If you’re getting divorced in Ohio and one of you is an executive, there may be a significant amount of money involved. Understanding how compensation is provided in this situation is crucial to ensure the appropriate fair values are used when handling the divorce process. Paying close attention to stock options and restricted stock awards and units can be crucial.
Examining stock options when going through a divorce
The pay for executives can be much more complex than providing a straight salary. Often, stock options are used to provide incentive to work harder at growing the bottom line for the company the executive is in charge of assisting. If you or your spouse is an executive who is getting divorced, paying close attention to the value of the stock options can be crucial. For example, if the company’s share price has escalated and the stock options provide the ability to purchase shares at a discount, there will be immediate profit and tax consequences
Handling restricted stock awards and units during the divorce process
Using restricted stock awards and units is another way executives may be compensated. With these investment vehicles, limits apply. They may be tied to a restriction that requires the shares to vest before they can be exercised. Tax consequences must also be considered when dealing with restricted stock awards and units during the divorce process.
Paying attention to vesting periods is a must
Often, executive compensation, such as restricted stock awards and units or stock options, may not be exercised for a specific period until they vest. If the executive leaves a company before this timeframe passes, forfeiting these assets may be required. These vesting schedules can greatly affect the division of marital property during a settlement agreement.
Understanding the consequences of vesting periods for stock options and restricted stock awards and units can be crucial during the divorce process. If you are an executive or married to one, paying close attention to the details of these investment vehicles used for executive compensation is a must.