Restrictions on stock options in divorce

During a divorce, a number of the things that both parties must address can be quite complex. Distributing stock options may be one of those complexities in the divorce process.

To aid in that process, it may be helpful to understand the possible restrictions one may face.

Restricted stock

As the name indicates, a restricted stock is a stock option that has some form of restriction on it. Some common restrictions include an employee working for the company for a certain amount of time, or the employee having to exercise the stock and not transfer it to another party. In such cases, it is still possible for an ex-spouse to receive a portion of the stock; the spouse who receives the stock would have to meet the requirements and cash the stock for the other party.


Depending upon the classification of the stock, the IRS may tax it at different levels. Also, it is important to note that the stock will be taxed in the tax bracket of the ex-spouse who initially obtains the stock, in accordance with divorce law. Keeping this in mind can assist in determining the net value of the stock.

Determining value

Considering that stock values may change, it can be difficult to predict the value of the stock. Therefore, it may be beneficial to consult with a financial expert versed in divorce proceedings. If an ex-spouse chooses not to receive the stock, he or she may select a property division option that allows the party to choose more of another asset that is of similar or equal value. In such an instance, the party should make sure that the asset he or she selects has the same or similar opportunity for appreciation as well.

Though stock options are not always a guarantee for a high return, they can be a quality asset. Parties should take some time to review the available options and determine the best course of action in their particular situation.