Stock awards often make up a large part of an executive’s pay. If you divorce while some shares or options remain unvested, you may wonder how the court will account for compensation you cannot use yet. Several grants with different vesting dates can make property division more difficult.
Maryland courts recognize that an unvested stock option may still qualify as marital property. You do not avoid property division simply because you cannot exercise the option yet. If you must keep working after the marriage ends to earn the full grant, however, only part of it might count as marital property.
How Maryland treats stock options in divorce
Maryland law generally looks at when you acquired property and where it came from. If you acquired a stock option during your marriage, the option may qualify as marital property even before you gain the right to exercise it.
A long vesting period can complicate that analysis. If you must remain employed after the marriage ends to earn the option, a court could treat only part of the grant as marital. Maryland courts have used a time-based formula that compares the period during the marriage with the full period between the grant date and vesting date.
Why the vesting terms matter
Your plan documents explain when the stock will vest and what you must do to receive it. They may also explain what happens to the award if you leave your job before the vesting date.
Why your employer gave you the stock might also matter. The award could reward work you already performed or depend on work you will do in the future. These details help show when you earned the award and how much of it relates to your marriage.
Keep your stock records organized
Unvested stock may account for a large part of your total pay. Deciding how much belongs in property division can add another difficult financial issue to your divorce.
Consider keeping your grant agreements and vesting schedules with recent account statements. These records could make the key dates and terms easier to review and give you useful documentation as you work through the process.
