In re Marriage of Nelson

Harold Nelson, Jr. (plaintiff) filed for divorce from Mary Nelson (defendant). Harold was issued stock options from his employer, which the trial court separated into categories and characterized as partly community property and partly separate property. Specifically, the trial court held that Harold’s stock options that were granted and became exercisable before the parties separated were wholly community property. Harold’s stock options that were granted as a form of compensation to Harold before his separation but were not exercisable until after his separation (intermediate options) were held to be partly community property. The court used a time-rule formula to calculate the community-property interest in the intermediate options. The numerator was the number of months from the date of a stock-option grant to the couple’s separation, and the denominator was the number of months from the time of the grant to its date of exercisability. Lastly, Harold’s stock options that were granted after the parties separated (postseparation options) were held to be entirely separate property. These postseparation options were given to Harold as a year-end and promotion bonus 25 days after the parties separated, on the date the board of directors of Harold’s company approved his promotion. During the marriage, Harold believed he would receive the promotion and knew that a bonus was likely. Harold appealed the trial court’s holding that the intermediate options were partly community property, arguing that because the stock options depended on future postmarriage increases in market value to gain financial value, these options constituted an expectancy rather than a vested property right and were therefore wholly separate property. Mary appealed the trial court’s holding that the postseparation options were separate property.