If your spouse was granted the stock options prior to your separation (during your marriage), the options are considered community property subject to equal division. However, some stock options are granted on a certain date, vested on a certain date, and exercisable on a certain date. On each of these dates a certain portion of the stock option becomes property. If all three dates occurred during the marriage and before the separation, the entire proceeds are community property subject to equal division.
However, if the option is granted during the marriage, becomes vested after the marriage, and then is exercised after the marriage, the stock acquired is usually apportioned in accordance with a complicated formula called the “time rule.”
Additionally, payment is required to exercise the stock option. If the payment is made with community money, it gives the community a greater interest than if it was exercised with the payment of separate money. Typically, a forensic accountant is required to calculate the community interest in an apportioned stock option.
John Gilligan is a founding partner at the family law firm offices of Brandmeyer Gilligan Dockstader & Davidson, LLP in Long Beach, CA. John has over 30 years of experience handling family law, probate litigation and estate planning matters. He can be reached directly at 562-431-2000. View their firm online profile here.