As a family law attorney, you know you can face complex issues that require advanced financial knowledge and skills. That’s where your CFL Designation for Divorce Practitioners comes in handy, giving you the confidence to handle any difficulties with ease. But, with deferred assets like restricted stock awards, negotiations can get tricky. For instance, when stock awards are tied to certain requirements that don’t necessarily involve a marriage, should they be shared equally?
That was the question in the recent New Jersey appeals court decision of M.G. v. S.M. Before the divorce complaint, M.G. was awarded restricted stock that would vest based on his future work performance. Under New Jersey law, any assets received during a marriage before the date of a divorce filing are usually considered marital property. But in cases like this one, that’s debatable.
Background
The couple married in 1998, when M.G. became principal consultant for a major multi-national corporation. He received a restricted stock award based on his “level of proficiency” from his employer annually from August 2003 to 2010, and it would vest on a rolling basis. For example, in 2003, he received 490 shares. Starting in 2011, 174 of the shares would begin to vest annually.
When M.G. and S.M. filed for divorce in July 2014, three of M.G.’s eight stock awards had fully vested. He argued that only the vested stock should be equally distributed to his spouse.
The trial court ruled that all of the stock should be distributed equally because it was tied to M.G.’s work performance during the marriage. After the judge denied his motion, M.G. appealed.
Appellate Court Decision
The Appellate Court rejected the trial court ruling and sided with M.G., finding that the judge’s decision was “contrary to the evidence and his credibility findings, and mistaken as a matter of law.”
The court refuted the argument that “performance” required M.G. merely to continue living and to go to work, noting that nothing on record supported that assertion. “Indeed, all of the objective evidence…demonstrates much more was required of plaintiff as a high-level corporate employee in a highly competitive industry.”
The court, therefore, decided that M.G.’s employer had described the stock as a “reward program” that depended on his “sustained individual excellence.” Also, according to the court, “the analytical framework is not when the stock was received, but rather, the efforts required for it to vest.”
Together with that logic, the court used the following standards to reach its conclusion:
- “Where a stock award has been made during the marriage and vests prior to the date of complaint it is subject to equitable distribution.”
- “Where an award is made during the marriage for work performed during the marriage, but becomes vested after the date of complaint, it too is subject to equitable distribution.”
- “Where the award is made during the marriage, but vests following the date of complaint, there is a rebuttable presumption the award is subject to equitable distribution unless there is a material dispute of fact regarding whether the stock, in whole or in part, is for future performance. The party seeking to exclude such assets from equitable distribution on such ground bears the burden to prove the stock award was made for services performed outside the marriage….”
The court held that M.G.’s testimony, the stock plan award correspondence, award, and vesting schedules, and the stock plan itself “strongly suggest” the unvested awards weren’t part of the marriage, and shouldn’t be shared equally.
Gain financial skills and knowledge to grow your practice. Get our free information packet today!
About the author