Denver, CO family law attorney Kristi Wells explains how vested and unvested stock rights are treated in a Colorado divorce. She states that “stock rights” is a broad term encompassing a variety of equity compensation instruments, including stock options, restricted stock, restricted stock units, phantom stock rights, and stock appreciation rights. All of these are forms of executive compensation, each with unique complexities. While the Internal Revenue Code provides some guidance, there is no single framework that governs all stock rights—each plan and award agreement is distinct.

In Colorado, she emphasizes that vesting alone does not determine whether a stock right constitutes marital property. Many clients mistakenly assume that unvested stock options are automatically separate property, reasoning that they will vest only after divorce. However, Colorado law is clear that the critical factor is whether the individual has a presently enforceable right under the plan, award agreement, employment contract, or severance agreement.

Determining a presently enforceable right requires a detailed review of all relevant documents. For instance, provisions may allow an award to be realized prior to vesting in certain circumstances, such as death, disability, or a change in corporate control. Any clause that allows the recipient to obtain the stock before the vesting period ends can create marital property.

She notes that there is no universal formula for evaluating these rights. Each plan and agreement must be carefully analyzed to understand whether a property interest exists under Colorado law, making it essential to examine the contractual terms in detail to determine marital versus separate property.