Divorce for high-net-worth individuals with executive compensation

Divorce for high-net-worth individuals with executive compensation

| May 11, 2021 | High-Asset Divorce |

Divorce is always challenging. But for high-net-worth individuals, dividing up the assets can be particularly difficult. With so many things to value and divide, the process is nuanced and can be time-consuming. High-asset couples in the Pensacola, Florida, area need to be aware of the pitfalls that can arise in dividing assets.

Stock options

One of the biggest hurdles in a high-asset divorce is executive compensation. This often takes the form of stock options. Stock options allow executives in companies to benefit from an increase in the price of shares. The idea is that if they perform well and lead the company well, they will eventually benefit from the increase in the stock price.

Restricted stock is also a common kind of executive compensation. People who receive restricted stock can’t sell it until it is vested, which takes time. They also lose this benefit if they are fired or quit. Both restricted stock and stock options are taxable once they are vested.

The impact of vesting schedules

Because of vesting schedules, it is challenging to accurately count the amount of marital property to be divided. Taxation creates another wrinkle. These forms of compensation are taxed as ordinary income. That means that people can lose 40% of what they receive in the divorce just to taxes. In some cases, the stock awards must be placed in a trust, rather than transferred from one spouse to the other.

It’s important to find a lawyer who is experienced in the nuances of high-asset divorce. They may be able to help you understand what the division of property will mean for you in the long run. A skilled attorney might also have solid referrals for financial advisors for their clients.