KRISTI ANDERSON WELLS

How are vested and unvested stock rights treated in a Colorado divorce?

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so stock rates is a general term that

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encompasses a lot of different types of

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equity compensation things like stock

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options restricted stock restricted

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stock units sometimes we see Phantom

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stock rights or stock appreciation

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rights all of those are forms of

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executive compensation and all of them

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can be very complex and very different

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there’s no uh format that’s sort of

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generally governs those rights although

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the Internal Revenue code does play into

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it but every single plan is different

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every award agreement is different and

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the difficulty is in Colorado vesting is

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not determinative when you’re looking at

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whether or not a stock right is marital

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property so everyone comes into my

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office and says I don’t have to worry

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about the stock options they’re not

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vested yet so once they vest we’ll

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already be divorced and it’s my separate

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property the law in Colorado is very

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clear that vesting is not determinative

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so instead we have to look to the

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contract the plan document any

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amendments any award agreements

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sometimes it’s in the employment

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agreement sometimes in the severance

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agreement we have to look at the

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contract that provides the benefit and

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determine whether there’s a presently

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enforceable right if there’s a presently

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enforceable right regardless of whether

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or not the stock rate is vested you’ve

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got marital property now I’m getting

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into what forms it presently enforceable

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right it’s a very long and involved

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process but it really boils down to are

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there any circumstances under the plan

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where the person who’s received the

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award could get the stock right before

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investing is there a provision that says

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they can get it if they die or they

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become disabled during the vesting

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period sometimes there are Provisions

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that say if there’s a change in control

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of the corporation during the vesting

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period their vesting will accelerate

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those sorts of Provisions that provide

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that people can get that award before

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the end of the vesting period will

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create property in Colorado and we have

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to address that and unfortunately

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there’s no formula you have to read

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those documents and understand what they

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say in order to determine whether or not

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there’s property right