Stock Certificate

Unvested Stock Rewards in New Jersey Divorce

In a recent case, M.G. v S.M., the New Jersey Appellate Division decided in favor of the plaintiff husband.  The issue was whether or not a restricted stock award from the husband’s employer, which vested after the filing of a Complaint for Divorce, was subject to equitable distribution.  The trial court found that the wife was entitled to 50% of all of these stock awards.

The Appellate Court reversed and found that a portion of the restricted stock award was not subject to equitable distribution. This was because this particular award is based upon future performance – after the marriage ended.  Another consideration was that much of the award was not fully vested until after the divorce complaint was filed. 

The Court did rule that unvested stock awards would generally be subject to equitable distribution unless one of the parties can prove that such awards are based upon post-marriage, future performance.  In other words, stock awards should be considered a marital asset if they are based on past performance, efforts during the marriage, or part of a deferred compensation program. 

The vesting issue is a little more murky.  Judge Mawla, writing for the majority, acknowledged that there had been little guidance for the trial judge.  Therefore, he sent the case back to the trial court for further proceedings suggesting factors in the New Jersey equitable distribution statute to be considered.  I will update you with the trial court’s findings on this issue.

When it comes to marital assets and equitable distribution in New Jersey, things can get a bit complicated.  This case is just on example of the potential complications.  It is important to have a full understanding of your and your spouse’s compensation package.  Equally important is to keep compensation plan documents.

If you have any questions about this post contact me at jlawrence@lawlawfirm.com.

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