How are Stock Options Divided in an Arizona Divorce Case?
DUE TO COVID-19 AND OUR NEED TO ENSURE THE HEALTH OF OUR CLIENTS, ALL INITIAL CLIENT CONSULTATIONS WILL BE CONDUCTED BY PHONE. YOU MAY CALL US AT (480)305-8300 TO SCHEDULE A TELEPHONE CALL WITH ONE OF OUR EXPERIENCED FAMILY LAW ATTORNEYS.
Stock Options Divided in an Arizona Divorce Case
As many are aware, an employee may receive Stock Options or Restricted Stock Units from their employer as a form of compensation. The question becomes how are stock options are divided in a divorce in Arizona.
A stock option provides the employee an option to purchase company stock at a stated price, referred to as the “strike price,” at a given point in time.
Typically, the options have a vesting period.
For example, an employee may be granted 1000 stock options that vest equally over four years such that each year 250 of the options vest until the passage of four years at which time all 1000 options are vested.
If the market price of the stock is higher than the “strike price,” the employee can turn the stock back to the company and be paid the difference between the “strike price” and the actual market value of the stock.
Alternatively, the employee can continue to hold the stock to see if future appreciation will provide the employee with a greater profit from the stock.
The main difference between a stock option and a restricted stock unit is that the employee owns the company’s shares that were granted under the terms of the stock option plan.
They can sell them, or they can hold them as long as they wish. A Restricted Stock Unit, however, is different.
Dividing Restricted Stock Units in an Arizona Divorce
Similar to stock options, a Restricted Stock Unit will have a “strike price” and a vesting schedule.
However, unlike stock options, the employee does not own the stock when the Restricted Stock Units vest.
Instead, the employee is only entitled to cash in the difference between the “strike price” and the current market value of that stock. Many Restricted Stock Units also have a date by which the employee must elect to exercise the cashing in of the Restricted Stock Units after which time they are deemed void.
Both Stock Options and Restricted Stock Units are taxable income.
As a result, you must take into consideration the income tax effects of these assets when dividing them in an Arizona divorce.
Almost all employee benefit plans contain language providing that these stock options cannot be transferred, which means the court has no authority to order the company to rename the Stock Options or Restricted Stock Units in the name of the nonemployee spouse.
In such circumstances, it may be wise to have the employee spouse hold the nonemployee spouse’s share of those Stock Options, and Restricted Stock Units in a constructive trust with specific language included to protect the nonemployee spouse.
One of the more complicated aspects of dealing with Stock Options and Restricted Stock Units is understanding the terms of the Stock Option and Restricted Stock Unit plan to identify the community property interest in those assets that have not fully vested.
It is equally important to know whether the assets were granted to the employee as a reward for past performance or, instead, as an incentive to continue employment in the future.
Arizona court’s lacked guidance on how to address Stock Options and Restricted Stock Units until the Arizona Court of Appeals addressed the issue directly in the case of Brebaugh v. Deane.
If you need information about how stock options are divided in a divorce in Arizona, you should seriously consider contacting the attorneys at Hildebrand Law, PC. Our Arizona community property attorneys have over 100 years of combined experience successfully representing clients in divorce cases in Arizona.
Our family law firm has earned numerous awards such as US News and World Reports Best Arizona Family Law Firm, US News and World Report Best Divorce Attorneys, “Best of the Valley” by Arizona Foothills readers, and “Best Arizona Divorce Law Firms” by North Scottsdale Magazine.
Call us today at (480)305-8300 or reach out to us through our appointment scheduling form to schedule your personalized consultation and turn your Arizona community property case around today.
Arizona Family Law Attorneys in Scottsdale and Tucson Arizona
Other Articles About Community Property in Arizona
- Community Lien in Arizona
- Community Lien on Sole and Separate Property in Arizona
- Community Property and Personal Guaranty in Arizona
- Determining Community Versus Sole Property in Arizona
- The difference Between Community and Separate Property in Arizona
- Disclaimer Deed in a Divorce in Arizona
- Divide Retirement Accounts in an Arizona Divorce
- Dividing Property Not Included in Divorce Decree in Arizona
- Division of Debt in an Arizona Divorce
- Do Rules Regarding Property Apply to Debts in an Arizona Divorce
- Enforce Division of Property and Debt in an Arizona Divorce
- Enforcing a Property Settlement Agreement in Arizona
- Filing a Lis Pendens in a Divorce in Arizona
- How is Property Divided in a Divorce in Arizona
- How to Divide Property in Arizona When a Spouse is Hiding Assets
- Is All Property Community Property in Arizona
- Is Arizona a 50 50 State in a Divorce
- Is Separate Property Divided in Arizona Divorce
- Marital Property Laws in Arizona
- Military Retirement Pay and Divorce in Arizona
- Pensions and Divorce in Arizona
- Separate Property Used to Purchase a Home During Marriage in Arizona
- Sole and Separate Property Divorce Arizona
- Is a Spouse Liable for Credit Card Debt in Arizona
- Stock Options Divided in an Arizona Divorce Case
- Unequal Division of Property in Arizona Divorce
- Unfair Separation Agreement in Arizona
- Valuation and Distribution Options For Pensions in an Arizona Divorce
- What is Community Property in Arizona
- What is Separate Property in Arizona
Chris Hildebrand wrote the information on this page about how are stock options divided in an Arizona divorce to ensure everyone has access to information about divorce and community property laws in Arizona. Chris is a family law attorney at Hildebrand Law, PC. He has over 24 years of Arizona family law experience and has received multiple awards, including US News and World Report “Top Arizona Divorce Attorneys”, Phoenix Magazine “Top Divorce Law Firms”, and Arizona Foothills Magazine “Best of the Valley” award. He believes the policies and procedures he uses to get his clients through a divorce should all be guided by the principles of honesty, integrity, and actually caring about what his clients are going through.