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Calgary Secured Child and Spousal Support

Calgary Division of Stock Options on Separation is an important question our Calgary family lawyers deal with related to Calgary and Alberta division of matrimonial property. In today’s blog, Brianne Beckie, Student-at-Law at our Calgary office explains how the matrimonial property division of stock options works. She works with Peter Graburn to provide our Calgary family law clients with sage family law advice.

Calgary family law clients have attended at our office to seek legal advice on whether or not their former spouse/partner is entitled to share in their stock options – the short answer to this question is YES, unless your particular case is very unusual in some regard.

Calgary Division Of Stock Options On Separation

Our top-rated Calgary Division Of Stock Options On Separation lawyers tell our clients that stock options may be provided to employees, managers, and directors as a form of compensation to align their goals with those of the organization. Stock options allow employees to share in the profits of a successful corporation. In particular, employee stock options allow the employee (option holder) to purchase a set number of shares at a specified price for a definite period of time. The employee must decide whether she or he wishes to exercise the option or let it expire. If the underlying stock’s price is above the exercise price, then it makes economic sense to exercise the option. On the other hand, if the underlying stock’s price is below the exercise price, then the option should not be exercised.

Our Calgary Division Of Stock Options On Separation also know that dividing stock options between adult interdependent partners who have separated can be complex due to the inherent uncertainty associated with stock options; stock options have the potential to provide a future benefit, but there is no guarantee of the same. The value of a stock option that has not been exercised is speculative and subject to market fluctuations. If a financial benefit does, in fact, accrue to an employee/spouse, the value of that benefit is unknown until the stock option is exercised and the shares are sold.

Calgary Division Of Stock Options On Separation – The Law

Stock options may be considered income or, alternatively, property under Alberta’s Family Property Act. This categorization depends on the status of the option and optioned shares at the time at which a court application is brought, and the nature of the relief sought by the applicant. Stock options that have not yet been exercised, whether they have vested or not, are characterized as family property, rather than income, and subject to division between ex-partners if the stock option was granted to one of the partners during the marriage or adult interdependent (or “common law”) relationship (Gardiner v. Gardiner, ABQB 1996 [Gardiner]). Stock options acquired during a marriage or adult interdependent relationship will usually be divided equally between the ex-partners. An equal division of stock options will give each partner an equal opportunity to benefit from whatever income the stock options generate in the future (H.C.F. v. D.T.F., BCSC 2017). Once an option has been exercised, the acquired shares are considered the recipient partner’s property in the same way as any other securities. Once the shares are sold, any capital gains from the sale of the shares will be included in the seller’s income, which will be used to calculate child and spousal support obligations, if applicable (Line 150 on the spouse’s income tax return for the year). After the stock options have been exercised and the shares disposed of, the financial benefit will be considered income because the financial risk and uncertainty associated with exercising the stock options will have been eliminated (MacDonald v. McDonald, ABCA 1997).

Calgary Division Of Stock Options On Separation want you to understand as described above, the time at which stock options are exercised and/or sold determines whether the options are considered income (used to calculate support) or property (stock options will be divided between partners). In Gardiner, the stock options had not been exercised at the time of trial, but during or after the trial, the vested options were exercised and the acquired shares were sold. In that case, the Court held that the stock options were property under the Matrimonial Property Act (now the Family Property Act in Alberta) because the stock options had not been exercised until after the trial. Therefore, the cash received from the sale of the shares was included as an asset in the division of property.

In sum,  our Calgary Division Of Stock Options On Separation lawyers want you to understand that if you acquired stock options during an adult interdependent relationship, you will likely be required to share their value (if any) with your ex-spouse, whether that be by way of an increase in your support obligation or by way of division of family property.

Calgary Division Of Matrimonial Property Lawyers

The Calgary division of matrimonial property lawyers at MacLean Law are experts in dealing with complex property disputes between separated spouses, including disputes in regard to the division of stock options.