settlement proceeds to Wendy at dissolution, and Henry has no interest in the
proceeds.
1c. The Stock Option Profits
In determining whether stock options are CP or SP, the court will determine
whether the options were granted as deferment of wages, or as a future incentive to
continue working for the company. As a spouse's labor during marriage, in the form of
wages, is CP, the community will have a greater interest in options that are granted as
deferred wages. The court will conduct a proration to determine the CP interest in the
stock options, dividing the years of employment during marriage over the years for the
option to become exercisable. In this case, the court will take the years of employment
during the marriage (2010-2013) divided by the years of employment until exercise
(2010-2014). The community will have a 3/4 interest in the stock options under this
approach, so Henry and Wendy would each have a 1/2 interest in $60,000 of the profits,
and Wendy would own $20,000 as her SP. Thus, Henry would take $30,000 at
dissolution, and Wendy would take $50,000.
Alternatively, if the options are granted as a future incentive, the court will divide
the years of employment during the marriage after the option is granted by the years the
option is granted to becoming exercisable. Thus, the court would divide the years of
marriage from the grant of the option (2012-2013) divided by the option's grant to its
being exercisable (2012-2014). In this case the community would have a 1/2 interest,
so Henry and Wendy would each own 1/2 of $40,000, and Wendy would have $40,000
as her SP. Thus, Henry would take $20,000, and Wendy would take $60,000.
Since Wendy was told that "if she performed well" at Company, she would
receive stock options in the near future, it appears that the options were granted as
deferred wages, earned by Wendy's labor during the marriage. Further, at the time they
were granted, Company stated they were because she "had been" an effective
employee, pointing to her labor during the marriage as providing the basis for the
options. Thus, the court will likely use the first approach, and Henry will take $30,000,
and Wendy will take $50,000.