In a divorce, awards of stock are frequently the largest assets in the marital estate. It is no surprise then that how these accounts are divided can be controversial and highly contested. This kind of division of assets in divorce can often be complex, particularly if the stock awards have not yet vested and their value is as yet unknown. In one recent case of first impression, MG v SM, there was an issue of whether or not certain restricted stock, which would vest after the complaint of the divorce, would be subject to division in a divorce if the vesting is contingent upon the party in question’s employment efforts after the complaint.
The parties married in 1998, the plaintiff became a principal consultant for a major multi-national corporation. From August 2003 through August 2010, the employer gave plaintiff an annual stock award, which would vest in yearly clusters. By way of example, the plaintiff noted that in 2003, he received 490 shares. Starting in 2011, 174 shares each year would begin to vest. The same schedule applied to all subsequent stock awards. According to plaintiff’s testimony, this was so the company could ensure continuous high-performance of the employees. So, if in the year the stock award was going to vest and the employee had performed poorly, the company had the option to terminate their employment, along with their rights in the stock.
When the plaintiff filed his complaint for divorce in July of 2014, just three of his eight stock awards had fully vested. When considering the division of assets in divorce, the plaintiff’s position was that the stocks which had already vested should be eligible for equitable distribution to his spouse, but not the ones which had not yet vested. The court disagreed. The judge ruled that the defendant could share the stocks which had vested as of the date of filing as well as the awards which would vest after the complaint. Continue Reading →