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Divorce and executive compensation require critical analysis

On Behalf of | Jun 19, 2023 | Divorce

If you’ve decided to get a divorce in California, knowing how to divide your assets fairly can be challenging, especially when executive compensation is involved. Accounting for assets, such as stock options and restricted stock, can be tricky. When done wrong, you risk losing a significant amount of your fair share. Knowing the intricacies of how stock options and restricted stock awards work is crucial to ensure you get the assets you deserve.

Corporate compensation may include stock options and restricted stock

If you’re married to a top executive or hold this position, the compensation received from an employer may include more than a salary. In this situation, experienced executives can receive compensation in the form of restricted stock and stock options as a way for the company to reward for hard work and keep motivation at a high level. This form of payment can be lucrative and must be analyzed thoroughly during a divorce to ensure the proper value is used when dividing assets. The more that is known about each of these assets, the easier it is to understand how to divide them equitably.

Understanding how stock options and restricted stock awards work is vital

A company can use stock options and restricted stock awards to provide an incentive for hard work. Stock options give employees the opportunity to purchase shares in the company. However, they must be held for a specific vesting period, ranging from one to five years. This requirement adds complexity to a divorce involving this asset. In addition, tax ramifications can reduce the amount kept considerably, making it imperative to calculate this deduction correctly.

Examining the vesting period

One of the restrictions associated with stock options and restricted stock is the timeframe they must be held. This requirement incentivizes an employee to continue working. If they leave, they may forfeit a significant amount of money. Adding this element into a divorce negotiation can make knowing how to split these asset types difficult.

Dividing assets in a divorce when executive compensation includes stock options and restricted stock can be highly challenging. Analyzing the requirements for these assets must be thorough to ensure it’s done right.