Are Stock Options Marital Property?

The short answer to the question posed above is: it depends. The answer to this question depends on several factors, including when the options were granted to the employee spouse and whether a spouse or both spouses put in any effort during the duration of the marriage to acquire and cause the vesting of the stock options. Stock options may indeed be deemed marital property subject to equitable division in Georgia, and the analysis for determining whether any portion of the stock options is marital property, just as in the analysis of other types of property, involves figuring out what exactly caused the stock options to be acquired and vested

Generally, stock options may be defined as a right given to an individual, such as an employee, by a corporation to purchase a set number of shares of that corporation's stock during a specific time frame and at a fixed price. If an employee is granted stock options, that employee is not required to exercise the option to purchase the stock, but that employee has the freedom to choose whether to exercise the option. Primarily, there are three reasons why a corporation would grant stock options to an employee:

1. To provide an incentive for the employee to remain with the company. An option granted for this purpose would represent compensation for future services;
2. To attract new employees. If stock options are granted for this purpose, the employee is usually paid below the going rate in return for a part of its future growth. Options granted in a circumstance such as this would generally represent deferred compensation for services rendered in the present.
3. To give current employees a bonus or reward for good work in the past. If stock options are granted for this purpose, they will represent compensation for past services.

In equitable division states such as Georgia, both stock options that are exercisable up to and upon the date the marriage ends and stock options that are not exercisable up to and upon the date the marriage ends may be treated as marital property. The key is to determine whether the stock options were acquired or vested during the course of the marriage due to a spouse's or both spouses' efforts and labor. In other words, Georgia Courts consider stock options and other retirement benefits as marital property if such property was acquired as a direct result of the labor and investments of the parties during the course of the marriage. Stock options granted to the employee spouse during the marriage may be deemed marital property subject to property division upon divorce. Similarly, stock options granted prior to the date of the marriage may also be deemed marital property if the stock options vest during the duration of the marriage due to a spouse's or both spouses' labor and investment. Newman v. Patton, 286 Ga. 805 (Ga. 2010). The seminal case of Newman v. Patton lists the factors that trial courts should consider in dividing stock options, which are as follows:

(a) The source of the funds (premarital funds versus marital funds) used to exercise the stock options;

(b) The purpose of the stock options (that is, were the stock options granted for past, present and/or future services?);

(c) The best formula for apportioning the marital share of the stock options based on the purpose and timing of the stock options in relation to the time of the marriage;

(d) A method of distribution to the other spouse; and

(e) The parties' tax obligations resulting from such distribution to the other spouse.

Because the classification of stock options, as marital or separate property, depends on each case's specific facts and circumstances, your attorney may be able to make a legal argument to the court regarding special circumstances. Additionally, a complex calculation is necessary to determine how stock options should be divided upon divorce, should they be deemed marital property. With that said, it is essential to seek the guidance of an Atlanta divorce attorney with the knowledge and skill necessary to ensure you are awarded a fair property settlement if you are seeking a divorce.