Divorce & Stock Options: Valuations, Exercised Options and Taxes Oh My!

Splitting stock options at divorce does not need to lead to headaches.

2012-05-11

May 11, 2012 (Press-News.org) Property distribution in divorce is difficult even in simple estates, but complications abound for those with more complex mixes of assets. These high-asset divorce cases often require review of financial portfolios, including stock options.

Stock options are often used to lure key employees into high-level positions. A stock option is a contract that allows the holder to purchase a specified amount of stock for a certain price within a set time period. Stock options can be provided as an additional form of compensation and offer an incentive not only to continue working for the company, but also to remain loyal, according to Forbes.

This type of asset is present in many upper-level employees' portfolios, is usually considered property within divorce determinations and often comes into play in high-asset divorce proceedings.

Knowing Your Assets: Types of Stock Options and Associated Tax Implications

If a stock option is vested, or belongs to the spouse, and is forfeited only when the option expires, it is subject to property-division determinations in divorce. Within this category there are two broad types of stock options: nonqualified and qualified. Qualified or incentive stock options -- known as ISOs -- receive special tax treatment, often not taxed until the stock is sold and taxed at a lower rate. This option is usually offered to those holding upper-level management positions.

Nonqualified plans are often given to employees and generally do not require the holders to pay taxes when granted. Income taxes are required, however, after stock is purchased pursuant to the option on the difference between the grant price and the stock market value.

One difficult decision is determining when to exercise the stock option. Conventional wisdom often guides the holder to wait until the option is about to expire to maximize potential gain. However, valid reasons to exercise earlier include:
-Loss of faith in the business' future
-Having more than 10 percent of company shares in a portfolio -- considered an overdose and many financial professionals recommend a more balanced approach
-Holder of stock option is on the cusp of entering a higher tax bracket -- selling a small portion one year and the rest the next instead of all the options at once may help avoid this

If these options are sold prior to the divorce, splitting the options as income is relatively easy. Unfortunately, this is often not the case. Instead, a complicated valuation process is required for stock options that have yet to be exercised.

How to Value and Divide Options

Valuation of unexercised stock options can be done using many methods. It is wise to use a financial professional to determine this figure. If both spouses are unable to agree upon a calculated estimation for the value of stock options, they can either agree upon a formula for payment after the options are cashed in or allow a court to retain jurisdiction and decide the case in the future when the options are exercised.

Ensuring all assets are included in divorce determinations and valued correctly is a complex matter. As a result, it is wise to seek the counsel of an experienced high-asset divorce lawyer to make certain all your legal rights are protected.

Article provided by O'Neil & Attorneys Family Law
Visit us at www.themayfirm.com

ELSE PRESS RELEASES FROM THIS DATE:

Large Trucks Pose Heightened Risks to Oklahoma Drivers

2012-05-11

Commercial trucks are -- quite literally -- some of the largest hazards on Oklahoma's roads. A fully loaded semi truck can weigh up to 80,000 pounds. By comparison, the average passenger vehicle weighs a mere 4,000 to 5,000 pounds. In a collision between the two, the truck almost always comes out on top. This disparity in size makes truck accidents considerably more deadly than other types of motor vehicle collisions. Although large trucks account for just 4 percent of all registered vehicles and 7 percent of all vehicle miles driven, they are involved in 11 percent ...

Asteroid collision that spawned Vesta's asteroid family occurred more recently than thought

2012-05-11

A team of researchers led by a NASA Lunar Science Institute (NLSI) member based at Southwest Research Institute has discovered evidence that the giant impact crater Rheasilvia on Asteroid (4) Vesta was created in a collision that occurred only about 1 billion years ago, much more recently than previously thought. This result is based on the analysis of high-resolution images obtained with the Dawn spacecraft, which entered orbit around Vesta in July 2011. In addition to creating the crater, the impact is believed to have launched a large number of fragments into space, ...

Ineffective Assistance of Counsel Applies To Plea Bargain

2012-05-11

The recent Supreme Court decision in Lafler v. Cooper addresses the degree to which the Sixth Amendment's guarantee of effective assistance of counsel during a criminal case applies to the plea negotiation process. In Lafler, the defendant received a plea offer from the prosecutor. He rejected the plea on advice of counsel, stood trial, was convicted and sentenced. His sentence was more severe than the plea offer, and he appealed based on ineffective assistance of counsel. A System of Pleas The importance of this issue is underscored by the predominance of the ...

Culprit responsible for severe systemic scleroderma complications in African-Americans found

2012-05-11

WASHINGTON – A new analysis finds that compared to Caucasians, African-Americans with systemic scleroderma have more antibodies in the blood that are linked to severe complications and an increased likelihood of death. They say this finding, published today in Arthritis & Rheumatism, suggests physicians can use these disease markers to screen and treat scleroderma patients proactively. For the study, Georgetown University Medical Center (GUMC) teamed up with researchers from the University of Pittsburgh School of Medicine to examine 35 years of data collected about ...

Could the ways animals regenerate hair and feathers lead to clues to restore human fingers and toes?

2012-05-11

Bethesda, Md. (May 10, 2012)—This summer's action film, "The Amazing Spider-Man™," is another match-up between the superhero and his nemesis the Lizard. Moviegoers and comic book fans alike will recall that the villain, AKA Dr. Curt Connors, was a surgeon who, after losing an arm, experimented with cell generation and reptilian DNA and was eventually able to grow back his missing limb. The latest issue of the journal Physiology contains a review article that looks at possible routes that unlock cellular regeneration in general, and the principles by which hair and feathers ...

Seeking Disability Benefits in Fibromyalgia Cases

2012-05-11

Fibromyalgia is a musculoskeletal ailment characterized by widespread pain accompanied by fatigue, sleep, memory and mood issues. Doctors believe that the disease amplifies pain by affecting the way the brain processes pain signals. Essentially, painful sensations are a result of how normal signals are amplified. Normally benign aches would register as debilitating pain. Fibromyalgia is also associated with increased fatigue and sleep disturbances which can further debilitate those with the disease. Fibromyalgia (FMS) awareness has gained significant traction over the ...

A closer look at PARP-1 reveals potential new drug targets

2012-05-11

PHILADELPHIA—A new study published in Science May 11 is shedding light on the molecular details of PARP-1, a DNA damage-detecting enzyme that when inhibited has been shown to be effective in fighting cancer and other diseases. The investigation led by John M. Pascal, Ph.D., an assistant professor in the Department of Biochemistry and Molecular Biology at Thomas Jefferson University and Jefferson's Kimmel Cancer Center, revealed new target sites—including specialized "zinc finger" domains—for drugs aiming to stop PARP-1 activity. The idea for this area of research is ...

Brown, PC to Assist Texas Business Clients With Fresh Start Amnesty Program

2012-05-11

In announcing the program, Texas Comptroller Susan Combs explained that the amnesty provides an opportunity for businesses to clear up their tax records. Businesses can do this during the amnesty period without having to pay penalties or interest on any tax reports that should have previously been filed. The amnesty applies to taxes and fees that were due prior to April 1 of this year. It does not apply to underpaid tax returns, nor does it extend the filing periods in a business audit. But Fresh Start does apply to sales taxes, franchise taxes, and other types of state ...

Fighting Sexual Orientation Discrimination in Ohio Workplaces

2012-05-11

Throughout the nation, laws are moving slowly but invariably towards greater protections for LGBT citizens. Unfortunately, LGBT employees still do not have full protection from discrimination in the workplace, particularly in Ohio. As a result, victims of employment discrimination due to sexual orientation will have no legal recourse in many instances. But that is not always the case. Under certain circumstances, LGBT victims of workplace discrimination can vindicate their rights. There is a growing social and legal trend towards prohibiting sexual orientation discrimination ...

Enzyme corrects more than 1 million faults in DNA replication

2012-05-11

Scientists from the Medical Research Council (MRC) Institute of Genetics and Molecular Medicine (IGMM) at the University of Edinburgh have discovered an enzyme that corrects the most common mistake in mammalian DNA. The mistake is the inclusion of individual bits of RNA within the DNA sequence, which the researchers found occurs more than a million times in each cell as it divides. The findings, published in Cell, suggest the RNase H2 enzyme is central to an important DNA repair mechanism necessary to protect the human genome. Each time a cell divides it must first ...

In a landmark study, an NYBG scientist and colleagues find that reforestation stands out among plant-based climate-mitigation strategies as most beneficial for wildlife biodiversity

Divorce & Stock Options: Valuations, Exercised Options and Taxes Oh My!

ELSE PRESS RELEASES FROM THIS DATE:

LAST 30 PRESS RELEASES: