Unvested Stock Options Divorce Attorney Union County, NJ
Linden Divorce Lawyer proving counsel to couples in Summit, Linden, and the greater Union County area
Going through a divorce in New Jersey requires careful guidance and support, and there are often many questions concerning the financial division of assets that were earned or acquired in the course of the marriage. A common concern is how to equitably distribute those earnings. When it comes to unvested stock options or awards, the New Jersey Appellate Division has decided that certain factors must be present to include or exclude these assets from the division process during a divorce.
What is Vested vs. Unvested Stock?
Any unvested stock is a stock that a person does not fully own, but has the potential to own. Essentially, an employer or company may put aside certain stock shares that an employee may earn or purchase. Any unvested stock is a stock that the company still retains and has not fully transferred ownership to its employee.
How the courts decide cases
In all areas of law, courts and attorneys rely upon enacted laws to guide them in deciding cases and advising clients. The enacted law is known as a statute. Statutes lay out what one may be entitled to. However, the statutes are sometimes vague when explaining how the unique facts of each case may be applied under the law. The courts are responsible for hearing cases to decide how these laws apply to individuals in specific cases. When it comes to the issue of stock options in divorce, the court in M.G v. S.M. reviewed and decided the issue of whether a husband’s unvested stock benefit was subject to equitable distribution.
M.G. v. S.M.
In this case, the Appellate Division was charged with deciding whether the unvested portion of the husband’s stock as provided by his employer, which vested after the divorce complaint was filed, was subject to equitable distribution. The trial court that had original jurisdiction over the case previously decided that the stock was, indeed, subject to distribution. They determined that the asset was earned during the marriage and the spouse was therefore entitled to her share. The husband appealed this decision, arguing that he did not fully own the stock at the time of the divorce. In other words, his company still retained ownership of the unvested stock. The Appellate Division overturned the decision of the trial court and found that the stocks were not subject to distribution. The details of this case, as noted below, illustrate how complex equitable distribution under the law can be.
M.G. v. S.M Specific Facts
The specific facts of M.G. v. S.M. are as follows. The husband and wife were married in 1998. In 2001, the husband began his employment as a consultant with a corporation. The corporation offered stock awards to the husband beginning in 2003. He then received stock awards from 2003 until 2010. The husband filed for divorce from the wife in 2014. At the time of the filing of the complaint, three of the eight stock awards were vested to the husband. The remaining five stock awards would not vest until after the divorce complaint was filed, and in fact, several years later.
With wife sought equitable distribution of the remaining five unvested stock options. The trial court, where the complaint was filed, ruled that the wife was entitled to a share of the unvested stock awards. The husband appealed the decision of the trial court.
Appellate Division Final Decision
The Appellate Division overturned the decision and found that the stocks were not subject to distribution. They reviewed the testimony of the husband and found that the unvested stock had not been earned during the course of the marriage and was therefore not subject to distribution. The court relied upon the evidence and testimony given by the husband, who testified that the stocks were not awarded automatically but rather based upon job performance. The job performance that would entitle him to these stocks had yet to be completed or performed at the time of the filing of the complaint. More importantly, the employee’s stock agreement made it clear to the court that the husband was not entitled to the stocks unless his job performance was found to be acceptable. Essentially, the stocks were based upon future job performance, not work that was already performed during the marriage.
In cases involving equitable distribution, the courts will look at whether the asset that is sought to be distributed has been earned during the marriage. The asset will be subject to distribution unless the party seeking to exclude it can prove that it was earned after the marriage was dissolved or the divorce complaint was filed. If the evidence presented demonstrates to the court that the asset in question was based upon a future event, such as work performance, it may not be subject to distribution.
Contact a Linden Divorce and Retirement Lawyer Today
If you are going through or contemplating divorce and have unvested assets, these cases can be complicated and require an attorney who is very well-versed in the law. Contact our office to speak with a divorce lawyer who has experience handling cases across Elizabeth, Westfield, Summit, Linden, and the greater Union County area
Attorney Edward Cooper is aware of how difficult the divorce process can be and takes that into account by offering compassionate legal service. Our firm offers honest counsel when it comes to negotiating your divorce settlement. We tell you when negotiation may be possible, but require extensive time and effort, when certain terms are downright unrealistic, and when an offer is fair and reasonable to you, and as our client, at all times you´ll be informed of every decision along the way.
To speak with our office today in a free and confidential consultation regarding your divorce or potential divorce, or discuss your options, please contact us online, or through our Linden, NJ office at (908) 481-4625.