Understanding Divorce and Stock Options in Georgia: A Comprehensive Guide

If you’re preparing for a divorce in Georgia while you or your spouse has stock options, it’s crucial to understand how these assets may be divided. Company stocks are challenging to assess, and you don’t want to end up with an unfair share after the property division.

This guide explains how Georgia courts handle stock options, restricted stock units (RSUs), and other equity compensation during divorce proceedings. For legal advice on your specific situation, please don’t hesitate to consult with knowledgeable divorce attorney Sharon Jackson.

Understanding the Basics of Stock Options

What is a stock option?

A stock option is an employee's right to buy a particular number of shares of their employer's company stock at a specific time and price. The employee is free to buy the shares whenever they choose, but they are not obligated to.

Are stock options the same as stocks?

Stock options are not the same as stocks: stocks are ownership shares of the company, while stock options are the right to buy stocks whenever the employee wishes to. The main benefit of stock options is that the option-holder can choose a strategic time to buy stocks, when they deem it most profitable.

What are restricted stock options (RSUs)?

Restricted stock options (RSUs) are a promise by the company to give the employee stock if or when certain conditions are met. Two common examples are rewarding the employee with shares when they reach certain performance goals or when they have worked for the company for a specific length of time.

What is vesting? What is a vesting schedule?

Vesting means gaining ownership of something such as a stock option. If you have vested stock options, it means you own those options and can exercise them at any time.

A vesting schedule is a timeframe by which companies give their employees ownership of their stock options. Companies do not usually give their employees stock options all at once, as the employees could simply exercise those options and then leave the organization. Instead, company stock options are typically vested in portions at predetermined dates, called the vesting schedule.

Why are stock options challenging in a divorce?

Stock options frequently increase in value over time because they are predicated on the company's potential for future growth. Because they hinge on future outlooks, stock options are challenging to evaluate and distribute between the parties in a Georgia divorce. Attorneys must therefore carefully consider, discuss, and sometimes litigate the split of either party's stock options in a divorce proceeding.

When navigating divorce proceedings in Georgia, the division of complex financial assets like stock options requires careful consideration and expertise. 

Georgia's Equitable Distribution Approach

Georgia divides marital property according to the equitable distribution principle. This means that property division aims to be fair but not necessarily be equal. The first question that the court asks is: which property can be distributed between the two spouses, and which remains their individual property?

Marital Versus Separate Property

The only assets that may be divided in a Georgia divorce are those that are marital property. This is typically property that either spouse gained during the marriage. Property owned before marriage or received through inheritance remains separate property, solely owned by the original owner.

Appreciation and Market Forces

Though separate assets are not divisible during divorce in Georgia, if those assets grew in value during the marriage, that appreciation may be subject to division. However, appreciation purely from market forces remains separate property.

Are Stock Options Marital Property?

When are stock options considered marital property, and when are they separate property? The short answer is that it depends on the timing:

• Options vested during a marriage will likely be regarded as marital property subject to property division upon divorce.
• If the employee spouse earned options due to the work they performed while married, those options may be subject to division as marital property.
• Stock options that remain restricted until after the marriage ends may be considered separate property.
• RSUs granted on a future vesting schedule may be separate property if vesting occurred pre-marriage or post-divorce.

How Stock Option Value Is Determined

After the court determines whether stock options are marital or separate property, the next step is determining the options’ value. Parties may choose from various valuation methods such as:

Intrinsic Value Method

This is determined by multiplying the number of options by the current stock value and subtracting the option strike price.

Black-Scholes Model

This is an intricate valuation formula that takes into account historical prices, strike price, and vesting schedule to estimate theoretical value.

Alongside the valuation technique, it’s necessary to thoroughly understand  the particular terms and conditions connected to each stock option.

Stock option valuation is a highly complex process. Many divorcing spouses would need the help of finance professionals and experienced divorce attorneys to help ensure that stock options are valued accurately for division.

How Georgia Courts Divide Stock Options During Divorce

In Georgia, stock options and RSUs are normally divided during a divorce through a Qualified Domestic Relations Order (QDRO). This is a legal document that instructs a third-party plan administrator on how to award a former spouse a portion of the employee spouse’s benefits. A QDRO can safeguard your rights and guarantee the proper distribution of these intricate assets in the case of stock options and RSUs. 

Tax Implications in Stock Option Division in a Georgia Divorce

The division of stock options carries significant tax considerations:

• Recipients typically bear responsibility for associated taxes.
• Careful planning may help minimize tax liability.
• Professional guidance is crucial for optimal tax strategy.

Best Practices for Protecting Stock Option Rights During Divorce

To ensure fair treatment of stock options during divorce:

• Maintain detailed records of all stock grants and vesting schedules.
• Document when options were granted relative to the marriage.
• Track any appreciation during the marriage.
• Consider engaging financial experts for complex valuations.

Navigating Stock Options in Georgia Divorces Require Experience. Call Attorney Sharon Jackson Today.

In a Georgia divorce, success in dividing stock options depends on proper documentation, accurate valuation, and strategic planning with qualified legal counsel.

Attorney Sharon Jackson is a top-rated Georgia divorce lawyer with nearly 20 years’ experience in this field. She provides sharp legal representation in high-asset divorces involving complex financial instruments. For assistance with stock option division and other divorce matters, contact Attorney Sharon Jackson at (678) 909-4100.