If you are going through a divorce in New Jersey, you may have many questions and concerns, from handling child custody to planning for your financial future. Asset division is often one of the most complicated parts of a divorce, especially for financially successful and prosperous couples. With greater assets, including real estate, retirement plans, and investments, comes greater concern for fair division of marital property.
What is executive compensation?
Executive compensation is one frequently overlooked yet important aspect to consider during the property division process in a divorce. A large number of companies use perks outside of salary, including restricted shares and stock options, to attract executives and other key employees. Stock options give employees the ability to redeem shares of stock as of the value at their time of issue at a later time, realizing the growth in value since that time, while restricted shares can only be sold after a period of time. In all cases, these are subject to a vesting period of a number of years.
Taxation and value fluctuation
While the profitability of such options and restricted shares is clear, there are also caveats. The stock value of a company can go down rather than up, and these changes can be sudden at times. In addition, restricted shares can be taken away if an employee is terminated. In all cases, selling restricted shares or exercising options can also come with a hefty tax bill.
Dealing with executive compensation in a divorce often requires a future-oriented solution. For example, the parties may agree to set up a trust to hold the restricted shares or stock options and then distribute them according to an agreed-upon formula once they fully vest, with provisions to cover the tax bill. Negotiating a clear solution can help prevent later concerns about inequity and unfairness.
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