Like many spouses preparing for divorce, you have a partner who earns significant income from a place of employment. Some of these businesses offer compensation other than cash, though. Your spouse may receive stock options as part of a compensation package. This could make your divorce more complicated.
To receive a fair share of marital assets, your spouse should disclose all of his or her assets. But as Kiplinger explains, you may have difficulty even learning about your spouse’s stock options, in addition to other issues that could make splitting stocks with your partner difficult.
Your spouse may not be forthcoming
Ideally, your spouse would reveal details to you about stock options, restricted stock or any part of a compensation package. However, some individuals try to keep their stock options a secret and get through a divorce without revealing them at all. If you suspect something is amiss, you may have to find out details of your spouse’s compensation package yourself.
Finding the stocks can be difficult
Discovering the existence of stock options is not easy. You will not find stock options or restricted stock on W-2s, tax returns or on other statements if your spouse has not exercised the options already or if restricted stock has not vested in that tax year.
One option is to have your spouse authorize the employer to release documents to your attorney that describe your spouse’s compensation package. In the event your spouse refuses to cooperate, you and your attorney may have to use other methods of discovery to learn about your spouse’s compensation.
Taxes may complicate dividing stock
If your spouse is reluctant to divide up stocks quickly, taxes may be a good reason. Generally, employers do not allow their employees to transfer stock ownership to another person even while divorcing, so you may have to wait until the stocks vest before you can receive a share.
Because the federal government might impose high taxes on your spouse after exercising the stock options, your spouse may insist on a settlement that minimizes tax risk. You will probably discuss various options before you and your spouse settle on a solution that fairly distributes taxes between the two of you and avoids some tax consequences.