Over Three Decades Of Resolving Family Law Issues In Montana

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How to split restricted stock awards in a divorce

On Behalf of | Apr 26, 2021 | Divorce |

Montana is one of many equitable distribution states throughout the country. Unlike community property states, the court does not always split marital assets 50/50. Rather, they determine who gets what based on numerous factors. For this reason, it’s important that you bring up all marital assets when constructing a divorce settlement. One asset the people tend to forget about is stock awards.

What are stock awards?

Many companies will award restricted stock awards to employees as a benefit. They cannot be sold right away. Rather it has to vest over a specific amount of time. For this reason, they’re commonly referred to as golden handcuffs because they keep the employee at the company for a lengthy period of time. If the employee decides to leave or is fired, they forfeit their rights to the shares..

Since employees are often awarded the shares early on in their careers, they can become quite valuable over time. When it comes to the asset division process of your divorce, you’ll want to double-check to see if your estranged spouse owns any.

Division of this asset can get messy

Due to the nature of the stock awards, many companies will not allow the shares to be transferred to another person. This means that your estranged spouse cannot transfer the shares to you. Rather, they may need to set up a constructive trust as part of your settlement agreement. When doing so, it’s important to determine who is going to be paying taxes once the shares are sold.