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Stock Options Might Not be Subject to Division in Michigan Divorce Cases

I am a divorce lawyer in the Rochester area of Oakland County, Michigan. My office is easily accessible to Clarkston, Troy, Birmingham, Oxford, Bloomfield, Lake Orion, Beverly Hills, and Macomb County.

 In every case, division of property is an issue. When the court divides the property between the spouses, it must first determine whether any particular property is marital or separate.   Generally speaking marital property is equitably divided between the parties and separate property is determined to be the property of one spouse and not subject to the overall division of property (of course there are always exceptions).

Marital property is typically anything that either spouse purchased or earned through his or her efforts during the marriage, the manner in which it is titled does not make a difference. Separate property usually falls into three categories: property owned by a spouse before the marriage and kept separate, inheritances that are kept separate and gifts given specifically to one spouse. However certain property does not easily fall within these parameters such as retention bonuses and stock options that are conditioned upon future employment.

The Issue

How should the court handle stock options, restricted stock, retention bonuses, performance cash units or other property conditioned upon a spouse's continued employment with an employer after the marriage?

The Answer

The answer is that the court has decided that it is neither marital nor separate property. In the case of Schiavone v Schiavone, Mich COA No. 314058, unpublished (April 10, 2014), the court dealt with this type of property. It held that it was not property subject to division basically because there is a condition subsequent to the divorce which the spouse must fulfill in order to receive the benefit so it is not actually earned during the marriage. However, it does not fit into the definition of separate property either. This is good because separate property can be considered with regards to alimony or invaded by the court under certain circumstances, whereas this property should not be considered in the division of property as there is no guarantee that the spouse holding this property will actually maintain her or his employment and receive the benefit of the same. In Schiavone, the husband's employer awarded him various employment incentives such as stock options and performance incentives that were conditioned upon him maintaining his employment with Whirlpool at a date after the end of the marriage. If he was not employed on the date of vesting for those options or incentives he would lose the same.  Therefore, while the property was awarded during the marriage, it could not be earned until after the finalization of the divorce. The Michigan Court of Appeals agreed with the trial court. It looked at the facts and found that the stocks had not matured, the husband had not exercised them and they would be lost if he did not continue his employment after the dissolution of the marriage. The court found that it appeared that his other incentives and bonuses were in the nature of a retention bonus and he would have to pay them back, if he received them at all, if he left the company before a certain date. Thus, this specific type of property is neither marital, nor separate and cannot be considered at all in divorce cases because they are based solely on the potential occurrence of future events unrelated to the marriage that will occur, if at all, after the end of the marriage.

Summation

It is very important to have an attorney that is well-versed in divorce law when handling cases that include stock options, retention bonuses, or other similar property because unless one is aware of the specific case-law that applies to this type of property, it would be easy to consider the same to be subject to division because the property was awarded to one spouse during the

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