The Indiana Court of Appeals attempted to clarify how stock options are treated in Indiana divorce cases. In Fischer v. Fischer (Jan. 19, 2017; see 45A05-1512-DR-2328), the appellate court reversed the trial court’s inclusion in the marital estate stock options which were not vested on the date the petition for dissolution of marriage was filed, but had vested prior to the final hearing. The trial court awarded the spouse of the employee 60 percent of the value of the then vested stock options. The trial court also included those same vested options in the husband’s income for purposes of calculating child support.
The appellate court reviewed the prior case law regarding the inclusion of stock options in the marital estate and found that there was confusion. Judge Robb, writing for the panel, concluded as follows:
“Although George was granted those stock options during the marriage, his future enjoyment of them was contingent upon his continued health and employment. He did not become able to exercise the options until after the petition for dissolution was filed. In other words, on the parties’ final separation date, the stock options were neither vested in possession—because George did not have an immediately existing right of present enjoyment—nor vested in interest—because George did not have a presently fixed right to future enjoyment.”
The appellate court did conclude that the stock options that vested before the final hearing should be included in the recipient’s income for purposes of calculating child support.
The stock option vesting appellate cases have been used to evaluate other types of benefits that have vesting schedules and rights. Assuming that the higher court does not ultimately grant transfer and vacate the Fischer opinion, the critical date in determining whether a “vesting” asset is a marital asset is the date the petition is filed (“date of final separation”).