Couples usually divide property and assets during a divorce. Along with these, a couple may need to divide stock options. A stock option gives employees the right to purchase company stock at a fixed price and sell it later for a profit if the stock price increases. Knowing how Ohio courts approach stock options can significantly affect what each spouse ultimately receives.
What to watch out for when dividing stock options
Ohio follows the equitable distribution law. The court aims to divide marital property fairly, but not necessarily equally. Dividing stock options can still be difficult because of:
- Vested and unvested stock options: Some stock options become available immediately. Others become available only after an employee works for the company for a certain period. The court identifies the stock options earned during the marriage and divides only those options.
- Changing value: Because stock prices can change at any time, the value of stock options can also change. This makes them harder to value during a divorce.
- Tax concerns: A spouse who receives the stock options under a divorce agreement may have to pay taxes on them.
Ohio spouses can split the stock options in various ways based on their circumstances. If the stock options are vested, the couple may sell them and divide the money or agree to wait until the options can actually be used or converted into shares or cash. Sometimes, they trade one asset for another instead of dividing the stock options. Choosing the right option while considering the tax consequences can preserve the value each spouse receives.
Why carefully dividing stock options matters
Stock options can make up a large portion of a family’s assets. Ohio courts generally treat options earned during the marriage as marital property. A miscalculation can affect the financial interests of either party. Several conditions affect the value of stock options and how courts divide them. These challenges can significantly affect the outcome, so working through them carefully – ideally with financial and legal guidance – can help avoid costly surprises later.