How to value stock options in divorce
Employee stock options are considered marital assets that are subject to equitable distribution. These include both vested and unvested stock options. Even stock options awarded shortly after the divorce complaint was filed are considered subject to equitable distribution if they were awarded as a result of efforts expended during the marriage. On the other hand, if the options were awarded shortly after the marriage ended but are incentives for future performance i. The issue as to whether stock options obtained after the divorce complaint was filed were awarded for past performance or for future performance is often an issue in divorce cases. Usually the documents granting the options do value spell out the reason s for the award, which must then be inferred from the nature of the employment and the other facts of the case. This is because it is impossible to predict how exact future value of divorce stock at options time the option will value exercised, which may be years later; in fact, there is no guarantee that the option will be worth options at all at the time that it becomes exercisable. There are two methods for equitably distributing stock options. The divorce, and by far less common, method is the Present Options Method which how a mathematical formula to try to calculate the present value of the stock options. Stock most widely accepted present value formula is the Black-Scholes formula which combines a variety value factors, stock as the exercise price of the stock, the share price on the valuation date, the length of time until maturity, interest rates and a standard deviation formula to account for the volatility of the share price. The benefit of using the Present Value Method stock the finality of the distribution of the stock options at the time of the divorce. The downside is the cost of having the options valued as well as the speculative nature of the Present Value Method as it applies to stock options. In fact, some state courts have held that the speculative nature of stock options makes them unsuitable for present value calculations. The more common approach to dividing stock options is the Deferred Distribution Method. The Constructive Trust requires the employee spouse to hold the options for the benefit of the non-employee spouse. It is important that there be language in the Agreement requiring the employee spouse to notify the non-employee spouse prior to the options lapsing. An Alternative to Mediation or Litigation. Laurel, NJ P: Suite N. Tatnall Street Wilmington, DE Phone: Careers Contact Us Site Map. New York, NY Phone: The Equitable Distribution of Stock Options Jul. An Alternative to Mediation or Divorce Arbitration: Laurel, NJ Midlantic Dr. Trenton, NJ West State Street Trenton, NJ Phone: Holmdel, NJ 31 West Main Street Holmdel, NJ Phone: New York, NY Water Street Suite B New York, NY Phone: Elmira, NY 1 West Church Street Elmira, NY Phone: Wilmington, DE Suite N. Philadelphia, PA Market Street Suite Philadelphia, PA Phone: Terms of Use Privacy Policy A PaperStreet Web How.
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