Vested vs. Unvested Shares in High-Net-Worth Divorces
High-net-worth divorces in Atlanta often contain complex assets. These assets may be difficult to value, difficult to locate, or extremely lucrative. Unvested shares could fall into all three of these categories. But what exactly is an unvested share, and how is it distinct from a vested share? These are questions many spouses may ask as they approach divorce, and an experienced family law attorney may be able to provide answers.
What Is a Vested Share?
First, let’s consider the definition of a vested share. This type of stock is fully “owned” by the investor. This term usually refers to stock options earned through employment benefits. These benefits are common in the corporate world, and high-level executives can become extremely wealthy after receiving stock options throughout their careers. When an employee fulfils the conditions associated with the stocks in question, they earn these stocks. At this point, the stocks are “vested” and owned.
For example, an employee might need to work a certain number of years to earn stock options. They might also have to reach certain thresholds or milestones, such as selling a certain amount of inventory or helping the company reach net earning goals.
What Is an Unvested Share?
An unvested share is a share that has not yet been earned. Technically speaking, the employee does not own these shares. However, they represent possible assets that the employee might one day earn if they fulfil the conditions attached to them. Although these unvested shares might be associated with the employee, the employee has no right to sell or transfer them until they become vested.
What Happens to Vested and Unvested Shares During Divorce?
Vested shares are easier to divide during divorce because they are fully owned by the spouse. As a result, the court only needs to determine whether the shares are marital property (divisible) or separate property (ineligible for division). The court might consider when the stocks were “earned,” and not necessarily when the spouse received them. For example, if a spouse received shares after the marriage date but earned these shares due to their performance in the year prior to marriage, the spouse might argue that these are separate assets.
The same logic applies to unvested stock, and the court may need to determine when these employment benefits were earned. However, dividing these assets is more complex because of their unclear values. Often, the true value of company shares is not clear until after they are vested. For example, a tech startup’s stock price might skyrocket three years after the divorce becomes final. As a result, it might be more prudent to divide the unvested stocks without liquidating them.
Can a Divorce Lawyer in Atlanta Help With High-Net-Worth Divorce?
An experienced divorce lawyer in Atlanta may be able to help with complex asset division during high-net-worth divorces. The distinction between vested and unvested shares is just one example of a complex situation that might arise during property division. There are many others worth considering, and you can discuss your specific circumstances during a consultation. Contact Buckhead Family Law today to schedule your first meeting.
Source:
investopedia.com/terms/v/vesting.asp
