Addressing stock options in a Washington divorce

Addressing stock options in a Washington divorce

Deferred compensation can be a stumbling block for successful professionals preparing for divorce. Stock options or equity options give executives and other well-compensated employees a potential interest in the company that hires them.

After meeting certain contractual standards related to the duration of their employment or their overall job performance, professionals offered stock options in their contracts can choose to acquire equity in the company. Doing so can be a smart long-term decision.

Stock options can be an important element of a complex compensation package. They can also quickly create contention during property division. If an individual with stock options in their employment contract decides to divorce, their future equity options could become a complicating factor in their divorce proceedings.

Deferred compensation may be divisible

Stock options are one type of deferred compensation that employers can use to round out a complex compensation package. By giving successful employees the option of acquiring company equity, the organization can incentivize worker retention and better overall job performances.

The future acquisition of stock could prove quite lucrative for those working at the right businesses. It is therefore only natural that the professional with the deferred compensation and their spouse may both take an interest in the as-of-yet unpaid deferred compensation.

Under Washington’s property division rules, assets that people acquire and the income they earn during marriage are part of the marital estate and subject to division. Even resources that are not readily accessible, including stock options not yet available to the worker, can theoretically be part of the marital estate.

Spouses may have some complex negotiations ahead if they must address stock options and other deferred compensation during property division negotiations. They need to decide what those assets are worth and how much of that value is part of the marital estate. They may also have to decide ways to address that value, as the stock options are likely not available yet and are not directly divisible between the spouses.

Those with complex compensation packages and valuable investments often have more challenges as they prepare for divorce in Washington. Identifying potential sources of complication and learning more about Washington divorce rules can be beneficial for those preparing for the end of a marriage.