Call 24/7 To Set Up Your Free Case Evaluation 201.419.6223
We Protect What Matters Most! Experienced. Dedicated. Committed.

How Are Stocks Divided During Divorce?

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, including 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.