언제 RSU 지불금을 받을지 알고 있으며, 판매 및 판매 여부를 결정하는 어색한 위치에 있지 않습니다. 현재 가격의 주식 옵션. 한편, 고용주는 피고용인의 매각 및 피고; 주식 가격이 떨어지면 스톡 옵션 주식 스톡 옵션을 가진 장기간 직원들에게 막대한 보수를 지불합니다.

아마도 RSU를 통해 직원에게 지불하는 것의 가장 큰 이점은 직원 보유 혜택입니다. 직원은 RSU가 확정 한 시점에 회사의 직원 인 경우에만 RSU 보상을받습니다. 당신이 회사를 떠난다면, 당신은 모르는 RSU를 모두 포기해야합니다. 직원에게 전액 지불되는 현금 보너스와 달리 RSU 보너스는 회사가 소위 & nbsp; 황금 수갑 & rdquo; & ndash; 직원은 보상 패키지의 혜택을 받기 위해 회사에 머물러야합니다.

스톡 옵션 및 RSUs에 대한 최종 참고 사항 : 개인 주식 매각과 달리 주식 옵션 및 RSU의 지급금은 지급 된 해의 직원에 대해 과세 대상 W-2 수입으로 간주됩니다. 직원이 2016 년에 RSU 또는 스톡 옵션 수익금으로 100,000 달러의 배당금을받는 경우 올해 W-2는 현금 보너스와 마찬가지로 일반 고용 소득으로 $ 100,000를 표시합니다. RSU 및 스톡 옵션의 처리는 배우자가 RSU 나 스톡 옵션을받는 이혼에 상당한 영향을 미친다.

이혼 케이스의 스톡 옵션과 RSU : 같은 치료를 받아야합니까?

스톡 옵션은 RSUs보다 오래 동안 인기가 있었기 때문에 주식 보상을 다루는 판례법의 대부분은 RSUs 대신 스톡 옵션에 초점을 맞 춥니 다. 그러나 Hoegen v. Hoegen (2016)에서 항소 법원은 RSU가 관련된 경우에 스톡 옵션만을 취급하는 Wooters 대 Wooters (2009)의 많은 추론을 적용했습니다. 우리는 스톡 옵션과 같은 RSUs로부터의 지불이 지원 목적을위한 소득 원천이라는 항소 법원의 결정에 따라 당시 Hoegen에 대해 블로그를 작성했습니다. 공개되지 않은 2014 년 결정에서 Brookes v. Brookes (2014), 항소 법원은 RSU가 주식, 보너스 및 우발 사건의 동일한 계열의 일부분으로 특징 지웠다. 이는 이전의 경우 스톡 옵션을 포함하고 있습니다.

이혼 관점에서 스톡 옵션과 RSU는 매우 유사합니다. 각 보상 형태에는 가득 기간이 있으며, 각각은 직원에게 과세 대상 W-2 수입으로 지급됩니다. 실제로 RSU는 어떤면에서 이혼에서 훨씬 더 쉽게 설명 할 수 있습니다. 스톡 옵션과는 달리, 배우자가 시간이 지남에 따라 저장 및 비축 할 수있는 경우 대부분의 RSU는 고정 된 일정에 따라 자동으로 비용을 지불합니다. 논란의 여지는 있지만, RSUs가 배우자의 계속 고용에만 의존하는 보장 된 지불금을 나타내는 사실은 RSUs가보다 신뢰성 있고 & nbsp; 자산 & rdquo; 스톡 옵션보다 주식 가치가 높기 때문에 이익을 얻습니다. 그러나 RSU는 일반적으로 스톡 옵션보다 수명이 짧기 때문에 스톡 옵션보다 현금 보너스와 비슷한 점이 많습니다. 스톡 옵션은 장기 투자와 비슷합니다.

여하튼 매사추세츠 판례법에서는 어떤 도구를 통해 지불금을 일반적으로 비슷한 목적, 시기, 조건 및 세제를 고려할 때 RSU가 이혼 소송에서 스톡 옵션과 다른 대우를 받아야한다고 제안하지 않습니다.

이국적인 친척 : 주식 보상 알파벳 수프.

고소득 종업원을위한 스톡 옵션 및 RSU만이 주식 보상 방식이 아닙니다. 회사 직원은 보상 계기의 전체 알파벳 수프를받습니다.

비공식 스톡 옵션 (& NdOs & rdquo; & nbsp; NSSOs & rdquo;) 인센티브 스톡 옵션 (ISOs & rdquo;) Restricted Stock Awards (RSAs & rdquo;) Stock Appreciation Rights (& SARL & rdquo; 실적 공유 실적 단위 (& ldquo; PSUs & rdquo;)

각 형태의 주식 보상에는 다양한 세부 사항과 방아쇠가 포함되지만 대부분은 여러 가지 예외를 제외하고는 스톡 옵션 및 이혼시 RSU와 비슷한 방식으로 취급됩니다.

분배되지 않은 주식 옵션과 RSU를 이혼 케이스의 자산으로 나누기 : Baccanti 공식.

스톡 옵션과 RSU의 지연된 성격 때문에 이혼 사건은 복잡한 주제가됩니다. 십년 이상 동안, 권리를 포기할 수있는 스톡 옵션과 RSU에 관한 한 가지 질문이있었습니다. 이 계좌는 자산, 분계 대상 또는 미래 소득 원천으로 취급되어야합니다. 이 계좌는 위자료 또는 자녀 양육비를 지불 할 수 있습니다. 이 질문의 결과는 중요합니다. 미확인 RSU가 자산으로 취급되는 경우, 다른 배우자는 RSU의 자산 가치의 50 %를 자산 분할로 수령해야한다는 강력한 주장을 가지고 있습니다. 미확인 RSU가 미래 소득원으로 취급되는 경우, 다른 배우자는 미래의 위자료 또는 자녀 양육비의 형태로 실질적으로 더 작은 몫 (즉, 15 % 내지 35 %)을받을 자격이 있습니다.

Attorney Lynch가 그의 Hoegen 블로그에 썼 듯이 :

Hoegen 결정은 RSU가 수정 작업에서 수입으로 취급되어야하는지 여부를 처리합니다. 이혼 할 때 어때? 결혼 도중에 배우자에게 지불되지 않은 RSU는 자산으로 분류되거나, 분할되거나, 미래의 위자료 나 자녀 양육비가 지급 될 소득이 있습니까? 매사추세츠 법원은이 어려운 문제에 대해 10 년 이상 고심하고 있습니다.

2001 년, 대법원은 Baccanti v. Morton (2001)에서 부분적으로 이러한 질문에 답했다. Baccanti에서 법원은 미성숙 된 스톡 옵션을 이혼 자산으로 분리 할 수 ​​있다고 판결했습니다. 그러나 SJC는 이혼이 자산으로 최종 결정되기 직전에 수령 한 적법하지 않은 스톡 옵션을 처리하는 것이 부당한 것으로 알고 있으며, 배우자는 미지급 주식 옵션을 징수하기 위해 추가로 일할 필요가 있습니다. 이 문제를 해결하기 위해 법원은 소위 & ldquo; Baccanti formula & rdquo;를 발표했습니다.

Baccanti 수식에는 비교적 쉽게 수행 할 수있는 수학 방정식이 포함되어 있지만 일반 영어로 설명하기가 어려울 수 있습니다. 기본 전제는 다음과 같을 것입니다 : 배우자의 미성년자 스톡 옵션이 이혼 당시 가득 기간의 중간에 있다면, 적법하지 않은 스톡 옵션의 절반을 나누어야합니다. 주식 매입 선택권이 이혼 당시 가득 된쪽으로 4 분의 1이되면 스톡 옵션의 4 분의 1을 나누어야합니다. 가득 기간이 98 % 완료되면 주식 옵션의 98 %가 분할되어야합니다.

아래 표는 직장에서의 Baccanti 공식을 보여줍니다. 표에서 우리는 5 년의 가득 기간이있는 3 가지 주식 보상을 봅니다.

& ldquo; Baccanti 공식 & rdquo; 는 매사추세츠의 이혼으로 자산 분할에 따라 스톡 옵션과 제한 주식 (RSU)을 분리하는 방법을 제공합니다.

스톡 포상 1은 1 년 전에 수여되었으며 주식 조끼가 발효되기 4 년이 더 남았음을 의미합니다. 따라서 Stock Award 1은 20 %의 기득권이 있다고 말할 수 있습니다. 스톡 포상 2 (100 주)는 3 년 전에 수여되었으며, 이는 주식 조끼가 발효되기 2 년 전의 것입니다. 따라서 Stock Award 2는 60 %의 기득권이 있다고 말할 수 있습니다. 주식 보너스 3 (150 주)는 4 년 전에 수여되었으며, 이는 주식 조끼가 발효되기 1 년 전의 것입니다. 따라서 Stock Award 3은 80 %의 기득권을 보유하고 있다고 말할 수 있습니다.

Baccanti 공식에 따르면, 테이블에 표시된 주식의 비율은 자산으로 나뉘어 다음과 같이 표시됩니다.

Stock Award 1 & ndash; 50 주 x 20 % = 10 주 50/50 주식 보너스 2 & ndash; 100 주 x 60 % = 60 주 50/50 주식 보너스 3 & ndash; 150 주 x 80 % = 120 주 50/50으로 나눕니다.

따라서 총 300 개의 주식 중 190 개의 주식이 자산으로 분리 될 것입니다. 50/50 사업부를 가정 할 때, 이는 비 근로자 배우자가 95 주를 받고, 배우자 배우자가 나머지 205 주를 보유한다는 것을 의미합니다.

DIY Baccanti : 워크 시트를 사용하여 Baccanti 자신을 계산하십시오.

스톡 옵션, RSUs, RSAs, PSU 또는 이와 유사한 종업원 주식 보상에 대한 가득 표가 있습니까? 다음 양식을 사용하여 Baccanti 공식을 적용하십시오.

(참고 : 양식을 사용하려면 : (1) 그래픽의 오른쪽 상단을 클릭하여 Google 스프레드 시트에서 미리보기를 엽니 다. (2) & ldquo; 다음 페이지 상단에서 Google 스프레드 시트에서 열기 (3) 각 상에 대해 부여 날짜 (B 열), 최장 날짜 (C 열), 이혼 예상 날짜 (D 열) 및 총 주식 (1 열)에 대한 RED 필드 최대 5 개의 주식 시상식을 한 번에 계산하십시오. 우리의 워크 시트는 Baccanti 공식을 사용하여 나누어 질 주식의 수를 계산하여 결과는 BLUE입니다. 귀하의 브라우저 / 장치에서이 양식을 작성하는 데 기술적 인 노하우가 필요할 수도 있음을 알려드립니다.)

매사추세츠의 위자료 지원 또는 자녀 부양비 지급을위한 수입원으로서의 미확인 형 RSU 및 스톡 옵션 처리.

Wooters v. Wooters (2009)에서 매사추세츠 항소 법원은 이전 남편의 스톡 옵션이 당사자에 따라 위자료를 계산할 목적으로 수입이 있다고 판결했습니다. & rsquo; 이혼:

스톡 옵션의 행사로 실현 된 소득은 총 고용 소득으로 간주되어야 함을 의미합니다. 이는 일반적으로 보상 패키지의 일부로 정의되며 W-2 양식에 기재되어 있으며 과세 대상입니다 다른 수입과. & hellip; 행사 된 스톡 옵션은 위자료 소득으로 간주되지 않았기 때문에 단순히 급여 대신 스톡 옵션으로 보상 받기로 선택함으로써 잠재적으로 자신의 의무를 피할 수 있습니다. & hellip; 결론적으로, 우리는 남편의 행사 된 스톡 옵션이 연 & nbsp; 연간 총 고용 소득의 일부라고 결론 내립니다. & rdquo;

Wooters 법원이 스톡 옵션 (및 아마도 RSUs)이 위자료 목적을위한 수입원으로 취급 될 수 있다고 명확하게 주장했지만, Wooters는 2006 년 전 남편에 의해 행사 된 스톡 옵션 1994 년에 이혼 한 지 몇 년이 지났습니다. 다시 말해서, Wooters에서 남편이받은 주식은 이혼 한 지 수년이 흘렀습니다.

Ludwig v. Lamee-Ludwig : Baccanti의 재산으로 분류되지 않은 미확인 스톡 옵션 또는 RSU는 위자료 또는 자녀 양육비 계산을위한 소득원입니까?

Ludwig v. Lamee-Ludwig (2017)에서 항소 법원은 Baccanti와 Wooters가 매사추세츠의 스톡 옵션과 RSUs와 관련된 이혼 소송에 대한 명확한 경로를 제공하기 위해 합리적으로 잘 작성된 사법 의견을 제시했습니다. 법원은 Hon이 입력 한 하급심 판결을 확인했습니다. 노퍽 검사와 가정 법원의 존 D. 케이시 (John D. Casey). 루드비히 판결은 법원이 앞으로 이혼 할 때 RSU를 검토 할 때 몇 가지 명확한 지침을 제시합니다.

Baccanti 수식 아래의 계산 날짜는 이혼 날짜입니다. 루드비히에서 남편은 당사자가 분리 된 날을 주장했다. 이혼 날짜가 아닌 & ndash; Baccanti에 따라 각 당사자의 적법하지 않은 스톡 옵션의 주식을 계산하는 데 사용해야합니다. 법원은 Baccanti 공식을 이혼 날짜로 적용한다는 하급 법원의 판결을지지하면서이 주장을 거부했습니다. 이 판결의 부분은 특히 중요한데, 평가 일을 이혼을위한 이의 제기 또는 서비스 일까지 거슬러 올라가면 직원 배우자가 분할되지 않은 스톡 옵션 중 더 많은 부분을 부서에서 제외시키기 위해 이혼을 연기하도록 유도했을 것입니다 자산의 이의 제기 날짜로 평가 날짜를 고정함으로써 항소 법원은 RSU 및 스톡 옵션과 관련된 경우 합의를 자주 좌절시키는 문제에 대해 필요한 명확성을 가져 왔습니다. Division에서 제외 된 주식 옵션 Baccanti Formula는 위자료 또는 자녀 양육비 지불을위한 미래 소득입니다. 위의 Baccanti 공식에 대한 예에서 가능한 300 개의 주식 중 190 개가 나누기 대상입니다. 결과적으로 이것은 110 개의 주식이 우리의 예에서 나누기에서 제외되었음을 의미합니다. Ludwig에 따르면, 부문에서 제외 된 110 개의 주식은 위자료 또는 자녀 양육비 지급을위한 미래 수입원으로 취급 될 수 있습니다. 항소 법원은이 분할되지 않은 채권을 지원 목적의 소득으로 취급하는 것이 이중 담금 거래를 구성한다는 남편의 주장을 거부했다. 법원은 Baccanti 공식을 통해 주식이 부문에서 제외 된 경우, 이중 담금 & 몫은 자산으로 분할되고 지원을 위해 소득원을 사용했다.

Ludwig v. Lamee-Ludwig Hearing & ldquo;에 관한 최종 판결 및 표현;

Ludwig v. Lamee-Ludwig의 결정에 이르게 한 독자적인 청문회에 최종 메모를 포함하지 않으면 나는 좌절 할 것입니다. 항소 법원에 따르면, 당사자들은 분리 협정을 맺어 두 가지 문제를 제외하고 이혼에서 모든 문제에 동의했습니다.

적법하지 않은 채로 Baccanti 공식에 따라 나누지 않은 채로 제외 된 스톡 옵션은 당사자가 정의한대로 위자료 목적으로 수입으로 계산됩니다. 분리 협정 (Separation Agreement) : 남편의 소득 중 일부를 위자료로 인정한 것으로 추정 됨. Baccanti 수식이 이혼 날짜 또는 이혼 불만 신고 일자와 같은 이른 날짜에 계산되어야하는지 여부.

흥미롭게도, 당사자들은이 두 가지 문제에 대한 재판을 포기하기로 동의했으며, 대신 변호사들이 변호인의 재판에 대한 장점을 주장 할 것에 동의했다. & ndash; 즉, 직접적인 증언없이. 변호사들은 남편 및 전문가의 보고서를 포함하여 판사에게 합의 된 여러 전시회를 제출했습니다. 이런 식으로이 문제를 논쟁함으로써 당사자들은 본격적인 재판의 지연과 비용에 비해 많은 시간과 법률 비용을 절약 할 수있었습니다. 그러나, 항소 법원의 결정은 재판의 절차를 앞당기는 데 관련된 몇 가지 위험을 보여줍니다.

특히, 항소 법원은 평가 일을 둘러싼 남편의 주장에 비판적이었습니다.

그가주는 유일한 이유는 판사가 G. L. c에 따라 사실적인 발견을하지 않았기 때문입니다. 208, & Sect; 34. 미성년자 옵션의 유지에 대한 아내의 기여; & rdquo; 파티가 끝나면 & rsquo; 분리. & hellip; 남편은 당사자들이 규정에 따라 그렇게 할 수있는 증언이나 다른 증거를 제시하지 않았을 때 판단을 내리지 못해서 판사를 거의 단속 할 수 없습니다.

남편의 변호사에 대한 법원의 거부는 남편 변호사의 비판으로 해석되어서는 안됩니다. 당사자들은 판사가 대표성에 대한 결정을 내려야한다는 데 동의 할 경우 당사자와 증인이 여러 날간의 재판을 통해 전달할 것이라는 상세한 증언을 희생합니다. 변함없이이 간증은 광범위한 쟁점과 사건을 다룬다. 이 경우 재판에는 당사자의 결혼에 대한 이전 아내의 기여와 관련한 증언이 포함되었을 가능성이 큽니다. 분리. 그러나, 그러한 증거는 문제가 재판 될 때 기록의 일부가 될 것 같지 않다; 표현에 관해서 & rdquo; 비록 변호사가이 주장을 주장한다고 할지라도 그 논쟁은 재판의 목적을위한 증거가되지 못한다.

당사자들이 법원에 판결을 내 리도록 동의함으로써 재판을 포기하는 데는 여러 가지 이유가 있습니다 (판례 & rdquo; 이러한 이유 중 첫 번째는 비용과 타이밍입니다. 또 다른 중요한 요인은 당사자가 될 수 있습니다 & rsquo; 시도 할 필요가없는 모든 쟁점에 대한 합의를 확고히하기를 원한다. 루드비히에서는 양당이 이혼시 주요한 모든 문제에 실질적으로 합의했으며, 당사자들에게 좋은 의미가 있었다. 표현의 두 가지 좁고 투쟁적인 입장을 재판관에게 제시하는 것에 동의하는 것. & rdquo; 결론적으로 남편이이 사건을 완전히 시도했다면 남편이 다른 결과를 얻었을 것이라는 결론은 하나도 없다. 한 가지 확실한 것은 완전한 재판이 훨씬 더 많은 시간을 필요로했을 것이고 남편에게는 훨씬 많은 비용이 듭니다. 청문회보다 비용이 많이 들다. & 표현에. & rdquo;.

Lynch & amp; Owens Massachusetts 위자료 계산기.

매사추세츠에서 위자료가 있다고 생각하십니까? 귀하의 사건에 대한 위자료의 액수와 기간을 Lynch & amp; amp; Owens Massachusetts 위자료 계산기 :

저자에 관하여 : Jason V. Owens는 매사추세츠의 이혼 변호사이며 매사추세츠 주 Lynch & amp; Owens, Hingham, Massachusetts에 위치.

캘리포니아에서 이혼하는 동안 스톡 옵션 나누기.

이 기사는 캘리포니아 부부가 이혼시 스톡 옵션을 나눌 수있는 방법을 다룹니다.

일부 자산은 이혼에서 쉽게 나눌 수 있습니다 - 자동차를 판매하고 이익을 나누는 것은 보통 생각할 필요가 없습니다. 그러나 주식 옵션을 나누는 것은 독특한 도전 과제를 제시 할 수 있습니다. 제 3 자에게 매각 할 수 없거나 실질 가치가없는 주식 옵션 (예 : 개인 회사의 스톡 옵션 또는 미확인 옵션)은 가치를 산정하고 나누기가 어려울 수 있습니다.

그러나 캘리포니아 법원은 이혼시 스톡 옵션의 분할을 다루는 몇 가지 방법을 결정했습니다.

가상 증권의 보통주 옵션.

전형적인 실리콘 밸리 시나리오는 다음과 같습니다. 한 배우자가 창업 회사에서 훌륭한 직장을 구 축하며 보상 패키지의 일부로 4 년 정족수의 일정에 따라 스톡 옵션을받습니다. 부부는 신생 기업이 그대로 계승 될 것인지, 인수 될 것인지, 밸리의 다른 많은 회사와 마찬가지로 접을 지 여부는 불확실합니다.

부부는 나중에 이혼 결정을 내리고 자산 분할에 관한 논의에서 스톡 옵션이 나옵니다. 그들은 옵션으로 무엇을해야 할지를 알고 싶어하지만 규칙은 불분명합니다. 첫째, 그들은 캘리포니아에서 결혼 재산 권리의 기초를 이해해야합니다.

커뮤니티 속성.

캘리포니아 법에 따르면, 결혼 날짜로부터 당사자가 분리하는 날짜까지 취득한 자산 (주식 선택권 포함)은 분리 재산의 & rdquo;라고 불리는 것으로 간주되며, 이는 커뮤니티 소유물로 간주됩니다. & rdquo; 이 추정을 & ldquo; 일반적인 커뮤니티 속성 추정이라고합니다. & rdquo; 공동체 재산은 배우자간에 똑같이 나누어집니다 (50/50 분리).

속성 분리.

분리 된 재산은 별도 재산을 소유하고 배우자와 별도로 소유하고 (공동으로가 아니라) 이혼 후에도 계속 소유하게되는 배우자를 의미하는 무술 재산의 일부가 아닙니다. 별개의 재산은 이혼시 분열의 대상이 아닙니다. 캘리포니아 주에서는 별도의 재산으로 배우자가 취득한 모든 재산이 포함됩니다 :

선물이나 상속에 의한 결혼 전, 또는 별거 일 이후 (아래 참조).

따라서 일반적으로 부부가 분리 된 부부가 분리되기 전에 종업원 배우자에게 부여 된 스톡 옵션은 종업원 배우자의 별도 재산으로 간주되며 이혼시 분할 대상이 아닙니다.

분리 일.

& ldquo; 분리 날짜 & rdquo; 별도의 재산권을 설정하기 때문에 매우 중요한 날짜입니다. 별거 일은 한 배우자가 결혼이 끝났다고 주관적으로 결정한 날짜를 말한 다음 이사하는 등의 결정을 객관적으로 이행 한 날짜입니다.

많은 이혼 부부는 분리 된 정확한 날짜에 대해 논쟁합니다. 그 이유는 어떤 자산이 공동체 재산 (따라서 동등한 구분에 따라) 또는 별개의 재산으로 간주되는지에 큰 영향을 줄 수 있기 때문입니다. 예를 들어, 분리 일 이전에 수령 한 스톡 옵션은 공동 재산으로 간주되어 동등하게 나뉘지만 해당 날 이후에 수령 된 옵션 또는 기타 재산은이를받은 배우자의 별도 재산으로 간주됩니다.

위의 가상으로 돌아가서, 분리 일에 논쟁이 없다고 가정합시다. 그러나 부부는 옵션의 일부가 기득권자임을 확인합니다. 결혼 중 그리고 이혼 일 이전에. 이제는 이것이 어떻게 부서에 영향을 미칠지 결정해야합니다.

확약 된 옵션과 확정되지 않은 옵션.

종업원 주식 옵션 & ldquo; 베스트, & rdquo; 직원은 운동 & rdquo; & ldquo; strike & rdquo;에서 회사 주식을 사기위한 옵션 가격은 고용주와 고용인 간의 최초 보조금 또는 스톡 옵션 계약에 일반적으로 명시된 고정 가격입니다.

그러나 결혼 도중에 부여되었지만 별거 일 이전에 기증되지 않은 옵션은 어떻게됩니까? 어떤 사람들은 미확인 된 옵션은 다음과 같은 이유로 인해 가치가 없다고 생각할 수 있습니다.

직원은 이러한 옵션을 통제 할 수 없으며 직원이 회사를 떠날 때 미확인 옵션을 포기합니다. 이러한 옵션을 사용할 수는 없습니다.

그러나 캘리포니아주의 법원은이 견해에 동의하지 않으며, 미확인 된 옵션이 현재의 공정한 시장 가치를 갖지 않을지라도 이혼시 분할 될 수 있다고 주장했다.

옵션 나누기.

법원은 옵션 중 어느 부분이 비 직원 배우자에 속하는지 어떻게 결정합니까? 일반적으로 법원은 여러 공식 중 하나를 사용합니다 (일반적으로 & ldquo; 시간 규칙 & rdquo;라고 함).

사용 된 기본 시간 규칙 수식 중 두 가지는 포옹 1 수식과 넬슨 2 수식입니다. 법원은 어떤 공식을 사용할 지 결정하기 전에 먼저 해당 옵션이 직원에게 부여 된 이유를 결정할 수 있습니다 (예 : 직원을 직업에 끌어 들이기 위해, 과거 실적에 대한 보상으로, 또는 근무를 계속할 인센티브로). 회사) 이것은 어떤 규칙이 더 적절한 지에 영향을 줄 것입니다.

포옹 공식.

포옹 공식은 옵션이 주로 직원을 직장에 끌어 들이고 과거의 서비스에 대한 보상을 목적으로하는 경우에 사용됩니다. Hug에 사용 된 수식은 다음과 같습니다.

----------------- x 행사할 수있는 주식의 수 = 커뮤니티 부동산 공유.

(DOH = 고용 일자, DOS = 분리 일, DOE = 행사 날짜 / 권리 행사 또는 가득 조건)

넬슨 포뮬러.

넬슨 수식은 옵션이 주로 미래 성과에 대한 보상 및 회사와의 인센티브로 사용 된 경우에 사용됩니다. 넬슨에서 사용되는 수식은 다음과 같습니다.

----------------- x 행사할 수있는 주식의 수 = 커뮤니티 부동산 공유.

(DOG = 부여 날짜, DOS = 분리 날짜, DOE = 행사 날짜)

다른 유형의 옵션에는 다른 여러 가지 규칙 공식이 있으며 법원은 사용할 수식 (있는 경우)과 옵션을 나누는 방법을 결정할 때 넓은 재량권을가집니다.

일반적으로, 분리 일과 옵션이 가득되는 날짜 사이의 시간이 길수록 커뮤니티 속성으로 간주 될 옵션의 전체 비율은 더 작아집니다. 예를 들어, 특정 옵션 수가 별거 후 1 개월 동안 부여 된 경우 해당 주식의 상당 부분은 동등한 구분 (50/50)을 조건으로하는 공동 재산으로 간주됩니다. 그러나 옵션이 분리 일로부터 수년 후에 부여 된 경우에는 훨씬 적은 비율로 커뮤니티 속성으로 간주됩니다.

옵션 (또는 그 값)

시간 규칙을 적용한 후에, 부부는 각 옵션의 수를 알 수 있습니다. 다음 단계는 옵션을 분배하는 방법이나 그 가치를 파악하는 것입니다.

예를 들어, 각 배우자는 직원 - 배우자의 회사에서 5000 개의 스톡 옵션을받을 자격이 있다고 결정됩니다. 직원이 아닌 배우자가 옵션 자체 또는 5000 가지 스톡 옵션 값을 받는지 확인하는 방법에는 여러 가지가 있습니다. 다음은 가장 일반적인 솔루션 중 일부입니다.

비 종업원 배우자는 다른 자산이나 현금과 교환하여 5000 스톡 옵션에 대한 권리를 포기할 수도 있습니다 (이것은 옵션이 가치가있는 것에 대한 배우자 간의 합의를 필요로합니다 - 공개 회사의 경우 주식 가치가 공개되고 계약의 기초를 형성하지만, 민간 기업의 경우, 이것은 결정하기가 조금 더 어려울 수 있습니다 - 회사는 좋은 견적을 제공 할 수있는 내부 평가를 할 수 있습니다. 회사는 종업원이 아닌 배우자의 이름으로 5000 개의 스톡 옵션을 양도하는 데 동의 할 수 있습니다. 직원 배우자는 건설적인 신뢰로 옵션의 직원이 아닌 배우자의 지분을 계속 보유 할 수 있습니다 (5000). 주식이 가득 될 때 주가가 매각 될 수 있다면 비 종업원 배우자에게 통지를 받고 그 부분을 행사하여 판매 할 것을 요구할 수 있습니다.

결론.

배우자 & 스톡 스톡 옵션에 대한 권리를 포기하기로 동의하기 전에 현재로서는 가치가 없을지라도 옵션에 시간 규칙 수식을 적용하는 것이 좋습니다. 이러한 주식 및 잠재적 이익에 대한 관심을 유지하고자 할 수 있습니다. 회사가 공개되거나 주식이 인수 또는 기타 사정으로 인해 가치가있는 경우, 귀하는 계속해서 기뻐합니다.

이 가정법 분야는 상당히 복잡 할 수 있습니다. 스톡 옵션의 분할에 관한 질문이 있으시면 숙련 된 가정 법률 변호사에게 조언을 구하십시오.

자원과 미주

1. 포옹의 결혼 (1984) 154 칼. 앱. 3d 780

2. Nelson (1986)의 결혼 177 Cal. 앱. 3d 150.

이혼 변호사와 상담하십시오.

우리는 85 명의 클라이언트가 오늘 변호사를 찾도록 도왔습니다.

그것이 어떻게 작동하는지.

귀하의 사례에 대해 간략하게 알려주십시오. 연락처 정보 제공 변호사를 선택하여 연락하십시오.

제작품.

무료 법률.

우리와 접촉.

저작권 및 사본; 2017 Nolo & reg; 모든 주에서 셀프 도움말 서비스가 허용되지 않을 수도 있습니다. 이 사이트에서 제공되는 정보는 법률 자문이 아니며 변호사 소개 서비스를 구성하지 않으며 사이트 사용으로 인해 변호사 - 클라이언트 또는 기밀 관계가 형성되거나 형성되지 않습니다. 이 사이트의 변호사 목록에는 변호사 광고가 있습니다. 일부 주에서는이 웹 사이트의 정보가 변호사 소개 서비스로 간주 될 수 있습니다. 귀하의 주와 관련된 특정 정보에 대해서는 이용 약관 및 보충 조항을 참조하십시오. Your use of this website constitutes acceptance of the Terms of Use, Supplemental Terms, Privacy Policy and Cookie Policy.

Employee Stock Options and Divorce.

Learn how to determine the value of a stock before you decide whether or not to purchase it or take advantage of your employers stock option incentive. Expert accountant explains how the stock system works and formulas used to predict its future.

Updated: February 25, 2015.

As the stock market continues to rise, divorce attorneys are involved in more and more cases involving stock options. The grant of stock options to key employees is now common in high technology companies and is becoming popular in many other industries as part of an overall equity compensation strategy. Larger, publicly traded companies such as Pepsico, Starbucks, Travelers Group, Bank of America, Merck and the Gap now give stock options to almost all of their employees. Many non-high tech closely held companies are joining the ranks as well.

Traditionally, stock option plans have been used as a way for companies to reward top management and "key" employees and link (golden handcuff) their interests with those of the company and other shareholders. More and more companies, however, now consider all of their employees as "key." As a result, there has been an increase in the popularity of broad-based stock option plans, particularly since the late 1980s. More than a third of large United States companies now have broad-based stock option plans covering all or a majority of their employees--more than double the rate that existed in 1993. In a 1997 survey of 1,100 public companies conducted by Share Data, Inc. and the American Electronics Association, it was found that 53% of respondents provide options to all employees. In companies having 500 to 999 employees, the study found that 51% offer options to all employees, as compared to 30% in Share Data's 1994 survey and 31% in Share DataÕs 1991 survey. Forty-three percent of companies with 2,000 to 4,999 employees offer options to all, as compared to 10% in 1994. Forty-five percent of companies with 5,000 or more employees offer options to all, compared to 10% in 1994.

Since this trend shows no apparent sign of slowing down, matrimonial attorneys must be ready to address the unique issues that arise therefrom. This article will explain the basic nature of employee stock options, how they are valued, taxed and ultimately distributed incident to divorce.

What is an Employee Stock Option?

There is no question that "stock options" are assets subject to equitable distribution. However, simply to say that they are assets is not enough to guide the matrimonial litigator. We must first understand the basic nature and definition of a stock option. Basically, a "stock option" is "the right to purchase a specified number of shares of stock for a specified price at specified times, usually granted to management and key employees. The price at which the option is provided is called the "grant" price and is usually the market price at the time the options are granted.

Generally, stock options are an incentive to stimulate the efforts of key employees and to strengthen the desire of employees to remain in the employment of the corporation. Such incentives do not apply to retired employees. Stock option plans can be a flexible way for companies to share ownership with employees, reward them for performance, and attract and retain a motivated staff. For growth-oriented smaller companies, options are a great way to preserve cash while allowing employees a piece of future growth. They also make sense for public firms whose benefit plans are well established, but who want to include employees in ownership. (Note: By issuing stock options, a company potentially dilutes the value of existing shares.)

Whether a stock option is granted for money, for past services, as an incentive for future services, or for no consideration at all, an option holder must exercise the option within its terms or he is subject to the loss of his/her right to do so. In an option contract "time is of the essence." Generally, expiration provisions and stock option agreements are strictly enforced. The courts reject the inevitable breach of contract and forfeiture claims that employees, former employees and other stock option holders press when they fail to timely exercise their options. Although this rarely becomes an issue in divorce litigation, it is something to keep in mind in order to avoid severe economic loss to either party or a potential malpractice claim.

Are there different kinds of stock options, and how are they taxed?

Generally, stock options come in two basic categories: (1) incentive stock options (commonly referred to as ISOs) which are qualified or statutory options and (2) non-qualified stock options (which are commonly referred to as NQSOs). Simply put, the difference between an ISO and a NQSO turns on its compliance with specific Internal Revenue Code requirements at the time of grant which ultimately effects how the option is taxed.

Incentive stock options are granted to individuals for reasons connected to their employment. As a result they may only be granted to employees. They must also be approved by the shareholders of the corporation and granted at fair market value.

NQSOs, on the other hand, may be granted to both employees and independent contractors, and their beneficiaries.

An employee will not realize any taxable income upon the grant or exercise of an ISO. Concomitantly the corporation is not entitled to a deduction upon the exercise of the option. If the employee sells the stock within two years after the option is granted and within one year after the option is exercised, ordinary income will be realized in an amount equal to the lesser of 1) the excess of the fair market value of the shares at the date of exercise over the option price, or 2) the excess of the amount realized on the disposition over the option price. If the individual holds the shares for two years after the grant of the ISO and one year after exercise of the ISO, the difference between the sale price and the option price will be taxed as a capital gain or a loss. If the stock is sold after the two-year/one-year period, that gain will also be an alternative minimum tax preference item subject to the26/28 percent tax rate.

Regarding a NQSO, the holder "employee" of a non-statutory option must recognize income at the time the option is granted if the option has a "readily ascertainable fair market value" at the time of grant. If the option is not transferable and does not have a "readily ascertainable fair market value," no income will result to the individual upon the granting of the option. When the non-qualified stock option is exercised, the individual is taxed at ordinary income rates on the difference between the fair market value of the stock and the exercise price of the option. When the individual sells the stock, a capital gain or loss will be incurred on the difference between the amount received for the stock and its tax basis. Typically the tax basis is equal to the fair market value at the time of the exercise of the option. The capital gain would be either long term or short term depending on the length of the time the shares were held after exercise.

If the option is "actively traded on an established market" the code considers the option to have a "readily ascertainable fair market value." If there is no "readily ascertainable fair market value" at the time of the grant, the optionee recognizes income at the time of the option either: (1) becoming "substantially vested" or (2) is no longer subject to a "substantial risk of forfeiture". Any profit is a short term capital gain, taxable at ordinary income rates. The code establishes four conditions necessary for an option that is not "actively traded on an established market" to meet the "readily ascertainable fair market value" standard: (1) the option is transferable by the optionee (2) the option is exercisable immediately in full when granted (3) there can be no condition or restriction on the option that would have a significant effect on its fair market value, and (4) the market value of the option privilege is readily ascertainable. All four conditions must be met. Since these conditions are seldom satisfied, most non-qualified, non-statutory stock options not traded on an established market, do not have a readily ascertainable value.

There is another factor to consider that can apply to both incentive and non-qualified stock options. Some companies are offering options with a reload feature. A reload option provides for automatic grants of additional options whenever an employee exercises previously granted options.

If the stock that is received upon the exercise of the option is restricted property, the taxation is deferred until the restrictions lapse. Frequently employees receive restricted stock for services. The stock is not freely transferable and is subject to a risk of forfeiture based on the individualÕs performance or continued employment for a period of time. Pursuant to Internal Revenue Code Section 83(b), an individual can elect to recognize the fair market value of the shares, ignoring the restrictions, as income at the time of the award; if a Section 83(b) election is made, the holding period for capital gains purposes commences at the time of the election, otherwise the holding period begins to run at the conclusion of the restriction.

Based upon the foregoing, it may be appropriate to tax effect executive stock options for purposes of equitable distribution. This is because executive stock options have a fixed expiration date and therefore must be exercised and sold. The resulting tax is inevitable and therefore should be considered.

How are Stock Options Valued?

There are various methods to arrive at a present value for stock options. The two most popular are the "intrinsic value" and the "Black-Scholes" method. In 1995 the accounting profession formally recognized that executive stock options have value beyond their intrinsic value. In addition, the Black-Scholes Option Pricing Model was recognized as an appropriate method to calculate the value of executive stock options by the accounting profession. Interestingly, the Financial Accounting Standards Board (FASB) specifically stated that, "an employee's stock option has value when it is granted regardless of whether, ultimately (a) the employee exercises the option and purchases stock worth more than the employee pays for it or (b) if the option expires worthless at the end of the option period.

In the intrinsic value method, the value of the stock option is equal to the difference between the option exercise price and the fair market value of the stock. For example, if you had an option to purchase stock "x" for $5, and the stock was currently trading for $27 per share, the intrinsic value of the option would be $22 ($27 - $5 = $22). However, the intrinsic value method does not consider the value to the holder of having the right to buy the stock at some point into the future at a predetermined price. It also does not consider the volatility of the underlying stock as well as the incumbent advantages and disadvantages of same. Moreover, it does not consider the advantages and disadvantages of the option holder not receiving the stock's dividends as well as the opportunity cost of purchasing the stock and forgoing the lost interest on the acquisition funds.

One method that considers the above-referenced items is the Black-Scholes Method. You can see the Black-Scholes formula by clicking here.

The explanations of the letter designations for the other variables in the Black-Scholes formula are:

C = SN (ln(S/K) C = theoretical call premium N = cumulative standard normal distribution e = exponential function log = natural logarithm.

The first part of the calculation determines the expected benefit of purchasing the stock outright. The second part of the calculation determines the present value benefit of paying the exercise price in the future. The difference is the fair market value of the option.

However, an underlying problem with the Black-Scholes Method is that it makes assumptions concerning the volatility of the stock, future dividend rates, and lost interest. A change in these underlying assumptions can affect the value of the option calculated pursuant to this method.

The following table provides a summary of how a change in one of these assumptions will affect the value of the stock options calculated under the Black-Scholes Method.

Increase in Variable.

Decrease in Variable.

Risk Free Trade.

A common misconception in the valuation of long term options is that an option value is best represented by its intrinsic value. In fact, based on the various Black-Scholes factors, stock options which are "out of the money," i. e., the strike price exceeds the current fair market value, are actually traded with various dollar values. For example, a Dell Computer stock option with a strike price of $50.00 and a market value of $37.3125 as of May 24, 1999 traded for $8.75. This is so even though the option was almost $13.00 out of the money when the option was valued. The disparity in the value is due to investor optimism that the Dell shares would rise and be worth more than $58.75 before the expiration of the option.

How Are Stock Options Distributed In Matrimonial Matters?

Generally, the methods to distribute stock options usually fall into two categories:

Deferred Distribution Upon Exercise of Options (Constructive Trust); Present Valuation with off-set against other assets.

(Where one party argues that a portion of the stock options are non-marital, then an issue arises as to what portion of the stock options whether distributed through method 1 or 2 above, should be granted to the non-employee spouse. This is dealt with in more detail under the next section of this article.)

Deferred Distribution Method.

The Deferred Distribution Method is likely the most common manner in which options are distributed and was utilized in one of the earliest New Jersey cases dealing with stock options incident to divorce, to wit: Callahan v. Callahan. In that case, the trial court ruled that stock options acquired by a husband during the course of the marriage were subject to equitable distribution notwithstanding the fact that the options would terminate if the husband left the company within a certain period of time and the fact that they were subject to various SEC regulations. The court impressed a constructive trust on the husband in favor of the wife for a portion of the stock options owned by him in order to best effect the distribution of property between the parties without creating undue financial and business liabilities. It should be noted that all of the options were granted during the course of the marriage. However, although not specifically stated, it appears that some or all of the options were not fully vested since they were subject to divestiture under certain circumstances. This may have been why the wife was awarded only 25% of the options when they matured." (See section below regarding determining distributive shares.)

The second mode of distribution is the Present Valuation Method. In this method, the stock options must be valued with the non-employed spouse receiving her share of the marital portion in cash or cash equivalent. Such a method should use discounts for mortality, interest, inflation and any applicable taxes. The downside of this "off-set method" is that it may become inequitable in the event that the employee spouse is either unable to exercise the options or, on the date they become exercisable, they are "worthless" (i. e., the cost of the option exceeds the fair market value.)

A review of out-of-state authority indicates that matrimonial courts differ on the method of distribution of stock options depending upon the nature of the options themselves, whether they are vested or unvested, transferable or salable. If the options are able to be transferred to the non-employee spouse, that is the preferred method of distribution, since it effects a clean break between the parties; there is no need for further communication between the parties and there is no need to use valuation methodologies. However, transfer of stock options is rarely permitted by employee stock option plans. Some courts have devised other methods, including but not limited to allowing the parties to be tenants-in-common, or allowing the non-employee spouse to order the employee spouse to exercise his or her respective portion of the options, upon furnishing the capital to do so. This is similar to the constructive trust solution devised in the Callahan case previously discussed. Trial courts are accorded broad discretion in fashioning an approach to fit the facts of the individual case. (Caveat: all of these methods still assume that there is no exclusion of options based upon the argument that they are unvested or were otherwise not earned during the marriage.)

As a practice point, please note that when distributing options in kind, consideration should be given that neither party violates any insider trading rules. For example, it may be a violation if the participating spouse advises the non-participating spouse that he or she intends to exercise his options in the near future. Another concern about the distribution of options in kind is that they can lapse if the individual's employment with the company is terminated, either voluntarily or involuntarily.

Determining the non-employed spouse's distributive share.

What happens when the employed spouse argues that some of the options are unvested or were otherwise "not acquired during the marriage" and therefore not distributable to the other spouse?

New Jersey courts have made it clear that it is necessary to balance the need for definitiveness embodied in the date of complaint rule (i. e., the cutoff date for determining which assets are subject to distribution) with the need for flexibility inherent in equitable distribution when addressing stock options incident to divorce. Whereas courts of many other states have employed the "time-rule formula" approach to determine what portion of stock options should be subject to distribution (see below), New Jersey courts have laid the groundwork in a more general fashion. Basically, assets or property acquired after the termination of the marriage, but as a reward for or result of efforts expended during the marriage, normally will be includable in the marital estate and thus, subject to equitable distribution. The law in New Jersey recognizes that assets acquired by gainful labor during the marriage or as a reward for such labor are distributable while assets acquired after dissolution due solely to the earner's post-complaint efforts constitutes the employed spouse's separate property.

The seminal case in the State of New Jersey regarding the distribution of stock options is the Supreme Court case of Pascale. In that case, the parties were married on June 19, 1977. A complaint for divorce was filed on October 28, 1990. The wife began her employment with the Liposome Company on April 14, 1987 at which time she was immediately granted the option to purchase 5,000 shares of stock in said company. As of the date of trial, the wife owned 20,069 stock options awarded between April 14, 1987 and November 15, 1991. 7,300 of the stock options were granted after the complaint for divorce was filed.

There were two blocks of stock options in dispute (i. e., 4,000 and 1,800), both granted on November 7, 1990. These were granted approximately ten days after the wife filed for divorce. (There was no indication of whether the options were vested in whole or in part, however, it is assumed that these options were "unvested".) Her position was that these options were not subject to distribution because the 1,800 were issued in recognition of past performance and the 4,000 options were awarded in recognition of a job promotion that imposed increased responsibility on her in the future. The wife relied on the transmittal letters from her company to support her arguments. The trial court found that neither of the two blocks of options granted on November 7, 1990 could be excluded from equitable distribution and were to be divided equally.

However, the Appellate Division found that one of the two sets of options awarded on November 7, 1990 should have been included in the marital estate while the other should have been excluded. The Appellate Division based that decision on its interpretation of the facts, finding that the block of 4,000 options granted in recognition of a promotion in job responsibility and an increase in salary was "more appropriately . designed to enhance future employment efforts" and should not have been included in the marital estate. However, as to the block of 1,800 options, the Appellate Division found that these options were granted in recognition of past employment performance. Therefore, these options were properly includable in the marital estate notwithstanding the date of complaint rule.

In reversing the Appellate Court, the Supreme Court in Pascale concentrated on N. J.S. A. 2A:34-23 and the guiding principles enunciated in Painter v. Painter, that "property clearly qualifies for distribution when it is attributable to the expenditure of effort by either spouse during the marriage." The Supreme Court in Pascale made it clear that the focus in these cases becomes whether the nature of the asset is one that is the result of efforts put forth "during the marriage" by the spouse jointly, making it subject to equitable distribution. To refute such a presumption, the party seeking exclusion of the asset must bear "the burden of establishing such immunity [from equitable distribution] as to any particular asset."

The Pascale court concluded that "stock options awarded after the marriage is terminated but obtained as a result of efforts expended during the marriage should be subject to equitable distribution. The inequity that would result from applying inflexibility to the date of complaint rule is obvious." Note that no distinctions were made as to vested or unvested options. Therefore, it appears that the Supreme Court agreed with the goals sought to be achieved by the Appellate Division, but did not agree with their conclusions based on the record below. The Supreme Court gave greater weight to the "credible finding" made by the trial court after listening to many days of testimony that the promotion came about as a result of the excellent service that the wife had provided to the company during the marriage.

Query, what would the NJ Supreme Court have done if it determined that a block of options were awarded for a mix of pre and post marital efforts? What if there is no clear indication as to why the options are granted? What if the options are unvested and require future work effort to fully vest? These circumstances often exist and are where things get murky. New Jersey has not adopted a clear and precise method to determine what portion of options which have yet to be fully earned should be distributed. New Jersey's approach provides for a much more subjective analysis (and room for advocacy) than in other states which utilize various formulaic approaches including a coverture factor or time-rule usually taking into account vesting schedules.

Like New Jersey, the majority of states in this country do consider unvested stock options to be property subject to distribution in marital dissolution proceedings. Such was the recent ruling of the appellate court in Pennsylvania in the case of MacAleer. The Pennsylvania Appellate Court addressed the issue of whether stock options granted to a spouse during the marriage, but not exercisable until after the date of separation, constitutes marital property to be divided during the divorce. That court's reasoning parallels, to a large degree, the majority of the other states which hold that unvested stock options are marital property. Analogizing their prior decisions determining that unvested pensions were subject to distribution, the court noted that benefits resulting from employment during marriage are marital, since these benefits are received in lieu of higher compensation which would have been utilized during the marriage to acquire other assets or to raise the marital standard of living. Only a handful of states have specifically held otherwise. These states are Indiana, Colorado, Illinois, North Carolina, Ohio and Oklahoma. North Carolina and Indiana do not divide unvested stock options on the basis of the state's statutory definition of "property." Oklahoma does not consider unvested stock options to be marital property based on the common law foundation of the stateÕs statutory scheme. These states award the unvested stock options to the employee spouse as separate property not to be considered for equitable distribution. These decisions are distinguished upon the fact that they are heavily influenced by statutes which define property in those jurisdictions. However, the remaining states which have addressed the issue, do find unvested stock options to be marital property and generally follow the same procedure for determining how much, if any, of the options constitute marital property.

Many jurisdictions, like New Jersey, view the first consideration to be a determination of whether the options were granted for past, present or future services. However, most courts have learned that employee stock options are not usually granted for any one reason, and could be compensation for past, present and future services. As a result, these courts sought some structure to determining the distributable share.

Remember: The options that are clearly given to the employee spouse as compensation or incentive for future services are wholly non-marital property. The options clearly granted exclusively for past or present services are fully marital property. There is no need for the court to utilize a coverture factor or time rule fraction for either category in order to determine the marital interest since they are wholly marital or non-marital property as the case may be. The problems arise when the reasons are unclear, where the options are unvested or include an indiscernable mix of pre and post marital efforts.

"Coverture Factor" or "Time-Rule Fractions"

Most out-of-state courts which have addressed distribution of unvested stock options use a "coverture factor" or "time rule fraction" to determine how much, if any, of the unvested stock options constitute marital property. The most prevalent time rule fraction has evolved from that which was used by the California Court of Appeals in Hug. The trial court in Hug found that the number of options that were community property were a product of a fraction; the numerator was the period in months between the commencement of the spouse's employment by the employer and the date of separation of the parties, and the denominator was the period in months between commencement of employment and the date when the first option is exercisable, multiplied by the number of shares that can be purchased on the date that the option is first exercisable. The remaining options were found to be the separate property of the husband.

The husband in Hug agreed that the options were subject to division according to the time rule; however, he contended that the trial court used an erroneous formula. He argued that the proper time rule should begin as of the date of granting the option, not the date of commencement of employment, since the options were not granted as an incentive to become employed. He argued further that each annual option was a separate and distinct option which is compensation for services rendered during that year, and as it was to accrue after the date of separation, it was totally his separate property. The court examined the various reasons why corporations confer stock options to employees, and found that no single characterization could be given to employee stock options. Whether they can be characterized as compensation for past, present, or future services, or all three, depends upon the circumstances involved in the grant of the employee stock option. By including the two years of employment prior to the granting of the options in question, the trial court implicitly found that period of service contributed to earning the option rights at issue. The appellate court found that this was supported by ample evidence in the record.

Various versions of coverture factors have evolved as courts addressed different factual circumstances. The recent Wendt case out of Connecticut entails a voluminous decision in which the court surveys the states which addressed the issue of division of unvested stock options, and notes the competing arguments and the most common numerators and denominators in diverse forms of the coverture factors. A brief summary of the Wendt court's decision as to stock options is helpful to understanding the approach of many courts to the issue of unvested stock options.

According to the December 31, 1996 unaudited financial statement prepared by KPMG Peat Marwick, LLP, the husband owned 175,000 shares of General Electric Vested Stock Options and Appreciation Rights in the following amounts: 100,000 units granted November 20, 1992 with a $40 per share exercise price, 70,000 units granted September 10, 1993 with an exercise price of $48.3125 and 5,000 units granted June 24, 1994 with an exercise price of $46.25. The unaudited financial statements used the "intrinsic value" method, with a December 31, 1996 New York Stock Exchange price of G. E. common stock at $98 7/8 per share. On May 12, 1997, G. E. common stock split two for one and, thus, the number of options doubled to conform to the stock split. As of the date of separation, December 1, 1995, G. E. was trading at $72 per share. As of October 7, 1997, G. E. was trading at $72 per share in its split status or $144 per share at the pre-May 12, 1997 stock split number of stock options. Based on the facts found, the court divided the 175,000 vested stock options and appreciation rights based on the date of separation, December 1, 1995. In rejecting a Black-Scholes approach in favor of the "intrinsic value" method, the trial court valued the vested options as follows: 175,000 stock options at $3,200,000 for the November 20, 1992 grant; $1,658,125 for the September 10, 1993 grant and $128,750 for the June 24, 1994 grant for a total Ôintrinsic value" of $4,986,875. The court noted that this amount was before taxes. The court additionally noted that the options had no cash value until exercised at which point there would be tax due at short term capital gains tax rates, i. e., ordinary income tax rates. The court assumed maximum rates for the IRS, Medicare and Connecticut tax and calculated the net after tax of the intrinsic value to be $2,804,219. The court distributed one-half of that sum to the wife. The court found that the doubling of the G. E. stock after the date of separation was not due to the efforts of the wife, but that "she should share in the general increase in the investment community."

The Wendt court then proceeded to address the 420,000 unvested stock options differently. The court had already concluded that only a portion of these unvested stock options was marital property. The court had also concluded that the unvested stock options were granted for future services. Therefore, a coverture factor was required. The coverture factor was determined by a fraction as follows:

Number of Months from the Date of Grant to December 1, 1995.

Number of Months from the Date of Grant to the Date of Vesting and are not Subject to Divestment.

Number of Shares to be Vested at that Date of Vesting.

Since there were eight separate dates of vesting, eight separate coverture factors had to be calculated. For example, the coverture factor utilized for the 70,000 units granted on September 10, 1993 which vested on September 10, 1998 was as follows:

27.7 / 60 = 44.5% x 70,000 units = 31,150 units to be divided.

The court then took the price of the G. E. common stock on the date of separation (i. e. $72 per share) to calculate the intrinsic value and thereby determine the dollar amount owed to the wife for the marital portion of the unvested options. This was represented as follows:

$72.0000 -48.3125 (exercise price) = $23.6875 intrinsic value per share x 31,150 units = $737,866.

The "$737,866" represents the pre-tax dollar value of the marital portion of the unvested shares as determined by the coverture factor.

After all eight coverture factors were performed, the total dollar values of the marital portion of the unvested stock options was $1,626,273. The court then explored the various risk factors associated with the unvested stock options. It is helpful to review the various scenarios explored by the Connecticut court concerning what could happen to effect the unvested stock options.

The court had basically rejected the wife's expert's valuation methodologies (which included "Black-Scholes") and opted to use the "intrinsic value" to obtain the appropriate value. Specifically, the court rejected the wife's expert's use of the Black-Scholes model which actually resulted in a value 10% lower than the "intrinsic value" ultimately used by the court. The court then determined the wife's share of the intrinsic value of the unvested stock options (i. e., $1,626,273). The court noted that this amount was before taxes. The court proceeded to assume current maximum rates for the IRS, Medicare and Connecticut and found that the net after tax value of the gross intrinsic value would be $914,486. The court then proceeded to award the wife half of this sum. The court ordered the husband to pay the sum in cash and not in any portion of the options.

A similar approach was taken in the case of In re Marriage of Short. In this case, the court held that the inclusion of the unvested stock options in the pool of distributable assets depended on whether the options were granted to compensate the employee for past, present or future employment. The court held that unvested options awarded for past and present services were marital property regardless of the continuing restriction on transfer or vesting. Unvested options granted for future services were deemed to be acquired periodically in the future as the options vest and are subject to a time rule division to allocate the shares between marital (community) and non-marital (separate) property. A different time rule than in the Hug case was used to differentiate between vested options that are clearly separate property for which no time rule would be applied, and those which include both a community effort and separate effort.

Just recently, New York joined the substantial majority of states holding that "restricted stock and stock option benefit plans provided by a spouse's employer constitute marital property for the purposes of equitable distribution, where the plans come into being during the marriage but are contingent on the spouse's continued employment with the company after the divorce." New York's highest court, in a seven-judge panel, unanimously joined the majority of jurisdictions that use a time rule to divide such contingent resources. The DeJesus court laid out the following four-step procedure to guide courts in dividing such options:

1. Trace shares to past and future services; Determine the portion related to compensation for past services to the extent that the marriage coincides with the period of the titled spouseÕs employment, up until the time of the grant. This would be the marital portion; Determine the portion granted as an incentive for future services; the marital share of that portion will be determined by a time rule; and Calculate the portion found to be marital by adding: i) that portion that is compensated for past services; and ii) that portion of the future services deemed to be marital after application of the time rule.

The sum result will then be divided between the parties using the equitable distribution criteria.

This was the method utilized in Colorado in the case of In re Marriage of Miller. The DeJesus court was persuaded that the Miller type analysis best accommodated the twin tensions between portions of stock plans acquired during the marriage versus those acquired outside of the marriage, and stock plans which are designed to compensate for past services versus those designed to compensate for future services.

However, notwithstanding the complexity of these methods, the danger of rigidity and resulting unfairness from a blind application of a formulaic approach still exists. Such issue was addressed by an Oregon Court which stated that "No one rule will produce a just and proper result in all cases and no one rule will be responsive to many different reasons why stock options are granted." This was, more than likely, the reason that New JerseyÕs Supreme Court ruled as it did in Pascale.

Can stock options be viewed as income to the employee for support purposes?

There is little doubt that stock options constitute a form of compensation earned by the employed spouse during the marriage.

In February of 1999, an Ohio appeals court agreed with Susan Murray, the former spouse of Procter & Gamble Company executive Graeme Murray, that unexercised stock options should be used in calculating the value of child support for the couple's 16-year-old son. This decision was the first by an Appellate Court to say that parents cannot shelter income from their children Ð intentionally or unintentionally, by postponing the exercise of stock options until the kids are grown. Note that options granted in consideration of present services may also be deemed a form of deferred compensation. (See In Re Marriage of Short, 125 Wash.2d 865, 890 P.2d 12,16 (1995).

A Wisconsin Court of Appeals pointed out that a stock option is not a mere gratuity but is an economic resource comparable to pensions and other employee benefits. The Appellate Court of Colorado held that for purposes of determining child support, income includes proceeds received by father from actual exercise of father's stock options. The Supreme Court of Colorado held, in the Miller case already referenced above, that "under the Internal Revenue Code, the optionee of a non-statutory employee stock option must recognize income at the time the option is granted if the option has a "readily ascertainable value" at the time of the grant. If the option does not have a readily ascertainable value at the time of the grant, the optionee recognizes income at the time the option becomes "substantially vested" or no longer subject to a "substantial risk of forfeiture," which generally does not occur until the option is exercised.

The Miller Supreme Court found that unlike pension benefits, employee stock options may well be considered compensation for future services as well as for past and for present services.

It is clear that there is a growing trend among the courts of this nation to distribute unvested or non-exercisable stock options that were granted during the marriage. The key factor in such distribution is a determination as to the purpose for which the options were granted, i. e., whether the options were granted for past or future performance. Where an option is granted for a mixed purpose and/or requires continued employment past the termination date of the marriage (as determined by local law), many states are employing a time-rule fraction which may be modified by the trial court based upon the particular facts and circumstances of the case. Matrimonial practitioners must be aware of the various forms of time-rule fractions that can be used and the factors that can modify the fraction. Such factors include, but certainly are not limited to the following: (1) when the option was granted; (2) whether the option was granted for past or future performance (if "past" how far back); (3) whether or not the option was granted in lieu of other compensation; (4) whether or not the option was a qualified incentive stock option or non-qualified stock option; (5) when the options will expire; (6) the tax effect of the grant of the option; (7) the tax effect of exercising the option; (8) whether or not the option has a "readily ascertainable fair market value;" (9) whether or not the option is transferable; (10) whether or not the option is restricted property; (11) the extent to which the option is subject to risk of forfeiture; and (12) any other factors that the parties or court may deem fair and equitable to consider.

Since the majority of employee stock options are non-transferable and cannot be secured as with qualified pensions under federal laws such as ERISA, matrimonial attorneys should specifically tailor their language when drafting agreements concerning such assets. These agreements should include: (1) a list of all options granted and an explicit description of which options are marital and which are not; (2) if a Deferred Distribution Method is employed, a resortation of whether and under what terms the non-owner can compel the owner to sell options after they are vested; (3) provision for payment of the "strike price" by the non-employed spouse and taxes resulting from the exercise of options; (4) a description of how and when distribution is to be made to the non-owner spouse and (5) precise notification and document exchange provisions.

The matrimonial attorney involved in a case concerning stock options, especially when representing the non-employed spouse, should be sure to obtain the following information and documents: (1) a copy of the stock option plan; (2) copies of any correspondence or internal memorandum which were issued by the company at the time of the grant of any stock options; (3) a schedule of granted options during the employees period with the company; (4) the date of each option granted; (5) the number of options granted at each date; (5) the exercise price of options granted at each date; (6) the expiration date of each set of options granted; (7) the date of vesting for each set of options granted; (8) the date and number of options exercised; (9) all short term or long term employee incentive plans covering the employed spouse; (10) all Employment Agreements between the employed spouse and his or her employer; (11) all company plans, handbooks and option award letters related to stock options granted; (12) copies of the firm's 10K and 8K for the entire period that the employed spouse is with the company; (13) dates of promotions and positions held by the employee; (14) a brief job description of each position; (15) the salary history of the employee indicating all forms of compensation; (16) the grant date of exercised options and (17) copies of any corporate minutes or proxy statements referencing the award of options. The information listed herein provides the core information from which option values can be calculated and agreements intelligently reached concerning their distribution.

As we enter the 21st Century, it is clear that matrimonial attorneys will need to become as knowledgeable as possible regarding this unique kind of asset. Hopefully, this article has given some insight into the complexities involved when dealing with Employee Stock Options and Divorce.

Charles F. Vuotto, Jr., Esq. is a family law attorney in New Jersey.

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What You Need to Know About Dividing Stock Options in Divorce.

One of the more difficult items to divide in divorce is a stock option. An option is a specific type of employment benefit in which the employer company gives the employee an option to buy company stock in the future at a discounted or stated fixed price. So rather than simply offering the employee stock as a benefit, they are given the ability to purchase stock at an attractive price at some point in the future. Understandably, valuing and dividing stock options incident to divorce can prove quite challenging.

As an initial matter, it is important not to ignore the fact that a spouse has stock options. Just because this an option isn’t exercisable until the future, it is still often a source of tremendous wealth. If your spouse has stock options you certainly want to take the time to explore if any portion of the options are marital property and subject to division. If you do not know whether or not your spouse has options, be sure to obtain complete discovery showing all of his or her employment benefits.

Options have been a source of astronomical wealth for many people – consider for a Silicon Valley employee who was granted options in a software startup twenty years ago. Although they weren’t handsomely compensated at the time, many of these software engineers were granted options, and as the employer company’s wealth skyrocketed the options rewarded them with a serious payout.

Although the vast majority of North Carolina divorces will not involve Silicon Valley stock options, there are many local startups that may have offered stock options as an employment benefit. Getting full disclosure from your former spouse about each employment benefit is immensely important.

Marital v. Separate Property.

If a spouse has unexercised stock options, the first step will be to determine which options, if any, are considered marital. One might assume that any options granted during the marriage are considered marital. However this assumption is not entirely correct. Options are often granted as a reward for past work and as incentive for future work. Granting options is a way for a company to ensure that an employee will stay, even if the company doesn’t have the funds to properly compensate the employee right away.

The concept that the option might have been granted in some capacity as a reward for past work can complicate the analysis of labeling options as marital or separate. Contemplate a situation where a spouse was granted an option after separation. If the option was in some part compensation for work completed during the marriage, at least a portion of the option would be considered marital. Similarly, if an option was granted shortly after marriage, for work done before the marriage, a portion of that option would be considered separate, and not subject to distribution.

In classifying stock options as marital or separate, first it must be determined what the option was granted for. If it was granted for services rendered during the marriage, it is marital. This can often be hard to determine, so be sure that you gain access to the employee handbook, employment contract, and all other documents that give insight into whether the option was granted for past work or for future work.

Vested v. Unvested Options.

In addition to determining whether the options are separate property or marital property, you will need to consider whether the options are vested or not. The vesting period refers to the amount of time an employee has to wait before he is able to exercise an option. For instance, an option may have been granted to an employee in 2005, but may not be exercised until 2015. That option will be considered “unvested” until 2015.

As you can imagine, a vesting schedule will complicate the division of stock options incident to divorce even further. Consider the above example where the option was issued in 2005 but not vested until 2015. Add the fact that the spouses were married in 2003 and separate in 2012? Can the unvested stock options be classified as marital property?

예. In North Carolina both vested and non-vested stock options are subject to distribution. So, if a spouse has unvested options those options must still be classified as marital or separate, valued, and divided. In the above example, a portion of the unvested stock options would be subject to distribution.

Valuing the Option.

Once it has been determined that the options are marital, a value will have to be attached to them. This too, is a complicated process, and there are several methods that can be used.

The most common method used in North Carolina is known as the “Intrinsic Value Method.” The calculation used under this method subtracts the option strike price from the value of the current stock price, and then multiplies this by the number of options the spouse owns. This option is ideal when dealing with publicly traded stock. There are some detriments to this method, however. Because of the simplicity of the formula, there is no consideration given to the marketability of the shares, the fact that the value could drop before they could be exercised, and the risk that the options would never vest to name a few.

The Black-Scholes model is another approach to placing a value on a stock option. Unlike the Intrinsic Value Method, this model is complicated and typically requires a professional, such as a forensic accountant. This model produces a theoretical estimate of the value based on derivative investment instruments. It considers numerous additional factors, such as the historical price of the stock, the strike price, and the vesting schedule.

Although not a common method to value a stock option, a North Carolina court has held the “coverture fraction,” typically used to value qualifying retirement plans, may be used to value stock options. This formula divides the length of time a spouse was simultaneously married and contributing to the earning of the stock options by the total length of employment during which the options were earned.

A final approach to valuing stock options is to simply reach an agreement. The spouses can simply agree that the value of the marital portion of the options is a certain amount. This method obviously does not require the hiring of a forensic accountant, but it can be risky. If you agree that the marital portion of the assets is worth $50,000, but then later find out that this value is actually way less than the options are truly worth, there is nothing you can do to get your hands on the true value you were owed.

Dividing the Option.

After you have determined that the options are marital, whether or not they have vested, and you have come up with a value to assign to the marital portion, the work is still not over. At this point the way in which the value of the option will actually be distributed to the non-employee spouse will have to be addressed.

The easiest and most common method to divide stock options is to have the employee spouse who owns the option offset the agreed upon value of the option with another asset. For instance, if the option is valued at $100,000, the non-employee spouse is entitled to $50,000. Rather than actually attempting to split the option and potentially trigger adverse tax consequences, the non-employee spouse can agree to take the $50,000 she is owed by accepting another asset. She may prefer to get an the additional $50,000 in a lump sum cash transfer, or take title to a vehicle, jewelry, retirement account or other asset worth a comparable amount.

Sometimes the offset method above doesn’t work, however. Consider a situation where the employee spouse simply does not have an additional $50,000 in cash (or asset of comparable value) to transfer to his former spouse.

The deferred distribution model is a way to work around the aforementioned scenario. This model allows either the court, or the spouses, to decide on a formula that will prescribe how the non-employee spouse will be paid once the employee spouse has exercised the option. This distribution model eliminates the need to agree to a current value and allows for the valuation to be determined once the option is exercised – it is a “wait and see” approach. Essentially, the employee spouse will pay a prorated portion of the benefit to his former spouse once he receives the benefit.

If the deferred distribution model is the chosen method of distributing the value of the options, the non-employee spouse will want to make sure that the agreement prescribing this method of distribution contains language that protects the non-employee spouse. The following provisions are just a few of the many that should be included:

Notice must be given to the non-employee spouse if his employment terminates. Notice must be given to the non-employee spouse if the employee-spouse exercises any options. Notice should be given to the non-employment spouse if the employer re-prices the options or grants replacement options. Notice should be to the non-employment spouse if the employer accelerates the maturity date (vesting schedule) of the options.

Finally, the employee spouse should hold the options in a constructive trust that specifies the process that should be followed when there are newly vested options.

As you may have noticed, actually dividing the ownership, or transferring the option itself to a former spouse is not mentioned as a potential distribution method. This is because the vast majority of employee stock option plans explicitly prohibit the assignment or transfer of rights in the options. Companies usually offer stock options as a benefit to incentive the employee to stay with the company longer, if the employee were able to transfer his right to the options to someone else, this benefit would be lost.

Stock options that have value will result in the incurring of income taxes as soon as the value is realized. The tax implications will vary depending on what type of option is at issue, how the option is exercised and how much the option is worth. To further complicate the tax issues associated with the division of stock options, tax law is a moving target and may change in the future and the tax burden cannot be transferred to the non-employee spouse, so the employee spouse must be sure to anticipate any potential tax issues in advance.

The tax penalty that will occur when transferring stock options is a function of whether the options are “statutory stock options” (otherwise known as qualified stock options) or “non-statutory stock options” (otherwise known as non-qualified stock options).

The transfer of the latter type of option will result in the income being taxed at the usual rate upon the option being exercised. The employee spouse would be taxed when he or she exercised the option, and the non-employee spouse would be taxed once the shares were sold. These options can be transferred tax-free incident to divorce, and taxes will not be assessed until the option is exercised. Once these options are exercised they will be subject to withholding at the supplemental withholding rate and FICA taxes will be deducted.

Statutory stock options are treated differently, however. When statutory stock options are sold, the resulting consequence is capital gain treatment from the profits acquired when sold. When statutory stock options are transferred, however, they lose their status as statutory stock options and become non-statutory options. Statutory stock options have more favorable tax treatment, so it is advised that the receiving spouse consider ways to obtain the options without executing jeopardizing the favorable tax treatment of qualifying options. It is worth noting, however, that a different result occurs when instead of transferring qualifying stock options, the employee transfers the stock that is acquired once the qualifying option is exercised.

One option is to agree to a monetary value that the options will be worth once exercisable, and simply receive that amount as a lump sum from the other spouse. Another option is to include a provision in the separation agreement or court order expressing that the employee-spouse who owns the options will hold them on behalf of the other spouse. The spouse who is owed the options will have the authority to ask the other spouse to exercise the option at any time per his or her wishes. Because there will be a tax consequence when the options are exercised, the spouses should agree that the receiving spouse only takes the amount left after the tax penalty has been assessed. This transaction would not jeopardize the favorable tax status of qualifying stock.

Obviously, transferring stock options can create quite a headache from a tax standpoint. It is advisable to consult with an attorney or CPA before transferring any stock options so both spouses are fully aware of any tax consequences in advance.