Stock options are arising as property division issues in divorce cases more often. These are types of stocks that are worth an uncertain amount of money in the future but are worth little now. In Colorado, you need to know your rights and options.
How stock options stocks work
Stock options generally grant an employee the right to buy the stock at a set price on a future date. For instance, you may have options that allow you to buy stock three years from now for $10 per share. The plan is for the stock to go up, so if it costs $50 then, you could buy it and immediately sell it, making $40 per share. But, the stock could fall and be worth only $1. Then, those options are worth nothing.
How to deal with options in a property division
The best thing to do is to make sure your legal team includes someone who understands these stocks and potential future values. An expert may help you evaluate them. These people are specialists with knowledge about how options play out over time.
Know what is and is not there. People often don’t discuss options. You may not even know your spouse has them. Your spouse may be trying to hide the stock options or may have forgotten about them. A forensic accountant or economist traces your spouse’s assets and helps include everything in a division of property.
Evaluate the stocks’ potential. This process is difficult for future values. Still, an expert can guide you through the process. A divorce financial planner can help determine what is fair, even with some property at uncertain value. Know your rights and plan broadly in a property division.
Make sure you consider future taxes when planning. That “worthless” option today might make you some money in the future. But if it does, taxes will remove a chunk, either with a capital gains tax or an income tax.
Know about what stock options are marital property. Bring in experts to help. Solid planning now leads to solid results in the future.