In every divorce, but particularly in a high-net-worth scenario, obtaining a complete understanding of the couple’s financial situation is critical.
Accounting for marital and separate assets includes examining each spouse’s current compensation as well as potential future compensation (deferred compensation), which might have already been awarded in the form of stock options, restricted stock units (RSUs), non-qualified stock options and other financial instruments.
From Lisa’s interview for the Masters of Family Law series on reellawyers.com
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it’s such an interesting area to talk
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about when you talk about restricted
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stock units because restricted stock is
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not always actually vested and sometimes
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you might be starting a divorce and you
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might have UNR you might have restricted
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stock units that are not vested the way
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to deal with this sometimes is to figure
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out is it an incentive in other words
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are you incentiv getting this restricted
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these restricted stock units to keep you
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in
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place and forward-looking essentially or
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other these restricted stock units being
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given as a bonus for work already
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performed during the marriage now we
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have in New York something called the
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date of commencement of an action so you
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file your summons and at that point the
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action commences as long as you serve
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within 120 days from the filing it’s
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really important to understand as of the
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date of commencement what were the
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vested units of the restricted stock and
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what are the unvested units and then
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whether the unvested units are a bonus
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for the work already performed in the
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past during the marriage before the date
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of commencement or are they futur
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looking so that essentially like golden
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handcuffs that you’re keeping the person
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there as an incentive if they’re an
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incentive then we look at what’s called
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the deusu formula which is a coverture
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fraction formula so that you are getting
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basically credit for working the person
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who’s working is getting more credit for
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actually working through the years and
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the other person who is not the
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nonworking spouse at that point who’s
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not or the person who didn’t receive the
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restricted stock units is not cut off
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entirely but they are getting
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considerably less as the years go on and
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you’re working more years to get that
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restricted stock unit to vest and so you
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need to actually look at the award
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documents and the grant documents in
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order to actually determine what is the
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formula here and whether it is past
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performance or future performance
Asking the Important Questions
It is important to ask questions about your spouse’s executive compensation: Stock options, restricted stock, and other forms of executive compensation are among the easiest assets to hide, or even to “overlook.”
Many clients who are not in charge of household finances might not realize that their spouse has these potentially high-income benefits. As more companies offer varied compensation packages, it is imperative to be sure your attorney is skilled in these more complex financial matters.
For example, the top 10 companies that offer RSUs include Amazon, Facebook, Apple, Uber, IBM, Starbucks Coffee, Bank of America, Intel, Microsoft and Verizon. Lesser- known entities and many startup companies offer similarly complex compensation packages for executives and non-executives alike.
As your tax returns may not reflect certain compensation until it actually vests, you must have your attorney conduct the necessary financial discovery.
In many cases, your attorney can issue subpoenas to third parties, including the spouse’s employer, or obtain an authorization for certain documents, to achieve a full and unbiased financial accounting of the various forms of compensation that your spouse has and will receive, which will be the basis on which you build a case for financial support and equitable distribution. Your attorney will likely request award letters, employment offer letters and/or contracts as well as other documents.
Put Lisa’s Experience on Your Side
As both a family law attorney and Certified Divorce Financial Analyst, Lisa Zeiderman has the financial expertise to ask the right questions and understands where to find the answers. She then can assist in performing a complex financial evaluation of yours and your spouse’s executive compensation to determine their worth, always keeping in mind the cost of litigation. Contact her office in New York City or White Plains today to get started.