The Challenges of Stock Options and Divorce

Even the most amiable parting can lead to frustration and resentment when it comes to investments and divorce. Whether you have followed and acted on Penny Stock Tips and failed miserably or owned stock options before or after the marriage, splitting up is far easier than splitting investments.

Stock Options and Divorce
Stock options are a popular reward shared with high level employees of many businesses who may not have the cash to provide more lucrative salaries. The law views stock options as subject to distribution during divorce proceedings. However this is not the case in every state so it is important to check with your lawyer. Non-vested stock options are more likely to be in question as opposed to vested stock options. It is also interesting to note than in many cases, stock options are rewarded as a future investment in which the employee will participate as opposed to a current benefit. Therefore this can bring stock options under scrutiny during divorce.

What the Non-employee Needs to Know
If you are the non-employee during the divorce investigate the following:

  • Stock purchase plans
  • Long-term incentives
  • Supplemental retirement plans
  • Stock grants and reload provisions
  • Securities and Exchange Commissions filings

You and your lawyer will want to be aware of all benefits and compensation your ex-spouse is entitled to and decide where you are missing out. A forensic accountant can provide the expertise to dig deep and discover any further compensation of which you might not be aware.

ISO’s, ESPP’s and NSO’s
You will also want to determine if your ex has incentive stock options (ISO’s), Employee Stock Purchase Plans (ESPP’s) or non-qualified stock options (NSO’s) as each of these will have different meaning during the dividing of assets. There are tax implications to be considered with each of these options including some liabilities on NSO’s.

Value and Compensation
The details can then get ugly trying to determine how you will be compensated. However, in the case of an amiable split often agreements can be made for a single payment or a trade for assets such as second homes, cars or other things of importance such as art. If this doesn’t work a coverture fraction can be applied to determine the amount you are entitled to once the stock options are exercised.

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