Dear Family Law Attorney: I am in the middle of a divorce.  My husband was granted stock options by his employer three (3) years ago, but they will not vest until two (2) years after the divorce is final.  Am I entitled to anything from the eventual exercise of these stock options?  Elizabeth from Golden Valley, MN

Family Law Attorney: Yes.  The general rule is that any property acquired during the marriage, and up to the valuation date, is deemed marital property.  Any property acquired by your husband post-valuation date would be deemed his nonmarital property.  In your case, a portion of the stock options were earned during the marriage, and a portion will be earned after the marriage.  Your husband’s stock options therefore will have both marital and nonmarital components.

When your husband exercises his stock options, he will in effect receive extra compensation for five years of working for his employer.  You and your husband were married for three of the years which entitled your husband to the stock option proceeds.  In total, your husband worked (or will work) for five years.  The court applies a formula for determining your respective interests in the stock option proceeds.  The marital interest is a fraction of the total payment.  The numerator in the fraction represents the number of years of marriage during which benefits accumulated, and the denominator represents the total number of years during which benefits were accumulated.  So, in your case, the marital interest in the stock option proceeds is 60% (3/5’s).  The remaining amount is your husband’s nonmarital property.  Generally speaking, you would be entitled to 50% of the marital portion of the proceeds.

In establishing this formula, the court recognizes that even though the proceeds are not paid until well after the divorce is final, marital effort was largely responsible for the husband’s right to receive the payment.  See our website at www.gadtke.com or contact a Gadtke & Beyer attorney if you have questions.