Are you divorcing with stock options or Restricted Stock Units (RSUs)? These complex assets can greatly affect your divorce settlement and future taxes.
Many employers, especially in tech and finance, now offer stock options and RSUs as part of pay packages. This trend has led to more divorces involving these assets in White Plains and Westchester County. As a result, local courts have gained experience in addressing these complex financial assets during divorce proceedings.
Understanding the basics
Stock options and RSUs are the two main types of equity compensation. Both have unique features that affect how courts treat them in divorce:
- Stock options: You can buy company stock at a set price within a specific time
- RSUs: Your employer promises to give you shares of stock in the future
New York law usually sees these assets as marital property if granted during the marriage. Courts aim to split them fairly.
Figuring out the value of stock options and RSUs can be hard because market prices change daily. In White Plains, courts often use the “intrinsic value” method for stock options. They subtract the strike price from the current market price. For RSUs, courts usually look at their value when they vest. They may value unvested RSUs differently.
Tax-smart strategies
Careful planning can help minimize tax consequences and ensure a more equitable division of these complex assets. When splitting these assets, consider these tax-smart strategies:
- Trade for other assets: It can simplify division and may reduce tax issues
- Wait to exercise or sell: It can help you avoid immediate taxes and allow time for planning
- Use a Qualified Domestic Relations Order: It lets you transfer some retirement benefits without immediate tax penalties
- Set up a constructive trust: It allows one spouse to hold the stock options or RSUs for the other, potentially delaying taxes until exercise or sale
Each approach has its own pros and cons, and New York courts consider these factors as they strive to divide assets fairly. They also examine factors like how long you were married and each spouse’s financial situation. Consider consulting an experienced divorce attorney to help you understand local laws and protect your finances.
By taking a smart approach to dividing stock options and RSUs, you can lower tax impacts and set up a better financial future after divorce.