In Re Marriage of Hug

Summary

Paul's employer granted him stock options before separation that became exercisable in yearly increments, some after separation. The trial court applied a time rule: months from employment start to separation, over months from employment start to first exercisability, times the shares exercisable. It treated that share as community property and the rest as Paul's separate property. The court of appeal held this was not an abuse of discretion because the record supported finding the options were earned from the start of employment, and it affirmed the judgment.

What it means for the financial analysis

When options vest after separation, the tracing analysis may need to document when and why the options were granted (inducement, deferred pay for early service, or future incentive) rather than relying on vesting dates alone. The court approved this time rule only on these facts and said no single formula applies. It also noted that options that can be valued might instead be valued at the date of separation and offset with other community assets.

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