A New Jersey appeals court recently considered the question of whether a stock award that was issued to an executive prior to his divorce filing but which was vested after the divorce filing was subject to equitable distribution.
The case — M.G. v. S.M. — involved a divorcing couple that married in 1998. As part of his compensation from his employer, the husband plaintiff received annual stock awards that vested in yearly tranches that were dependent upon performance. When the plaintiff filed a divorce complaint in July 2014, he was entitled to eight stock awards. Three of these awards were fully vested; the other five were set to vest after the filing of the complaint.
Plaintiff argued that only the three awards that were already vested should be subject to equitable distribution. The other five unvested awards were dependent on his future performance and the plaintiff asserted that these should not be shared. The trial court disagreed, relying on a Supreme Court decision in Pascale v. Pascale, which held that stock options awarded after a divorce were subject to equitable distribution if those awards were the result of efforts expended during the marriage.
On appeal, the court found that the trial court erred in applying Pascale since that case did not deal with awards for future performance. The appeals court ruled that stock awards for future performance post-complaint are NOT subject to equitable distribution.
In addition, the court established a standard for future cases involving unvested stock awards: a party seeking to exclude a stock award that is issued during a marriage has the burden of proof to show that the award is for future performance instead of a reward for past behavior.
It is important that you do not wait too long to retain an attorney when you are facing a family law issue. Delays can cost you valuable legal rights, and you want to make sure that you have the advice and support you need to make the best decisions for you and your family long after the divorce settlement is reached. Contact us today for your free consultation.