Exercising Stock Options and Divorce in The Woodlands

I’ve discussed before how stock options can be a complicated asset to deal with in a Woodlands Divorce case. They present valuation issues and even more complicated issues surrounding when and how they can be liquidated and divided. If your Woodlands Divorce attorney is not careful in the language he uses to divide the stock options in your divorce case you could end up back in court and spending more money. The Houston appeals court was confronted with a stock option dispute in a divorce decree not even two months ago and their ruling provides valuable reminders on some critical points. Let’s take a look.

What Went Wrong

Luc and Katy got divorced. In their divorce decree Luc’s stock options in ConocoPhillips were divided between them. The language in their decree got off to a good start because they specifically identified which stock options were being divided. The divorce decree also included provisions that exercise of the stock options was restricted by Luc’s terms of employment. So far so good.

The problem in this case is not what they put in the divorce decree, it is what they left out. Can you guess what that provision was? If you guessed the timeframe for exercising the stock options then you would be correct. Their divorce decree was silent on this issue. This silence led to the dispute that Katy thought she could tell Luc to exercise her options whenever she wanted and Luc thought he was in control of when to exercise Katy’s stock options.

How Did It End?

The Appeals court agreed with the trial court that the language used in the divorce decree gave the power to Katy to determine when to exercise her stock options. And if you were rooting for Luc it gets worse. The Appeals court also gave Katy an award of $32,107.99 for attorneys fees which Luc had to pay on top of his own attorney fees for the privilege of losing his case due to poor drafting in his divorce decree.

Don’t Let This Happen To You

Problems and expenses like this can be avoided. You can avoid them by having your Woodlands Divorce attorney protect you from these scenarios with the language included your final divorce decree. An ounce of prevention is worth a pound of cure and if you asked Luc today if he would rather spend some additional time during the divorce to finalize the unanswered question of who would exercise the stock options rather than have the costs and headache of an appeal I’m pretty sure he would choose to avoid this whole issue.

This case is also a reminder that if the timing of the exercise of stock options is an important issue to you then a Collaborative Divorce is worth considering because if a judge divides the stock options it is very likely you are going to be left with no control over when your ex-spouse can exercise his or her stock options.