Characterization, Division & Allocation of Stock Options

How are Stock Options Divided?

In a California divorce, stock options and similar assets granted during the marriage, or partially vested during the marriage, may have a community property component. Stock options that are earned during the marriage are allocated between community property and separate property. The foundation for the allocation is the community property presumption that provides that “earnings” during the marriage are community property. If a spouse is compensated during the marriage, in part, with a grant of stock options that partially vest during the marriage, the stock options will most likely be partially community property. If a spouse’s employment during the marriage results in partial vesting of stock options granted before the date of the marriage, the options will also most likely have a community property component. The number of options allocated between separate property and community property can vary depending upon which formula is used.