Divorce and Dividing Stock Options
Identifying, Classifying and Valuing Stock Options for Equitable Distribution and Income Availability
Recording of a 90-minute CLE webinar with Q&A
This CLE course will prepare family law practitioners to better represent litigants in identifying, classifying and valuing stock options for purposes of both equitable distribution and income availability upon divorce or in the context of post-judgment modification.
Outline
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Accounting/tax issues
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Overview of employee stock options
- ISO vs. NQSOs
- Tax implications
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Valuation issues
- Intrinsic value
- Mathematically derived values
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Matrimonial/legal issues
- Case law history
- Deferred distribution methods
- Present valuation with offset
- Value used for support
- Defining if an option is subject to distribution
- Recent developments
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Case law
- In re Marriage of Hug, 154 Cal. App. 3d 789, 792, 201 Cal Rptr. 676 (1984)
- In re Marriage of Miller, 915 P.2d 1314 (Colo. 1996)
- In re Marriage of Short, 125 Wn. 2d. 865, 872, 890 P2d. 12 (1995)
- Bornamenn v. Bornamenn, 245 Conn. 508, 752 A.2d 978 (1998)
- Wendt v. Wendt, 59 Conn. App. 656, 757 A.2d 1225 (App. Div. 2000)
- Callahan v. Callahan, 142 N.J. Super. 325 (Ch. Div. 1976)
- Pascale v. Pascale, 140 N.J. 583 (1995)
- DeJesus v. DeJesus, 90 N.Y.2d 643 (1997)
- Murray v. Murray, 128 Ohio App. 3d 662 (1999)
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Distribution (two-step process)
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Determine the “marital portion” subject to equitable distribution
- Distribute vested options only
- Present evidence of why options were awarded in order to determine if earned income “during the marriage” or “through marital efforts”
- Coverture fraction/time rule
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Method of distribution of “marital portion”
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Valuation and offset
- Intrinsic value
- Black-Scholes method of valuation
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In-kind distribution
- Transfer of title
- Trust device
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Valuation and offset
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Determine the “marital portion” subject to equitable distribution
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Stock options as income for support
- Previously distributed options
- Existing, but undistributed options
- Projection of future income from past awards
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Current developments in stock options
- Options to be expensed by corporations
- Sarbanes-Oxley Act of 2002
- Revenue Ruling 2002-22
- Hanson v. Hanson, (A-4492-D0T1) (App. Div. 2002) and the treatment of stock options
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Overview of employee stock options
Benefits
The panel will review these and other key questions:
- What is the difference between a vested and unvested stock option?
- How are different stock options identified?
- What “time rules” are used in various venues?
- What different valuation methods can be applied to value a stock option, and under what specific circumstances should the different valuation methods be applied?
- When should stock options be considered as marital assets subject to equitable distribution, and under what circumstances can and/or should stock options be considered income?
- How does one equitably distribute a stock option?
Following the speaker presentations, you'll have an opportunity to get answers to your specific questions during the interactive Q&A.
Faculty

Charles F. Vuotto, Jr.
Partner
Tonneman, Vuotto, Enis & White
His practice focuses on family law. He is a frequent lecturer at both family law and CPA conferences and seminars. He... | Read More
His practice focuses on family law. He is a frequent lecturer at both family law and CPA conferences and seminars. He is a published author on family law topics. He is the Editor-in-Chief of the New Jersey Family Lawyer. He is a member of the ABA, N.J. Bar Association and the AAML.
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Neil Beaton
Managing Director
Alvarez & Marsal
Mr. Beaton specializes in the valuation of public and privately held businesses and intangible assets for purposes... | Read More
Mr. Beaton specializes in the valuation of public and privately held businesses and intangible assets for purposes of litigation support, particularly in the valuation of early-stage, venture-backed companies. He also performs valuations for employee-owned companies and municipal, state and federal entities. He writes and speaks frequently on valuation techniques for companies with capital structures.
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