Question: My husband has worked for a rather large public company for 22 years and, as a result, has acquired a significant 401k, pension plan, and what my lawyer describes as valuable stock options. He and I have been involved in the divorce process for more than a year now, mostly because of his refusal to agree to divide his stock options with me. Although I really never understood what these options are, my lawyer tells me that they are worth fighting for. My husband and his lawyer have finally agreed that I would get 40 percent of his stock options, but now they are arguing about how to value them and how to divide them. Isn’t there a simpler – and less expensive -- way to approach this problem?

Answer: Today, more and more large companies are giving higher level executives stock options. A stock option permits the employee to purchase an established number of shares of stock in the company over an established number of years at a predetermined price per share. The per share price will be either the price of the stock on the day the option is granted or a minimal cost per share, such as $1.00. In addition to saving cash that would otherwise be spent by the company to sweeten employee benefit packages, stock options offer executives an incentive to work harder to increase the value of the company stock. As the market value of the stock increases, the value of the stock options also increases.

There are many different types of stock options which may include waiting periods, staged rights of exercise, and various incentives. Because of these contingencies, stock options are very difficult to value, and the manner in which these assets are valued and divided varies from state to state. Some courts do not consider stock options to be marital property, meaning that the options would belong to the employee spouse and would not be divided.

If determined to be marital property, stock options are divided in a number of different ways, including the court holding in abeyance the division until the options are exercised and a profit is made. If, for example, the options allow the purchase of company stock for $1.00 per share and are exercised at a time when the stock is $4.00 per share, the court would divide the $3.00 profit. This transaction will raise certain tax consequences that are much too complex for discussion here.

Bottom Line: If stock options are marital property in your state and the company for which your husband works is stable, it is probably a good idea to invest in your lawyer’s time and the necessary experts to protect your interests. On the other hand, you must understand that if you are granted a percentage of the options and the options are either not exercised or exercised at no profit, you will receive nothing. Depending on the circumstances, since your husband thinks the options are so valuable, it might be a good idea to explore negotiating to get more of the current marital property (i.e., a larger percentage of the 401k or more cash) for a waiver of your rights to the options. This is an economic decision only you can make with the assistance of your lawyer and those experts hired to represent your interests.

SoloFact: Today, divorce is a multidisciplinary undertaking. In addition to a lawyer, litigants may need the assistance of certified public accountants, actuaries, psychologists, psychiatrists, counselors, mediators, and other experts. Because of the increasing complexity of marital litigation and the far-reaching economic effects, it is important to use a team approach when the issues justify it.