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Dividing Stock Options and Business Assets in an MA Divorce


Stocks and business assets are among the more complex aspects of property division in a divorce in Massachusetts. If both parties are unable to arrive at a mutually acceptable agreement on marital property division, they will have to abide by the court’s decision. Under Massachusetts law, property division in a divorce must be equitable, but not necessarily equal.

It is best for parties with a high net worth, a running business, or complex assets such as stock options to have an experienced divorce attorney on their side. Davis Law Group has the expertise to ensure that your property interests are protected in an MA divorce.

Where necessary, we will work with a CPA or a forensic accountant so that your share in marital property is not compromised because of any errors in property evaluation or due to hidden or unknown assets. Call us at (617) 752-6216 to schedule an appointment.

How to Split Stocks in a Massachusetts Divorce?

During the course of marriage, a spouse may have received stock options as an employee. Employers may sometimes grant these stock options based on the past job performance of the employee (which may include a period prior to marriage).

In other cases, stock options may be offered to incentivize and retain employees or compensate them for their future performance. It can be difficult to determine the accurate market valuation of these stock options, particularly when the stock price is significantly fluctuating. If the company is unlisted or is a startup with no established history of stock performance but has a promising future, stock valuation can be challenging.

These are the types of peculiar circumstances in property division where you need a skilled attorney. Jay Davis has deep knowledge and understanding of these complex property division matters, and he provides strong legal representation to protect your rights to marital assets. Call Jay’s office now at (617) 752-6216.

Baccanti Formula for Dividing Unvested Stock Options

Stock options and restricted stock units (RSUs) are time-delayed financial assets, which makes it difficult to divide them in a divorce. In 2001, the Massachusetts Supreme Judicial Court addressed the issue in Baccanti v. Morton case. The Court held that while dividing property in a divorce, any unvested stock options can also be divided the same way as other assets.

However, if a spouse received unvested stock options only some time before the divorce was finalized, he or she would have to work for a number of years before they could collect on those stock options. To ensure a fair division in this situation, the Court determined the “Baccanti formula.”

The basic premise of this formula is that if the unvested stock options of a spouse are halfway through the vesting period when the divorce is finalized, then 50 percent of the unvested stock options will be divided. If the stock options are only quarter of the way through the vesting period, then 25 percent of the stock options will be divided. Similarly, if 95 percent of the vesting period is complete, then 95 percent of the stock options will be divided, and so on.

In addition to this formula, an opinion in 2017 by the MA Appeals Court in Ludwig v. Lamee-Ludwig said that any RSUs or unvested stock options that are not divided as assets must be counted as income for alimony calculation purposes.

Division of Business Assets can be Challenging in an MA Divorce

The family court in Massachusetts may sometimes decide to hand over the business assets to the party that has set up and operated the business throughout the marriage, and may compensate the other party by way of cash or other assets.

In any case, the valuation of business assets can be tricky, particularly when dividing intangible assets such as goodwill, intellectual property, brand identity, client database, and social media or e-commerce memberships. In some cases, a spouse may have used pre-marital funds to launch the business or founded the company before marriage, but may have transferred a percentage of the business interest to the other spouse after marriage (for tax purposes or to form a partnership).

It is also possible that a spouse may have contributed to the business development without any consideration, while the business is owned by the other spouse. In all these situations, business will not be viewed as a separate property, and you may have a legitimate right over a part of the business assets.

Speak to an Experienced Massachusetts Divorce Attorney Now!

If business assets or stocks are included in your marital estate, Jay Davis and his legal team will use all their skills and resources to ensure correct valuations of these assets are determined and you receive your rightful share in a divorce.

Jay will be personally involved at every stage of your case. Give us a call at (617) 752-6216 to schedule a free consultation with the Davis Law Group today.

The post Dividing Stock Options and Business Assets in an MA Divorce first appeared on Davis Law Group.
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