By Charles Rubio Houston. Dividing marital assets in a family divorce is often difficult. The division of assets in a divorce becomes even more challenging when at least one of the spouses owns stock options or restricted stock.

Stock options and restricted stock are typically granted as part of an employee retirement plan. This is known as the vesting period. If the employee quits or is terminated before the vesting period is completed, the employee loses these rights.

Under Texas law, unvested benefits like stock options and restricted stock are contingent property interests that are subject to division in divorce. Berry [4], and is known as the Berry formula. After the divorce court applies the Berry formula, it has wide discretion on how to divide community property between the spouses.

In the alternative, the divorce court may order the employee spouse to turn over the options and stock, or their proceeds when the interests vest. In that case, it is important to for the spouses to be able to track the change in value of these interests because the increases or decreases in the value of stock options and restricted stock are also community property subject to division. If the divorce court orders a future division of these interests upon vesting, it is important that the non-employee spouse be aware of the risk that these interests may be lost if the employee spouse quits or is fired.

Divorcing spouses who own stock options and restricted stock would be well-advised to consider reaching a property division settlement that is designed to achieve their financial objectives. They can and should take matters into their own hands to avoid a ruling by the divorce court that imposes a result completely at odds with their own objectives. A negotiated property division in the divorce has the potential to provide the spouses with the following benefits when stock options and restricted stock are part of the marital estate:.

Divorce cases that involve substantial private company investments require a thoughtful approach to the problem of dividing these assets in a way that best preserves and maximizes value for all of the parties involved. In most cases, a carefully structured, negotiated settlement provides both spouses with a better outcome than the results of a court-ordered decree.

Boyd , 67 S. Grier , S. Berry , S. The Sharp Arrow in the Quiver Still Available to Minority Shareholders In Texas Private Companies.

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In Texas, are unvested stock options, granted during the marriage, community property or s

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Lance Coburn Frances Ellenbogen Jason Fulton Ladd Hirsch Richard Janvey Charles M. About Diamond McCarthy Client Testimonials Representative Cases. Contact Us Today Type your message here: Messages sent using this form are not considered private. Avoid sending highly confidential or private information via email. Thursday, January 29, Perilous Waters in Divorce Proceedings: Considering Issues That Arise When A Divorcing Couple Seeks to Divide Stock Options or Restricted Stock By Charles Rubio Houston Dividing marital assets in a family divorce is often difficult.

Employment Retirement Plans Create Stock Options and Grants Stock options and restricted stock are typically granted as part of an employee retirement plan. Benefits of Negotiated Divorce Settlement A negotiated property division in the divorce has the potential to provide the spouses with the following benefits when stock options and restricted stock are part of the marital estate: Previous Posts Shareholder Derivative Claims: Enterprise Products Partners LP Virtual Reality Goes To Court: Minority Shareholders Take the Shackles Off - Looking Back at Private Company Ownership Issues During Part 2 A Look Back at — Legal Issues Affecting Texas Private Company Owners and Investors Part 1 The Devil You Know: Pick Business Partners Wisely and Plan For Problems Ahead Business Partner Exits Part 2: Breaking Up is Hard to Do, Especially When Partners Do Not Adopt an Exit Strategy Partnership Disputes: Blog Categories Business Divorce Disputes Business Succession Planning Dallas Court of Appeals Decision Fraud Minority Shareholders.

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