image of stock options

How to Deal with Stock Options in an Arizona Divorce

Stock options are an incredibly complicated subject in even the best of times, much less during a contentious divorce. To ensure that your assets are protected and properly divested, keep on reading to learn more about stock options, what they are, and how they are handled during a divorce in the state of Arizona.

What Are Stock Options?

In the world of finance, a stock option is a contract that gives the owner the right, but not the obligation, to purchase or sell an asset at a specific price-point.  In the typical employer-employee relationship, this stock option is known as a grant. An option will be exercised at the moment that the employee in the relationship purchases the stock by following the options granted in the contract.

Options are granted for a litany of different reasons, but they always break down into either Qualified or Non-Qualified stock options.

  • Qualified Stock Options — A qualified stock option is also known as a statutory incentive stock option, otherwise known as the ISO. Taxes due on qualified stock options aren’t to be paid until the sale of the stock, when it was sold, and its corresponding tax rates.
  • Non-Qualified Stock Options — Taxing non-qualified stock options occurs after the value has been discerned from the established market, creating the income tax that is due when the grant is optioned.

Grants that are given, received, or exercised during a marriage will become a stock that has been exercised and as such will be distributed as a part of the community assets during the divorce.  These stock options can then be realized due to several factors about employment, financial compensation, or in exchange for a raise.

Consider how this might affect Silicon Valley employees investing heavily in startups, and we can quickly see how this becomes a point of contention during a divorce.

Distributing Stock Options During an Arizona Divorce

Arizona falls in line with many of the same state laws regarding divesting assets and stock options during a divorce. Like many other states, Arizona will distribute property resulting from the marriage only if that property was acquired during the marriage. Property that is available after the divorce has commenced is beholden to far trickier conversations.

Generally speaking, Arizona will treat stock options in much the same way that they do pension plans. As addressed through Brebaugh v Deane, 211 Ariz. 95, stock options must be further looked at to see the terms of their execution as well as when the grant would be paid out for potential future efforts, thus throwing a wrench into the entire conversation.

Unfortunately, there are no clear-cut answers when it comes to how a stock option will be dispersed during divorce proceedings. Depending on the court’s decision, and the case presented, the answer can go one of many directions. There are ways to maximize your chances at properly protecting your assets and that is through professional legal help.

The Sampair Group Is Ready to Help

To learn more about stock options and how they are distributed during a divorce, contact The Sampair Group for same or next-day appointments by telephone and video conference. The Sampair Group is made up of acclaimed family law attorneys who have represented thousands of Arizonans in their time of need.

With almost 40 years of legal experience, Attorney Patrick Sampair is ready to stand for YOU during your next legal battle.