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What is a stock option and how does it get handled in divorce?

One of the unique features of a Colorado divorce or separation involving a couple where one or both are high-profile executives or professionals is that there may be a lot of complex assets in play.

For instance, many well-compensated people, in addition to a large cash salary, also get valuable fringe benefits that may be less common in the broader economy. One such fringe benefit is the stock option.

As the name implies, a stock option is a right to purchase some stock, usually the stock of the company for which one works, at a future date. The attractive feature about a stock option is that the price of the stock is agreed upon at the time the person acquires the option.

Assuming the underlying stock increases in value, a stock option is effectively a coupon to buy stock cheap. For example, someone can purchase company stock at $10 a share, the agreed-upon price, when the going rate on the public market is, say, $20 a share or even more.

Although they are not the same as owning stock outright, a stock option is considered property, and, if acquired during a marriage, is likely going to be subject to a fair and equitable division during a high asset divorce.

Getting an exact value on a stock option, much less dividing them between a couple, can be a very complicated process. For one, there are number of factors that go in to evaluating a stock option, and it often takes the help of a financial expert to reliably estimate a value. Handling stock options and other complicated fringe benefits is also something with which an experienced divorce attorney can assist.

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