Today many companies short on cash offer employees “incentive compensation plans” including stock options and restricted stock. In a divorce, these types of compensation can be overlooked – perhaps intentionally on the part of the employee spouse – when negotiating a divorce settlement. After all, stock options and restricted stock do not show up on tax returns, W-2s, or financial statements unless the options are exercised or the restricted stock is vested so they are easier to hide. If not discovered, the assets may not be divided fairly in a divorce.
Understanding the different types of compensation an employee might receive is the first step to uncovering what may be hidden assets in a divorce.
Stock options give an employee the right to buy company stock at a particular price on a future date. Locking in a lower price for stock that will likely increase in future if all goes well can result in a hefty profit for the employee spouse. For example, if a spouse works at company trading at roughly $10 today, his or her company may offer a number of stock options based on that price. After the share price has gone up to $100, the employee could exercise his or her option to buy the shares at the discounted price of $10 when they are worth ten times as much. Keep in mind, however, that employers offer stock options that will vest after an employee has worked for the company for a certain number of years so the option to buy may be several years in the future.
Restricted stock is another form of compensation where a company issues employers actual shares of the company, which may also be subject to a vesting schedule before they are available to the employee. Getting stock now that is predicted to grow substantially in the future can result in substantial earnings for the employee spouse.
You don’t know what you don’t know. As part of the discovery process in your divorce, your attorney should insist that stock options and restricted stocks are included in your spouse’s financial disclosure statement. If you are concerned that your spouse may be hiding assets, it may be necessary to have him or her sign an authorization for the employer to release all documents related to his or her compensation or, failing that, your attorney can subpoena the information after all other methods of discovery have been exhausted.
Contact an Experienced Divorce Lawyer for Help
A divorcing spouse, especially one that may have put their career on hold to take care of the family, should seek the equitable distribution of all marital assets to ensure their financial well-being after a divorce. When you have questions about dividing employee compensation plans in your divorce, working with an experienced attorney is key to getting a fair shake. Contact the Libertyville, Illinois family law offices of Schlesinger & Strauss LLC for help at 847-680-4970.
