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If I exercise stock options granted to me before marriage, is that considered separate property or community assets?

Menlo Park, CA |

Can my wife claim parts of the proceeds in a divorce? What can I do to protect myself? I've set up a living trust before marriage and kept everything separate. Can I put the earnings from the stock options sale in this trust and still keep everything "separate"?

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Attorney answers 4


The answer to the first question is - probably. It was too general to give a difinitive yes or now as it also depends on the assets that generate the proceeds. You need to make sure that you have filed your declarations regarding community and separate property so that the court will have an idea as to your property rights that must be disposed of for final judgment. While it appears the stock options are our separate property, if you earned income from them during the marriage, then any income earned during the marriage might be divisible of that income was returned into an asset that might be subject to division as CP. You really need to see an attorney on this.


Stock options are tricky. They generate income and are also considered property. The "income" that they generate, if earned while you were married is most likely considered community property. Then, if you sell them during marriage you may have capital gain income as well.

Not only does this affect your property distribution, but it will also affect your potential child and spousal support obligations.

For California law on this, check out the case, Marriage of Cheriton (2001) 92 Cal.App.4th 269, and make an appoitment with an attorney.


You would have to review the stock option program. If the stock option was granted for your past performance, that being prior to your marriage, then it would be considered separate property. If it were granted for future performance, that being a portion all the time or a portion of the time you were married, then your spouse would have an interest in the stock option, that’s the law.

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This requires expert analysis and testimony. if you and she can work together one expert will suffice. if you wanted to "protect yourself" you needed to have had a prenup. Keeping your earning during marriage separate does not make them separate property in the absence of such a prenuptial agreement, although it can make "tracing" easier.

IF they were vested prior to marriage and for PAST performance they may be SP but you can't exercise any options if there has been a his untimely Petition filed. See the back of your Summons.

Get advice.

The stock options have to be valued whether or not you exercise them.

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