§5.04 Options for Past Services

If you find that stock options are partially for past services, and thus a form of deferred compensation, the community portion may be based on the date of initial employment, not the date of the grant of the option. The options are community property to the extent that the work done to earn them is performed between the dates of marriage and separation. [See Marriage of Hug (1984) 154 CA3d 780, 782, 789.]

In such a situation, you may apply a "time rule." The number of options you determine to be community property is a product of [Marriage of Hug, supra, 154 CA3d at 782, 789, 792]:

(1) A fraction in which the numerator is the period in months between the commencement of the spouse's employment by the employer and the date of separation of the parties, and the denominator is the period in months between commencement of employment and the date when each option is first exercisable, multiplied by

(2) The number of shares that can be purchased on the date the option is first exercisable.

The remaining options are the employee's separate property.