Restricted stock and stock options, often a valuable component of corporate compensation packages, create a challenge when dividing assets in a divorce.
These assets, which are becoming a common incentive to lure and retain employees, give the employee spouse the right to buy stock in their company at a set price, at a future date. The expectation is that the stock will rise in price over time so when the employee actually buys the stock, the purchase price is lower than the market price in the case of most stock options.
Depending on the specific plan, restricted stock is granted at no cost to employees, but it is not transferable until certain conditions are met, such as employment by the company for a certain number of years.
Both have the potential to result in huge payoffs.
The tricky part is that stock options and restricted stock may not appear on tax returns, W-2 forms, or other financial documentation when granted. Stock options and restricted stock are a marital asset. Once exercised they will appear on tax documents but that can be long after the divorce, so they can be hidden during the divorce process.
Tuft, Lach, Jerabek & O’Connell, PLLC has the expertise to work with you to determine whether your spouse is holding restricted stock or stock options. If so, we will find out what the timetable is for selling the stock/exercising the options and find resource to evaluate their value for you.
Determining the current value for publicly-traded companies can be easy and is often found online. But if the company is privately owned, it poses another obstacle as the financial records are not publicly available.
Finally, we will assist you in understanding the tax implications of liquidating these assets and advise you how to address them in the divorce process. In the vast majority of cases, the employer does not allow you to divide the options upon a divorce. This may result in complex language in the divorce decree about how the non-employee spouse will be granted his or her share.
In summary, the division of restricted stock and stock options is one of the more complex aspects of a divorce, but it is worth investigating.
If you have questions or concerns contact Tuft, Lach, Jerabek & O’Connell, PLLC today for a consultation.