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Addressing executive compensation in a high-asset divorce

On Behalf of | Apr 15, 2021 | High-Asset Divorce

A Texas high-asset divorce can be particularly challenging. One of the primary reasons why if often is is the existence of executive compensation in the asset mix. There are a number of points to bear in mind when this is the case.

Stock options

In many cases, an element of executive compensation that must be addressed in divorce proceedings is stock options. In a nutshell, a stock option provides an executive the ability to purchase stock at a future point in time for what is known as a grant price.

A grant price typically is the value of the stock at the time an option is extended to an executive. The theory is that the executive is able to purchase a higher-valued stock at a future point in time for the lower grant price. The executive is then able to sell the stock and recoup what can be a handsome profit.

There is a catch, however. A stock option typically does not vest for a period of time. For example, an executive might not even have the ability to exercise a stock option until he or she is at the company for a period of a set number of years. The divorce proceedings may occur before the option vests, complicating the matter of asset division.

Restricted stock awards

In a related fashion, an executive might be awarded restricted stock as compensation. In that scenario, the person actually receives shares of stock, but is not allowed to sell all or a portion of them until a specified period of time passes.

These are just a few of the reasons why a high-asset divorce can be complicated. If you are involved in one, it is advisable to have the assistance of a family law attorney who has particular experience with these matters.