For divorcing couples in Maryland, stock options often raise complicated questions. Are they considered marital property? In many cases, the answer is yes. But it depends on the timing and conditions of the grant.
To understand how courts handle stock options, it helps to start with Maryland’s approach to dividing property in divorce.
Maryland follows equitable distribution
Maryland uses an equitable distribution system. Under this system, the courts divide marital property fairly but not always equally. The law defines marital property as most assets that either spouse acquires during the marriage. This applies regardless of whose name appears on the title. That definition usually includes stock options granted during the marriage.
Timing and vesting matter
Judges look at when the employer granted the stock options. They also consider why the employer made that decision. If the employer awarded the options for work performed during the marriage, the court often treats them as marital property. This applies even if they vest after separation. However, if the employer grants them after separation as a reward for future work, the court may treat them as separate property.
Both vested and unvested stock options can count as marital property. Judges often apply a time-based formula, like the time rule. This helps determine what portion of the options belongs to the marriage. It compares the length of the marriage to the total vesting period to calculate the marital share.
Both vested and unvested stock options can count as marital property. Judges often apply a time-based formula, like the time rule. This helps determine what portion of the options belongs to the marriage. It compares the length of the marriage to the total vesting period to calculate the marital share.
Valuing and dividing options
Stock options can be difficult to value. Courts may calculate the value by subtracting the exercise price from the market price. In some cases, judges wait until the employee exercises the options. That allows them to determine the actual value.
Most stock option plans prohibit transfers. Because of that, courts usually avoid splitting the options themselves. Instead, judges often give the non-employee spouse a larger share of other assets. That helps balance the overall value.
Why legal guidance helps
Dividing stock options can be one of the most complex parts of a divorce. Judges must consider many factors. These include employment agreements, vesting schedules and tax impacts. A skilled family law attorney can help you understand your rights. They can also guide you toward a fair outcome that protects your financial future.