How are retirement accounts and stocks divided in a divorce in Kentucky? Marital property is generally any asset acquired after the date of the marriage and before the divorce, with few exceptions (such as a properly structured inheritance). Marital property is to be divided equitably in Kentucky.
Key Elements of how are Retirement Accounts and Stocks Divided in a Divorce in Kentucky:
- The first step in property division is to determine the status of each asset and debt; is it “marital,” “separate,” or “commingled”
- Retirement accounts, pensions, and investments such as stocks that are considered at least in part to be marital property must have an accurate valuation established before the Court
- Marital property is to be divided “equitably” in Kentucky
If we presume that we are discussing the valuation and division of marital property in a Kentucky divorce, how are retirement accounts and stocks divided in a divorce in Shepherdsville, Mount Washington, Shelbyville, Taylorsville, Radcliff, Elizabethtown, Jeffersontown, or Louisville, Kentucky? Retirement accounts and pensions are fairly straightforward, when the parties are aware that they are marital property assets and subject to division. The valuation of the marital interest in the retirement asset (amount of growth from the date of the marriage to the present day) or investment account must be established before the Court. There are several options to establish the valuation of an investment account involving stocks.
Not all stocks of equal value carry the same valuation in a divorce case. Each stock purchase carries a tax “basis,” established at the time of acquisition. Therefore, when one goes to sell them, the difference between the selling price and the basis results in a taxable event, and the seller must pay taxes on the “profit.” Therefore, a $100,000 stock account with a basis of $40,000 would have a completely different valuation in a Kentucky divorce case than a stock account with a basis of $78,000. Both are technically worth $100,000 pre-tax, but their post tax net valuation is quite different. There are also often questions relating to “stock options.” Many corporate entities provide their employees with the ability to purchase company stocks during employment. In other examples, stocks are awarded as a form of bonus or promotion. The key question in these matters is are the stocks “vested” or “unvested?”
Stock-based assets become “vested” when an option has been exercised and the cost of the stock has been paid. If stock has been awarded to one of the spouses with the option to acquire it at a specific price, they must usually wait a specified period of time. Stocks that have been offered but not acquired are considered to be “unvested.” Often, we will be discussing a Restricted Stock Unit (RSU) which occurs when a company promises an employee a future grant of stock, based on certain conditions, such as waiting a specified period of time. With RSUs, you don’t have to pay for the shares (or the present value of the shares) up front, but you receive either the value of the shares or the shares themselves after a given period of time. A stock option provides the opportunity to acquire shares in a company at a specific, predetermined value after the stocks are “vested.” One doesn’t actually own the stocks until one “exercises” the option at the established price.
In terms of stock, a Restricted Stock Unit (RSU) is a form of employee compensation that promises a future grant of company stock, subject to certain conditions, typically time-based vesting. Unlike stock options, RSUs represent actual shares, but they are “restricted” meaning the employee doesn’t own them outright until they vest. The main difference between RSUs (Restricted Stock Units) and stock options lies in how ownership is granted and the associated costs. RSUs are a grant of actual company stock, while stock options grant the right to purchase stock at a set price. This means with RSUs, you receive shares (or their cash equivalent) after a vesting period, without any upfront cost. With stock options, you have the option to buy shares at a predetermined price (the strike price) after vesting, but you don’t own them until you exercise that option and pay the strike price. When the option is exercised and the purchase price is paid, the interest is considered to be “vested.”
Obviously, questions of how are retirement accounts and stocks divided in a divorce in Kentucky can become legally and financially quite complex. This is why it is important to work with an experienced divorce and family law attorney like John Schmidt. John has served the people of Jefferson, Bullitt, Hardin, Spencer, Shelby, and Oldham counties in Kentucky for more than 25 years. You are going to need an experienced, effective divorce attorney if your marital property division involves assets such as stocks, retirement accounts and RSUs or stock options.
We invite you to contact us via e-mail, schedule an appointment or call us today at (502) 509-1490 to get answers to your questions and to learn more about your unique circumstances and how to protect what is most important to you in your family law case.
