Dividing property and assets during a
divorce can involve much more than simply splitting cars and homes. In some cases,
it can involve a number of financial instruments and assets many people
would not think about or consider eligible for property division. This
is often the case when it comes to stocks.
Our New Jersey divorce attorneys at Moskowitz Law Group, LLC have helped
guide numerous men and women through all aspects of the divorce process,
property division. Backed by decades of collective experience, our team understands how
to handle complex property division cases, including those where one or
both spouses have stocks, including restricted stocks or stock options.
When understanding how stocks are divided in a divorce, it is first important
to understand how New Jersey law classifies property:
Community Property – Because New Jersey is an equitable distribution state, property
and assets acquired during the course of a marriage are subject to a fair,
but not necessarily equal, split during divorce. This includes stocks
owned by either spouse that were acquired or purchased during the marriage,
as income is considered community property. There may be exceptions, however,
such as when stocks are obtained as gifts or as an inheritance.
Separate Property – Separate property is any asset acquired prior to a marriage or
after the date of separation, as well as property acquired as a gift or
inheritance. If a spouse obtain stocks before or after a marriage, or
as an inheritance, they may be considered separate property. Family courts
have historically ruled that stock options acquired during a marriage
but have not vested before the date of separation are considered community
property and subject to division.
While understanding community and separate property can aid you in determining
whether or not stocks are subject to division during a divorce, it is
important to remember that the process of fairly dividing stocks can introduce
a number of complexities. For example, vested stock options require thorough
evaluations in order to classify which percentage of options can be considered
community property and subject to division, as well as which, if any, are not.
Dividing stock options and other stocks depends a great deal on how they
were acquired. For example, stocks are often a part of employment compensation
packages given as part of the hiring process. They may also be given to
employees for their past work performance. Depending on the circumstances,
courts may use different formulas, known as time rules, to evaluate what
percentage of options belong to the non-employee spouse. Generally, a
smaller portion of stock will be labeled as community property if there
is a lengthy period between the date of separation to the date that options vest.
Determining what portion of stocks are community property is only half
the battle. Stocks considered community property must then be calculated
for equitable division, which is not an easy task. In some cases, spouses
may choose to release their share of stocks in exchange for cash or other
assets. Other options include creating a trust to hold the non-employee
spouses share of stock or transferring stock to the other spouse.
Financial elements of divorce are both important and highly complex, which
is why experienced legal representation and guidance is crucial during
divorce and property division. Our legal team at Moskowitz Law Group,
LLC can help you learn more about stocks, property division, and what
we can do to assist you in your case during an initial consultation.
Contact us today to get started.