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How will stock options be handled in a divorce?

On Behalf of | Feb 26, 2019 | Property Division

Many people in Phoenix, Arizona, who have full-time positions get to take advantage of several benefits that their employers offer to them. Particularly in executive and other white-collar positions, for instance, an employee may be allowed to acquire stock options. As the name implies, a stock option is the right of a person to buy company stock at some point in the future for a price already agreed upon.

A person makes money off of a stock option when he or she gets to use it to buy stock at the agreed upon price of, say, $50, when the stock is worth more, say $100, at the time of purchase. In the context of a divorce or permanent legal separation, stock options present complex valuation questions. Unlike stocks one already owns, there are many factors that go in to estimating a value on a stock option, even if the stock itself is traded on the public market.

For example, the value of a stock option depends a lot on what the agreed-upon price of the stock is, as well as how frequently and violently the stock fluctuates in value. The amount of time one has to exercise the option, that is, purchase the stock for the agreed price, also has a lot to do with the value of the stock option.

While this is a general overview, the reality is that someone going through asset valuation and division will likely need some professional assistance in order to get an accurate value on one’s stock options. While this may require the help of an accountant an expert in business valuation, having the right attorney on one’s team is also important.