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hen a person works for a publicly traded company, they often receive fringe benefits that include stock in the company. Some C-Level employees of a company also enjoy other employment benefits that are linked to future performance of the company. When acquired during the marriage, these assets can represent valuable assets that must be divided at the time of divorce. This post will discuss how these assets are handled during a divorce.
Texas is a community property state, so all property acquired during the marriage is presumed to be community property. Community property includes all forms of income that a spouse might receive, including salary, commissions, bonuses, wages, retirement plans, and stock benefits. It does not matter which spouse earned the money. If it was earned during the marriage, it is community property.
With some types of earnings, it is necessary to determine when they were actually earned. If the parties divorce in the year 2020 but wife does not earn her bonus until 2021, this bonus will be a result of her post-divorce efforts. In this example, it would be unfair to wife to divide this bonus with her spouse. Since they are no longer married, she would not a have duty to share a bonus she earned after marriage.
Some employers will give their employees stock grants to incentivize company loyalty and performance. Many of these grants will vest over a period of several years. Once the stock option or restricted stock unit vests, the employee will have access to the stock and thus the financial benefit of owning the stock. Dividing the stock can become complicated when they are earned partially before and partially after divorce. As with the example of the bonus above, it would be unfair to the employee spouse to divide the portion of the stock earned after the marriage. The good news is that Texas law provides us with a formula for determining which stock belongs to the community and which stock will belong to the spouse earning it after divorce.
Many of these fringe benefits will be held in the name of the employee-spouse. Sometimes, the benefits will not vest until sometime after the divorce. During your divorce, you can sign an agreement with your spouse that sets out how you will be paid once the stock is available.
Here at Thompson Salinas Londergan, LLP, we handle these types of assets in a divorce. We are available to discuss these and other complicated property issues in your case.
