Opções de ações se divorciam de nova york

Opções de ações se divorciam de nova iorque
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Métodos para dividir opções de ações em casos de divórcio do tribunal estadual fornecidos pelo National Legal Research Group.
Quase todos os estados agora concordam que as opções de ações são bens conjugais na medida em que foram ganhos durante o casamento. Como resultado, na maioria dos casos em que as opções de ações estão presentes, o tribunal e as partes precisarão encontrar alguma maneira de transferir parte do valor das opções para o cônjuge não-proprietário. A lei federal não facilitou o processo de divisão; De fato, um bom argumento pode ser feito de que a lei federal contribuiu materialmente para o problema. Se a lei federal fosse esclarecida para permitir a atribuição direta de opções de ações sem conseqüências fiscais proibitivamente adversas, a divisão de opções de ações em casos de divórcio de tribunais estaduais seria um processo muito mais fácil.
O objetivo principal deste artigo é discutir as leis federais e estaduais sobre a mecânica da divisão de opções de ações entre as partes. Antes de chegar a essa questão, no entanto, revisaremos brevemente a natureza das opções de ações e discutiremos a maneira pela qual as opções de ações são classificadas e divididas.
I. OPÇÕES EM ESTOQUE EM GERAL.
Uma opção de compra de ações é um direito legal de comprar uma ação por um preço específico (o preço de exercício), independentemente do preço pelo qual a ação está realmente sendo negociada. As ações não precisam ser negociadas publicamente, mas na maioria dos casos relatados, existe um mercado regular para as ações em questão.
Em quase todos os planos de opções de ações, uma opção dada ao empregado é investida quando é recebida. Não pode ser exercido; Perde-se se o empregado deixar de trabalhar para o empregador. Depois que um período específico de tempo passa, a opção de ações é adquirida. Após o vesting, a opção de compra de ações pode ser exercida e não é perdida se o funcionário deixar a empresa. A maioria dos períodos de carência está no intervalo de dois a cinco anos. Depois de um período muito mais longo, muitas vezes 10 anos, a opção de compra expira e não pode ser exercida.
II. CLASSIFICAÇÃO DAS OPÇÕES DE AÇÕES.
As opções de ações se enquadram na categoria geral de direitos de compensação diferidos, uma categoria que também inclui ativos comumente discutidos como benefícios de aposentadoria, bônus e direitos de propriedade intelectual. Para efeitos de divisão de propriedade, os direitos de compensação diferidos são geralmente adquiridos quando são obtidos, e não quando o valor é efetivamente recebido. Por exemplo, se o marido auferir benefícios de aposentadoria durante o casamento, os benefícios auferidos são bens conjugais, mesmo que nenhum dinheiro seja realmente recebido até muito tempo depois do casamento terminar.
Os direitos de compensação diferidos são, na maioria das vezes, classificados pela determinação do período durante o qual são ganhos. Um plano de aposentadoria de benefício definido, por exemplo, é geralmente adquirido como compensação por um período específico de serviço creditável prestado ao empregador. O valor recebido por mês depende do total do serviço creditável prestado, com alguma função do salário anual mais alto do empregado, que também é trabalhado na fórmula. Para determinar a quota conjugal, o tribunal divide o tempo total casado durante o período de ganho pelo período total de ganho. Veja In re Marriage of Benson, 545 N. W.2d 252 (Iowa 1996); Koziol v. Koziol, 10 Neb. App. 675, 636 N. W.2d 890 (2001); Workman v. Workman, 106 N. C. App. 562, 418 S. E.2d 269 (1992). Ver, geralmente, Brett R. Turner, Equitable Distribution of Property (Propriedade Equitativa de Propriedade) 6:25 (3d ed. 2005). O tempo casado, neste contexto, significa o tempo entre a data de início (quase sempre a data do casamento) e a data da classificação. Identidade. A última data varia por jurisdição; geralmente é a data da separação final, a data do depósito ou a data do divórcio. Identidade. Seção 5:28.
Para dar um exemplo, suponha que um membro do serviço militar adquira benefícios de aposentadoria como compensação por 30 anos de serviço militar. O divórcio ocorre em Nova York, onde a data de classificação é normalmente a data do depósito. Dos 30 anos, 12 ocorreram entre a data do casamento e o arquivamento do divórcio. A parte conjugal da pensão é de 12/30, ou 40%.
No caso específico das opções de ações, o período de ganho sempre inclui o período de carência. O propósito do período de aquisição é incentivar o empregado a continuar trabalhando para o empregador; é por isso que o empregado perde opções não investidas se ele voluntariamente terminar seu emprego. Veja geralmente In re Marriage of Hug, 154 Cal. Aplicativo. 3d 780, 201 Cal. Rptr. 676 (1984). Quando emprego futuro é uma condição de aquisição, é muito difícil argumentar que a opção não é consideração para serviço futuro.
A pergunta difícil na classificação de opções de ações é se a opção também é considerada para serviços passados. Algumas opções de ações não investidas são concedidas de acordo com um plano regular que concede uma quantidade igual de opções de ações a todos os funcionários em um determinado nível, principalmente como um dispositivo para incentivá-los a permanecer na empresa. Esses tipos de opções geralmente são considerados apenas para serviços futuros. Veja In re Marriage of Harrison, 179 Cal. Aplicativo. 3d 1216, 225 Cal. Rptr. 234 (1986); Wendt v. Wendt, 59 Conn. App. 656, 757 A.2d 1225 (2000); Hopfer v. Hopfer, 59 Conn. App. 452, 757 A.2 673 (2000) (onde o marido começou com o empregador apenas um mês antes do divórcio); Otley v. Otley, 147 Md. App. 540, 810 A.2d 1 (2002); Em Re Marriage of Valence, 147 N. H. 663, 798 A.2d 35 (2002). Ver geralmente Turner, supra, 6:49. Em outros planos de opções, no entanto, mais opções não investidas são concedidas a funcionários que tiveram um desempenho melhor no passado, ou um comitê pode até ter liberdade para fazer concessões extraordinárias de opções não utilizadas para funcionários que fizeram contribuições extraordinárias para a empresa. Essas opções são consideradas para serviços passados ​​e futuros. Identidade. Seção 6:49.
Uma situação de fato relacionada ocorre quando as opções são usadas para atrair um funcionário para trocar de empregador. Essas opções normalmente são usadas para atrair funcionários somente depois de terem habilidades substanciais, de modo que as opções são, de certo modo, adquiridas com as habilidades. Além disso, os funcionários que fazem esse tipo de mudança de emprego muitas vezes perdem opções de ações não utilizadas com seu empregador anterior, opções que foram, pelo menos em parte, obtidas por meio do esforço conjugal. A regra geral é, portanto, que as opções de ações para mudar de emprego também são adquiridas em troca de serviços passados ​​e futuros. Em re Casamento de Abraço, 154 Cal. Aplicativo. 3d 780, 201 Cal. Rptr. 676 (1984); Salstrom v. Salstrom, 404 N. W.2d 848 (Min. Ct. App. 1987).
III DIVISÃO DE BENEFÍCIOS DE APOSENTADORIA.
Como os direitos de compensação diferidos são obtidos antes de serem recebidos, sua divisão apresenta problemas indevidos. Estes problemas surgiram primeiro no contexto dos benefícios de reforma, e a lei sobre a divisão de outros direitos de compensação diferida é geralmente uma aplicação específica das regras gerais estabelecidas nos casos de benefícios de reforma.
Em geral, os benefícios de aposentadoria podem ser divididos de duas maneiras. Sob o método de compensação imediata, o tribunal determina um valor presente para os benefícios. Para fazer isso, o tribunal deve medir a série de pagamentos futuros que o empregado provavelmente receberá; descontar esses benefícios pela probabilidade de que cada benefício não seja recebido (por exemplo, pela probabilidade de morte prematura); e depois reduzir os benefícios a valor presente. Este é um processo difícil, que geralmente requer testemunho de especialistas. Depois de determinar um valor presente, o tribunal multiplica esse valor pela quota conjugal para determinar o interesse conjugal e aplica os fatores de divisão estatutários para determinar a participação percentual do cônjuge não-proprietário na parte conjugal. O cônjuge nonowning, em seguida, recebe seu interesse em dinheiro ou outros bens, enquanto o cônjuge proprietário recebe toda a pensão. Turner, supra, Seção 6:31.
Deslocamento imediato requer um testemunho de especialista significativo no início, por isso é um método mais caro. Ele pode ser aplicado somente quando o espólio conjugal tem dinheiro suficiente ou outros ativos para permitir o pagamento da compensação. A exatidão do método depende da precisão das projeções atuariais, que quase nunca são exatamente precisas, de modo que um dos cônjuges ou outro está fadado a se machucar se ambos não viverem de acordo com suas expectativas de vida exatas. Mas a compensação imediata permite que toda a pensão seja dividida no momento do divórcio, sem exigir que as partes tenham uma conexão permanente entre si por muitos anos. Após o divórcio, é de longe o método mais fácil de implementar.
Sob o método de distribuição diferida, o tribunal não precisa determinar um valor presente para os benefícios no momento do divórcio (embora alguns estados exijam que o tribunal o faça para outros fins). Em vez disso, o tribunal mede a quota conjugal e determina o interesse equitativo do cônjuge não proprietário nessa parte. Por exemplo, se o interesse conjugal for 40% e uma divisão igual for justa, o interesse do cônjuge não proprietário será de 20%. O tribunal ordena então que o cônjuge proprietário pague ao cônjuge não-proprietário 20% de cada pagamento futuro recebido do plano de aposentadoria. Turner, supra, Sub Seção 6: 32-6: 33.
Como nenhuma divisão atual é feita, a distribuição diferida não depende da exatidão dos cálculos de valor presente ou projeções atuariais. O montante a pagar será exatamente correto, independentemente de quem morre quando. Mas as partes devem continuar a tratar umas com as outras por muitos anos, e o cônjuge não-proprietário deve arcar com o ônus de fazer cumprir a obrigação se o cônjuge se recusar a pagar. Há também uma variedade de maneiras inocentes e não tão inocentes nas quais os eventos futuros podem influenciar a distribuição. Para dar apenas um exemplo, muitos planos de benefícios definidos estão encontrando problemas financeiros significativos, que podem reduzir o valor a pagar. Se a perda resultar das condições de mercado, ela deve ser compartilhada; mas e se o cônjuge proprietário fosse o CEO da empresa e falhasse, negligente ou deliberadamente, em financiar o plano suficientemente depois do divórcio? A distribuição diferida cria um potencial significativo para futuros litígios; isso não leva a um rompimento claro entre as partes.
Os problemas administrativos de distribuição diferida são menos severos quando o administrador do plano pode ser direcionado para fornecer benefícios diretamente ao cônjuge não possuidor, Turner, supra, 6: 18-6: 20, ou talvez até para tornar o cônjuge não-proprietário um participante independente no plano. Identidade. Seção 6:34. A maioria dos planos de previdência privada é regulada por lei federal, e inicialmente havia alguma preocupação de que a lei federal não permitisse a cessão direta de direitos previdenciários. O governo federal eliminou essa incerteza em 1984, fazendo grandes modificações no ERISA, o estatuto federal que rege os planos de aposentadoria.
O estatuto modificado permite a atribuição direta de benefícios somente se a atribuição for feita em uma ordem de relações domésticas qualificada (QDRO). Uma ordem de relações domésticas (DRO) é uma ordem do tribunal estadual, sob a lei das relações domésticas, que determina que o administrador do plano atribua benefícios a um ex-cônjuge (o beneficiário alternativo). 29 U. S.C. Seção 1056 (d) (3) (A) (Westlaw 2006). Ele deve conter certas informações básicas de identificação e, mais importante, só pode dividir os benefícios que estão realmente disponíveis para o funcionário segundo o plano. Depois que o tribunal estadual faz um DRO, o DRO é então submetido ao administrador do plano, que determina se o pedido atende aos requisitos da ERISA. Se o administrador determinar que o pedido atende a esses requisitos, o pedido é qualificado e o administrador deve segui-lo. Se o pedido for rejeitado, ele não é qualificado e a lei federal impede sua aplicação. A decisão do administrador pode então ser revisada em um tribunal estadual ou federal. Veja geralmente Turner, supra Seção 6: 18-6: 19.
IV. TRANSFERÊNCIA DIRETA DE OPÇÕES EM STOCK.
Tratamento Tributário Federal.
Antes de discutir a mecânica da divisão das opções de ações, é necessário fazer uma breve digressão na lei do imposto de renda federal. Essa lei teve um impacto significativo no processo pelo qual as opções de ações são divididas.
Como regra geral, quando um empregador paga uma indemnização a um empregado, seguem-se duas consequências fiscais. A compensação é tributada como receita para o empregado, e é tratada como uma despesa comercial do empregador. Esta regra geral aplica-se à propriedade, bem como ao salário direto. Por exemplo, se um empregador dá uma parte das ações a um empregado, o valor da ação é uma receita tributável para o empregado, e uma dedução de despesas de negócios para o empregador.
No caso específico das opções de ações, o tratamento tributário é diferente. Quando as opções de ações são outorgadas segundo um plano qualificado, nenhuma receita é reconhecida quando a própria opção é concedida ou exercida, e o empregador não recebe dedução de despesas de negócios. I. R.C. Seção 421 (a). O empregado é responsável pelo imposto somente quando a parte das ações adquiridas com a opção é vendida, e o imposto pode ser pago com o produto da venda da própria ação. A lei federal reconhece dois tipos diferentes de planos de opções de ações qualificadas: planos de opções de ações de incentivo no âmbito do I. R.C. 422, e planos de compra de ações de funcionários no âmbito do I. R.C. 423
Se um plano de opção de compra de ações não atender aos requisitos de qualquer tipo de plano qualificado, será considerado um plano não qualificado. As opções de compra de ações dadas sob tal plano são tratadas como receita para o empregado, e uma dedução de despesa de negócios equivalente é permitida para o empregador. Essas regras entram em vigor no momento em que a opção é concedida se o valor da opção puder ser prontamente determinado; caso contrário, elas entram em vigor quando a opção é exercida. I. R.C. Seção 83; Amelia Legutki, Mertens Lei do Imposto de Renda Federal 6.01 (Westlaw 2006) [doravante Mertens].
Quando uma parte das ações adquiridas com uma opção de compra de ações é vendida, o empregado reconhece a receita igual ao preço de venda menos sua base no estoque. Se o plano de opção de ações foi qualificado, a base do funcionário é o valor pago sob a opção. Se o plano não for qualificado, a base do empregado é o valor pago, mais qualquer quantia previamente reconhecida como receita ordinariamente, o valor da opção quando concedido. Se a opção for mantida por um período mínimo, a receita é tributada em taxas de ganhos de capital; caso contrário, é tributado às alíquotas normais. Mertens Seção 6.01.
Lei Federal de Valores Mobiliários.
Assim como o método mais fácil de implementar a distribuição diferida de opções de ações é a atribuição direta de benefícios por meio de um QDRO, o método mais fácil de implementar a distribuição diferida de opções de ações é a transferência direta das próprias opções.
Como todos os títulos negociados publicamente, as opções de ações são reguladas pela Securities and Exchange Commission (SEC). Antes de 1996, a antiga Regra SEC 16b-3 proibiu positivamente qualquer transferência direta de opções de ações. Revisão Anual do Regulamento Federal de Valores Mobiliários, 52 Ônibus. Lei. 759, 766 (1997). Assim, a designação direta não era um método permissível para a implementação de uma divisão judicial de propriedade conjugal.
Em 1996, a SEC revisou a Regra 16b-3 para remover a proibição da transferência direta. 17 C. F.R. Seção 240.16b-3 (Westlaw 2006). Aprovou também o artigo 16a-12, 17 C. F.R. 240.16a-12 (Westlaw 2006), que estabelece que certas transferências que atendem à definição ERISA de um DRO (qualificado ou não) não precisam ser relatadas. Se uma regra expressa determinar que as transferências diretas não precisam ser relatadas, essas transferências obviamente não serão mais impedidas pela SEC. Assim, após 1996, a lei federal de valores mobiliários não proíbe mais a cessão direta de opções de ações.
Se as opções de ações fossem reguladas pela ERISA, a lei federal exigiria que os administradores de planos permitissem a transferência direta de opções de ações por meio de QDROs. Mas os planos de opções de ações não estão claramente dentro da ERISA. A ERISA aplica-se apenas aos "planos de benefícios", que são subdivididos em "planos de previdência" e "planos de aposentadoria". 29 U. S.C. 1002 (3) (Westlaw 2006). Como uma opção de compra de ações não é um benefício pagável apenas com a aposentadoria, um plano de opção de compra de ações não é um plano de aposentadoria. A definição de "planos assistenciais" inclui planos destinados a fornecer "cuidados ou benefícios médicos, cirúrgicos ou hospitalares, ou benefícios em caso de doença, acidente, incapacidade, morte ou desemprego, ou benefícios de férias, aprendizado ou outros programas de treinamento, ou creches, bolsas de estudo ou serviços jurídicos pré-pagos, "29 USC 1002 (1) (A), uma lista que exclui visivelmente as opções de ações. "Os planos de opções de ações para funcionários geralmente não são cobertos pela Lei de Segurança de Renda de Aposentadoria do Empregado (ERISA), pois não são considerados planos de previdência ou de aposentadoria". Matthew T. Bodie, Alinhando Incentivos com Equidade: Employee Stock Options e Rule 10b-5, 88 Iowa L. Rev. 539, 547 (2003). Ver, em geral, Oatway v. American International Group, Inc., 325 F.3d 184, 187 (3d Cir. 2003) ("a maioria dos tribunais considerou que um plano de opções de ações incentivadas não é um plano ERISA", citando os casos). Assim, as provisões QDRO da ERISA não se aplicam aos planos de opções de ações.
Lei Federal Tributária Poder-se-ia pensar que a decisão da SEC de tolerar transferências relacionadas ao divórcio tornaria tais transferências permissíveis. Infelizmente, a SEC é apenas uma das agências federais com o poder de limitar as transferências relacionadas ao divórcio. O IRS e a lei fiscal federal em geral continuam a dificultar a transferência direta.
O núcleo do problema está nos requisitos para as duas formas diferentes de planos de opções de ações qualificados. Os requisitos para um plano de opções de ações de incentivo fornecem:
(b) opção de ações de incentivo. Para os fins desta parte, o termo "opção de ações de incentivo" significa uma opção concedida a um indivíduo por qualquer motivo relacionado ao seu emprego por uma empresa, se concedida pela empresa empregadora ou sua empresa matriz ou subsidiária, para comprar ações de qualquer tais corporações, mas somente se.
. . . . (5) tal opção por seus termos não é transferível por tal indivíduo a não ser pela vontade ou pelas leis de descida e distribuição, e é exercível, durante sua vida, somente por ele [.]
I. R.C. Seção 422 (b) (5) (ênfase adicionada).
Os requisitos para um plano de compra de ações para funcionários fornecem:
(b) Plano de compra de ações do empregado. Para fins desta parte, o termo "plano de compra de ações para empregados" significa um plano que atende aos seguintes requisitos:. . . . (9) de acordo com os termos do plano, tal opção não é transferível por tal indivíduo, a não ser pela vontade ou pelas leis de descida e distribuição, e é exercível, durante sua vida, somente por ele.
I. R.C. 423 (b) (9) (ênfase adicionada). Assim, ambas as formas de planos de opções de ações qualificadas estabelecem que qualquer opção de ações concedida pode ser exercida apenas pelo empregado. Não há exceção que permita o exercício por um cônjuge, presente ou anterior.
Deve-se ressaltar que nenhum dos estatutos acima citados impede absolutamente que um plano de opção de compra de ações permita a transferência de opções de ações. Os tribunais federais se recusaram a interpretar um dos estatutos para impedir a transferência de maneira absoluta, da mesma maneira que a cláusula antiassignment da ERISA. Por exemplo, DeNadai v. Preferred Capital Markets, Inc., 272 B. R. 21, 40 (D. Mass. 2001) ("DeNadai falha em apontar qualquer evidência de que o Congresso pretendia que o IRC 422 (b) (5) servisse como uma isenção geral do processo do credor"). Essa recusa é altamente consistente com o fato de que tais transferências são implicitamente permitidas pela Regra SEC 16a-12.
O efeito da Subescrição 422 (b) (5) e 423 (b) (9) não é proibir as transferências diretas sob um DRO, mas sim alterar o tratamento tributário das opções que são assim transferidas. É altamente desejável para os funcionários que as opções de ações concedidas sob um plano qualificado sejam tributadas de acordo com as regras especiais estabelecidas na Seção 421 (a). A linguagem acima sugere, no mínimo, que qualquer opção exercida por um não funcionário perde o tratamento tributário favorável que de outra forma desfrutaria. Seria tributado como receita quando recebido ou exercido, e não quando a parcela de ações adquiridas fosse vendida.
Se um plano já não é qualificado, as condições estabelecidas nas Subseções 422 e 423 não se aplicam, e aparentemente não há motivo para que a legislação tributária federal exija ou até sugira que as opções não sejam transferíveis.
Receita Decisão 2002-22.
As preocupações sobre o tratamento fiscal das opções de ações transferidas diretamente de um cônjuge para o outro foram reforçadas pela decisão do IRS no Rev. Rul. 2002-22, 2002-1 C. B. 849. Essa decisão se concentrou principalmente em saber se as transferências diretas de opções de ações são um evento tributável. A regra geral é que as transferências relacionadas ao divórcio geralmente não são um evento como esse, I. R.C. 1041, mas o IRS já havia feito declarações informais de que poderia tentar argumentar que as transferências de opções de ações estavam de alguma forma fora de 1041.
Rev. Rul. 2002-22 recua destas sugestões e constitui uma admissão pela Receita Federal que os princípios gerais da Seção 1041 se aplicam. Mas a decisão vem carregada de ressalvas e qualificações. O efeito geral das qualificações é remover uma parte significativa do benefício prático da admissão.
O padrão de fato abordado diretamente na decisão surgiu de uma transferência relacionada ao divórcio de opções de ações concedidas sob um plano não qualificado. O Serviço determinou que a Seção 1041 fosse aplicada:
O termo "propriedade" não está definido na Seção 1041. No entanto, não há indicação de que o Congresso pretendia "propriedade" ter um significado restrito em 1041. Pelo contrário, o Congresso indicou que 1041 deveria ser aplicado amplamente a transferências de muitos tipos de propriedade. , incluindo aqueles que envolvem o direito de receber renda ordinária que tenha acumulado em um sentido econômico (como interesses em trusts e anuidades). Identidade. em 1491. Consequentemente, as opções de ações e os direitos de compensação sem financiamento diferido podem constituir uma propriedade na acepção do 1041.
O maior problema para os contribuintes não era a aplicabilidade da Seção 1041, mas sim a doutrina da atribuição de renda do common law. Segundo essa doutrina, "a renda é ordinariamente tributada para a pessoa que a recebe e a incidência da tributação sobre a renda não pode ser alterada por designações antecipatórias". Identidade. Ver geralmente Lucas v. Earl, 281, EUA 111 (1930). Se a doutrina aplicada, o marido seria responsável por todo o imposto devido, independentemente da cessão antecipada para a esposa. Mas o conceito de atribuição de renda é fundamentalmente incompatível com a Seção 1041, que se destinava a permitir transferências de propriedade ilimitadas e isentas de impostos entre os cônjuges incidentes ao divórcio:
A aplicação da doutrina de atribuição de rendimentos em casos de divórcio para tributar o cônjuge cedente quando o cônjuge transferido receber rendimentos do imóvel transferido no divórcio frustraria o propósito da Secção 1041 em relação aos cônjuges divorciados. Esse tratamento fiscal imporia ônus substanciais às liquidações de bens conjugais envolvendo tais propriedades e frustraria o propósito de permitir que os cônjuges divorciados cortassem seus interesses de propriedade em propriedade com o mínimo de invasão de impostos possível. Além disso, não há indicação de que o Congresso pretendesse que 1041 alterasse o princípio estabelecido nos casos anteriores a 1041, como Meisner, de que a aplicação da doutrina de atribuição de renda geralmente é inadequada no contexto do divórcio.
Rev. Rul. 2002-22. O Serviço, portanto, decidiu que opções não qualificadas poderiam ser transferidas entre cônjuges divorciados sem qualquer alteração nas conseqüências tributárias.
O problema com o Rev. Rul. 2002-22 começou quando o Serviço se afastou dos fatos apresentados e abordou as opções de ações qualificadas:
A mesma conclusão se aplicaria em um caso em que um funcionário transferisse uma opção de ações estatutária (como aquelas regidas pela Seção 422 ou 423 (b)) ao contrário de seus termos para um cônjuge ou ex-cônjuge em conexão com o divórcio. A opção seria desqualificada como uma opção de ações estatutária, vide Sub Seção 422 (b) (5) e 423 (b) (9), e tratada da mesma maneira que outras opções de ações não estatutárias. Seção 424 (c) (4), que dispõe que uma Seção 1041 (a) transferência de ações adquiridas no exercício de uma opção de compra de ações estatutária não é uma disposição desqualificante, não se aplica a uma transferência da opção de ações. Veja-se a patente de invenção norte-americana nº 795, 100th Cong., 2d Sess. 378 (1988) (observando que o propósito da emenda feita à Seção 424 (c) é "clarificar [y] que a transferência de ações adquiridas de acordo com o exercício de uma opção de ações incentivadas entre cônjuges ou incidente ao divórcio é livre de impostos ").
Identidade. (enfase adicionada). Assim, o Serviço expressamente confirmou que uma opção qualificada se torna uma opção de ações não qualificada quando transferida por um DRO, porque a Subseção 422 (b) (5) e 423 (b) (9) (ambas citadas anteriormente neste artigo) proíbem expressamente qualquer transferência de uma opção de ações qualificadas, mesmo um incidente ao divórcio. Esta conclusão não é alterada pela Seção 1041, que dispõe que as transferências incidentes ao divórcio não são eventos tributáveis, porque o problema não é que a transferência em si é tributável. O problema é que a transferência retira a opção do tratamento fiscal preferencial dado às opções qualificadas, porque as subseções 422 (b) (5) e 423 (b) (9) fazem da não-transferência absoluta uma condição sobre o status qualificado. Como resultado, enquanto Rev. Rul. 2002-22 beneficia os titulares de opções não qualificadas, proporciona conforto muito frio aos titulares de opções qualificadas.
Além disso, o Serviço adicionou uma segunda condição problemática à sua decisão:
Esta decisão não se aplica às transferências de propriedade entre os cônjuges que não estejam relacionados com o divórcio. Esta decisão também não se aplica a transferências de opções de ações não estatutárias, direitos de compensação diferidos não financiados ou outros direitos futuros de renda na medida em que tais opções ou direitos não sejam investidos no momento da transferência ou na medida em que os direitos do transferente a tais rendimentos estejam sujeitos. contingências substanciais no momento da transferência. Ver Kochansky contra Comissário, 92 F.3d 957 (9º Cir. 1996).
Identidade. (enfase adicionada). Por sua vez, portanto, a decisão se aplica apenas às opções de ações adquiridas. É muito possível que o Serviço tente aplicar regras diferentes quando as opções de ações não investidas são transferidas. Além disso, a natureza dessas diferentes regras é logicamente sugerida pelo caso citado, Kochansky v. Comissário, 92 F.3d 957 (9º Cir. 1996), que sustentava, sob a doutrina da atribuição de rendimentos, que um advogado era responsável por todos imposto devido sobre uma taxa contingente, mesmo que parte da taxa tenha sido atribuída ao seu cônjuge por divórcio. Em suma, o Serviço está mantendo a porta aberta para argumentar que o funcionário deve pagar todos os impostos devidos sobre uma opção de ações não investidas, independentemente de qualquer distribuição diferida para um ex-cônjuge. Veja David S. Rosettenstein, Opções sobre Divórcio: Tributação, Compensação de Responsabilidade e a Necessidade de Procurar Soluções Holísticas, 37 Fam. L. Q. 203, 207 n.13 (2003) ("Não está claro a que propósito a referência a Kochansky serve se não é deixar a porta aberta a uma atribuição de análise de renda, por mais inapropriada que seja a análise"); veja também id. em 207 n.19 ("[A] decisão parece reservar a capacidade do Serviço para adotar uma atribuição de análise de renda para quaisquer opções não investidas transferidas para o cônjuge não empregado").
Além disso, também é importante notar que a questão central em Kochansky, o efeito dos direitos de propriedade da comunidade da esposa sobre o resultado, não foi abordada porque não foi preservada no tribunal abaixo. Essa regra processual limita fundamentalmente o valor precedente de Kochansky, pois é muito possível que o resultado tenha sido diferente se a questão tivesse sido preservada. De fato, o próprio serviço admite mais cedo no Rev. Rul. 2002-22 que "a aplicação da doutrina de atribuição de renda geralmente é inadequada no contexto do divórcio". Citando Kochansky apesar desses pontos, o Serviço reduz o poder de sua própria admissão de que a doutrina de atribuição de renda é inconsistente com a política por trás da Seção 1041, e deixa os contribuintes razoáveis ​​sem nenhuma maneira de prever as conseqüências fiscais de uma método desejável de divisão da transferência direta de opções de ações qualificadas não utilizadas de um cônjuge para o outro incidente ao divórcio.
O que é duplamente frustrante é que uma resolução justa de toda a questão não deve ser excessivamente difícil. Como uma regra criada pelo tribunal, a doutrina da atribuição de renda é claramente secundária à Seção 1041. Essa lei exige, implicitamente, se não explicitamente, que as transferências de propriedade incidente para o divórcio não provoquem conseqüências adversas para o imposto federal. Não há base para aplicar a doutrina de atribuição de renda a qualquer transferência relacionada a divórcio, independentemente de as opções em questão serem adquiridas ou não investidas.
Exatamente pela mesma razão, é errado permitir que transferências relacionadas a divórcio de qualquer opção de ações resultem em perda de status qualificado. O que quer que o Congresso tivesse em mente ao promulgar a Subseção 422 (b) (5) e 423 (b) (9), não pretendia que essas seções se aplicassem a transferências relacionadas ao divórcio. A tendência consistente em todas as áreas de leis federais de impostos e valores mobiliários nos últimos 20 anos tem sido permitir transferências relacionadas ao divórcio sem maiores conseqüências tributárias do que teria estado se o divórcio não tivesse ocorrido.
Os estatutos reconhecidamente não contêm nenhuma exceção expressa para transferências relacionadas ao divórcio, e pode haver algum mérito no argumento de que o remédio deve ser estatutário. Mas esse fato não torna a reforma menos necessária. I. R.C. As subseções 422 (b) (5) e 423 (b) (9) devem ser emendadas para permitir transferências relacionadas ao divórcio de opções de compra de ações sem a perda do status qualificado.
"As opções de negociação também representam um contrato e, portanto, se enquadram no âmbito do direito comum dos estados." Bodie, supra, 88 Iowa L. Rev. at 547. A lei estadual que se aplica a opções de compra de ações não é substituída pela ERISA, pois, como observado anteriormente, a ERISA não se aplica a planos de opção de compra de ações. Uma vez que a distinção entre planos qualificados e não qualificados é puramente uma questão de lei de imposto de renda, os planos qualificados são elegíveis para tratamento tributário mais favorável. O status qualificado ou não qualificado do plano não tem efeito sobre a lei estadual.
As opiniões dos tribunais estaduais que dividem as opções de ações observaram com frequência que a grande maioria de todos os planos de opções de ações proíbe a designação direta. Veja Jensen v. Jensen, 824 So. 2d 315, 321 (Fla. 1a. Dist. Ct. App. 2002) ("Ambas as testemunhas especialistas neste caso testemunharam que as opções de ações não investidas não podiam ser avaliadas nem transferidas"); Otley v. Otley, 147 Md. App. 540, 557, 810 A.2 1, 11 (2002) ("A dificuldade de estabelecer um valor presente e o fato de que as opções em si não são geralmente divisíveis ou transferíveis tornam a abordagem [de distribuição diferida] desejável"); Fisher v Fisher, 564 Pa, 586, 593, 769 A.21165, 1170 (2001). Nada na lei federal exige que os tribunais estaduais imponham proibições de atribuição. A questão, portanto, é puramente de lei contratual estadual.
Embora não haja casos em tribunais estaduais que discutam restrições à transferência de opções de ações, há casos relatados discutindo restrições contratuais à transferência de ações efetivas de ações. The general rule is that these restrictions are binding, but that they are narrowly construed. For example, a restriction upon voluntary transfer, or even upon transfer generally, does not apply to involuntary transfer:
We hold that a transfer of stock ordered by the court in a marriage dissolution proceeding is an involuntary transfer not prohibited under a corporation’s general restriction against transfers unless the restriction expressly prohibits involuntary transfers. Ordinarily, for drafting purposes, we think use of the phrase "involuntary transfers" would be deemed to encompass divorce court transfers. No such phrase was used here, however; and the general language is inadequate to prohibit the court’s transfer of the F-L stock.
Castonguay v. Castonguay, 306 N. W.2d 143, 146 (Minn. 1981).
[T]he agreement requires a shareholder who wishes to sell, assign, encumber or otherwise dispose of the corporation’s stock other than as expressly provided for in the agreement to obtain the written consent of the other shareholders. The agreement contains no express provision regarding the interspousal transfer of shares incident to equitable distribution. The spouse has neither joined in the agreement nor has she waived her interest in the stock. We are not prepared to cut off the marital interest of a spouse under these circumstances. We hold that, under the rule of strict construction, a restriction on the transfer of stock does not apply to interspousal transfers of stock which is marital property absent an express provision prohibiting such transfers.
Bryan-Barber Realty, Inc. v. Fryar, 120 N. C. App. 178, 181-82, 461 S. E.2d 29, 31-32 (1995); see also In re Marriage of Devick, 315 Ill. App. 3d 908, 920, 735 N. E.2d 153, 162 (2000) ("Strictly construing the restrictive provision of the affiliate agreements, we determine that the restriction is applicable only to voluntary transfers and not to transfers by operation of law, such as by court order"). The reasoning of these cases is similar to the reasoning of the federal district court in DeNadai v. Preferred Capital Markets, Inc., 272 B. R. 21 (D. Mass. 2001), which held that the tax law transfer restriction in I. R.C. Section 422(b)(5) did not prevent involuntary assignment to creditors.
One fact not considered in some of the stock transfer cases is the presence of a bona fide reason to limit transferability. If the IRS continues to take the position that any transfer of stock options under a qualified plan destroys the qualified status of the option transferred, there is a good reason for most plans to limit transfers. Federal tax law on this point is unfortunate, but it must be lived with until it changes.
But even this situation is not unknown in the state court cases. In McGinnis v. McGinnis, 920 S. W.2d 68 (Ky. Ct. App. 1995), a shareholders’ agreement provided that "if any person obtains an attachment or other legal or equitable interest in any of the Shares owned by" an employee, the corporation would have an option to purchase those shares. Id. at 75. The court held that this provision did not on its face absolutely prevent a divorce-related transfer. It noted, however, that the practical result of such a transfer might be the involuntary sale of the very asset being transferred, and suggested that the court and the parties must live with this fact. By similar reasoning, it seems likely that a state court would not be deterred from dividing stock options by the mere fact that the shares so transferred might lose their qualified status. It also seems likely, however, that the court would first give the parties every opportunity to agree upon a method of transfer which preserves the tax advantages of qualified status.
V. OTHER METHODS FOR DIVIDING STOCK OPTIONS.
While federal law now permits direct transfer of stock options in at least some cases, direct transfer may cause prohibitively adverse tax consequences, and it may not be in the best interests of the parties for other reasons. Since direct transfer was not permitted at all before 1996, there is a reasonable body of case law discussing other division methods. On the facts of specific cases, these methods may reach results which are equal or even superior to the results of a direct transfer.
Deferred Distribution of Profits.
The most common method for dividing stock options in actual practice is a deferred distribution of the profits. Under this method, the court determines the nonowning spouse’s interest in each set of options. It then orders the owning spouse to pay the nonowning spouse the stated percentage of all profits traceable to exercise of the option. It will normally be necessary to direct the owning spouse to withhold taxes from the payment, or otherwise adjust the parties’ rights to reflect the fact that the IRS will assess the relevant tax consequences entirely against the owning spouse.
For cases making a deferred distribution of the profits of stock options, see In re Marriage of Frederick, 218 Ill. App. 3d 533, 578 N. E.2d 612 (1991); Frankel v. Frankel, 165 Md. App. 553, 585, 886 A.2d 136, 155 (2005); Otley v. Otley, 147 Md. App. 540, 559-60, 810 A.2d 1, 12 (2002) ("The benefit subject to distribution, as we stated in Green and repeated earlier in this opinion, is the profit"); Green v. Green, 64 Md. App. 122, 494 A.2d 721 (1985); Smith v. Smith, 682 S. W.2d 834 (Mo. Ct. App. 1984), overruled on other grounds, Gehm v. Gehm, 707 S. W.2d 491 (Mo. Ct. App. 1986); Fisher v. Fisher, 564 Pa. 586, 591, 769 A.2d 1165, 1169 (2001) (over a dissent which would give the nonowning spouse more control over when the options are exercised); and Chen v. Chen, 142 Wis. 2d 7, 15, 416 N. W.2d 661, 664 (Ct. App. 1987) ("The trial court determined a percentage . . . and divided the profit from the stock option contracts accordingly").
Deferred distribution of the profits works best when the parties expect to exercise the option within a fairly short period of time after it vests, and to sell the stock as soon as the option is exercised. If no limits are placed upon when the option will be exercised or when the resulting stock can be sold, the owning spouse could delay the exercise or sale longer than the nonowning spouse desires, or could exercise the option or sell the stock sooner than the nonowning spouse prefers. Because this method gives the nonowning spouse little control over the option and the resulting stock, it tends to work best when the owning spouse has superior financial expertise, and the nonowning spouse trusts the owning spouse to make a good decision in the financial interests of both parties. Since the parties are sharing the profit from each option, the owning spouse has a natural incentive to maximize both spouses’ profits, so long as the owning spouse can be trusted to behave in an economically rational manner.
Another common method for dividing stock options is to make the nonowning spouse an equitable owner of a portion of the options. This method is normally implemented by directing the owning spouse to set aside a certain number of options for the benefit of the nonowning spouse. These options cannot be exercised by the owning spouse alone. Rather, the owning spouse is ordered to exercise these options only when requested to do so in writing by the nonowning spouse. The resulting stock can be either sold immediately, or promptly transferred to the nonowning spouse. It will ordinarily be necessary to have the nonowning spouse make a separate payment to hold the owning spouse harmless from tax consequences, as the owning spouse may be liable to the IRS for taxes on the nonowning spouse’s shares. In situations in which actual transfer of the options is not possible or is otherwise inadvisable, this method provides a reasonably close approximation of the same end result.
For cases awarding equitable ownership of certain options to the nonowning spouse, see Keff v. Keff, 757 So. 2d 450 (Ala. Civ. App. 2000), and Callahan v. Callahan, 142 N. J. Super. 325, 361 A.2d 561 (Ch. Div. 1976). See also In re Marriage of Valence, 147 N. H. 663, 669, 798 A.2d 35, 39 (2002) (directing husband to exercise options as soon as possible, except that he could hold the options for the minimum period necessary to obtain favorable tax treatment, but allowing the wife to consent otherwise in writing, so that she could effectively make independent decisions).
It may be possible to mix both the deferred division of profits and the equitable ownership approaches:
[The trial court] ruled that the husband could exercise the options and then sell any or all of his shares if and when the options vest. If so, the judge determined that the husband must share with the wife one-half of the net gain (i. e., the gross proceeds less the purchase price and less the tax consequences to the husband) from the sale. If the husband decides not to exercise his vested options, the judge ordered that the husband notify the wife of his decision and allow her to exercise her share of the options through him. The wife would then be responsible for the tax consequences resulting from the sale of the shares.
Baccanti v. Morton, 434 Mass. 787, 802, 752 N. E.2d 718, 731 (2001). Thus, the husband had the right to exercise the options and sell the stock immediately upon vesting, paying the wife her share of the profit. If he declined to exercise the options or sell the stock immediately, he was required to hold the stock for the wife’s benefit, allowing her to exercise and sell her share of the options as she desired.
The equitable ownership method suffers from most of the same advantages and disadvantages as a direct transfer. It gives the nonowning spouse control over when to exercise options and sell stock, which is a powerful benefit when both spouses are equally able to make good investment decisions. It limits the owning spouse’s ability to commit financial misconduct, although not as much as direct transfer, because the nonowning spouse still bears the risk that the owning spouse will disregard instructions. The greatest limitation is again the fact that some nonowning spouses will not have the financial skills to make good investment decisions, and will not in the press of other matters be sufficiently motivated to seek expert assistance.
The ultimate form of equitable ownership is of course division in kind. Several state court decisions have stated that such division is preferable in situations in which it is permitted by the employer. See In re Marriage of Valence, 147 N. H. 663, 669, 798 A.2d 35, 39 (2002); Fisher v. Fisher, 564 Pa. 586, 593-94, 769 A.2d 1165, 1170 (2001). But both cases noted that transfer was not permitted on the facts.
There may be some concern on the part of the courts that equitable ownership, short of an actual transfer of the stock options, may be too difficult to implement. In Fisher, for example, after holding that a direct transfer was preferable but impossible, the court ordered the direct distribution of profits, apparently out of concern that allowing the wife more choice regarding the exercise of the options would unduly limit the husband’s rights. But the husband’s rights would surely have been even more limited by a direct transfer, and the court held that such a transfer would be favored, if permitted by the plan. Another possibility is that the court was concerned that equitable ownership would be an administrative burden to the husband, who would be responsible for exercising the wife’s stock options when requested to do so. But this burden must be balanced against the benefit of giving the wife control over when her share of the options is exercised.
A constructive trust is not really an independent method for dividing stock options, but rather a useful device for facilitating enforcement of either deferred distribution of profits or equitable ownership. By providing that the owning spouse hold certain stock options in trust for the nonowning spouse (under equitable ownership) or for the benefit of both parties (under deferred distribution of profits), an order or agreement imposes upon the owning spouse a familiar set of duties. As a trustee, the owning spouse must use reasonable care to manage the options held in trust, perhaps even using the care that a prudent investor would use with his or her own property. There is also a developed body of law on trustee misconduct which can be invoked in the event that the owning spouse acts negligently or dishonestly.
For cases expressly approving a constructive trust, see Jensen v. Jensen, 824 So. 2d 315, 321 (Fla. 1st Dist. Ct. App. 2002), and Callahan v. Callahan, 142 N. J. Super. 325, 361 A.2d 561 (Ch. Div. 1976). See also Banning v. Banning, 1996 WL 354930 (Ohio Ct. App. 1996) (trust permissible but not required).
Constructive trust tends to work best with deferred distribution of profits, where the owning spouse is expected to use his or her best judgment for the benefit of both parties. Under equitable ownership, the owning spouse is required only to follow the nonowning spouse’s instructions, not to use independent judgment, and it is important to draft any constructive trust language with this limitation in mind. For a good example of language which clearly imposes no duty of independent judgment in making decisions, see Callahan, 142 N. J. Super. at 330-31, 361 A.2d at 564 ("He shall exercise her share of the options only at her direction").
Where a constructive trust is ordered, the trial court normally retains jurisdiction to supervise its implementation. See Jensen v. Jensen, 824 So. 2d 315, 321 (Fla. 1st Dist. Ct. App. 2002) ("[T]he trial court imposed a constructive trust upon appellant to keep half of the options for appellee’s benefit, expressly reserving jurisdiction to enforce the provisions of the trust"). Indeed, continued supervision is generally necessary even where a constructive trust is not expressly ordered:
Unreasonable or spiteful spouses are not altogether unknown to trial courts charged with adjudicating the multifarious issues arising under the divorce code. The court of common pleas will have jurisdiction over the equitable distribution of the Fishers’ marital assets until all of the assets have been distributed; we have already determined that the stock options or their value cannot be distributed at the present time. Mrs. Fisher will be able, so long as options acquired during her marriage may yet be exercised, to petition the court if she has evidence that Mr. Fisher has violated 23 Pa. C.S. 3102(a)(6) (policy of effectuating economic justice between parties who are divorced) or otherwise deprived her, under principles of equity, of assets she is entitled to receive.
Fisher v. Fisher, 564 Pa. 586, 593-94, 769 A.2d 1165, 1170 (2001). Tax Consequences.
Regardless of whether the court defers distribution of profits or provides for actual equitable ownership of options, the court must include a separate provision accounting for tax consequences. If the options themselves are not actually transferred, all of the tax consequences will be due to the owning spouse. That spouse is therefore entitled to withhold from any payment to the nonowning spouse the taxes due on the nonowning spouse’s share of the options. See Fountain v. Fountain, 148 N. C. App. 329, 340, 559 S. E.2d 25, 33 (2002) (court "may choose to place conditions on the distribution, i. e. require . . . non-owner spouse to save owner spouse harmless from any tax liability incurred as a consequence of purchase"); In re Marriage of Taraghi, 159 Or. App. 480, 494, 977 P.2d 453, 461 (1999) (trial court properly authorized husband to withhold taxes; "[a] sale of the stock upon exercise of the options is contemplated and husband will be taxed on the entire capital gain").
Immediate offsets of stock options have been very rare in the reported cases. The fundamental problem is that an immediate offset requires a determination of the present value, and the present value of stock options is extraordinarily speculative. Indeed, it is often so speculative that the present value simply cannot be computed. See Jensen v. Jensen, 824 So. 2d 315, 321 (Fla. 1st Dist. Ct. App. 2002) ("Both expert witnesses in this case testified that the unvested stock options could be neither valued nor transferred"); In re Marriage of Frederick, 218 Ill. App. 3d 533, 541, 578 N. E.2d 612, 619 (1991) ("[T]he options could not be valued until such time as they were exercised"); In re Marriage of Valence, 147 N. H. 663, 669, 798 A.2d 35, 39 (2002) ("[U]nvested stock options have no present value"); Fisher v. Fisher, 564 Pa. 586, 591, 769 A.2d 1165, 1169 (2001) ("[I]t is impossible to ascribe a meaningful value to the unvested stock options, primarily because it is absolutely impossible to predict with reliability what any stock will be worth on any future date").
If the options are vested and there is a steady and stable market for the stock, it may be possible to reach a present value which both spouses can live with. If neither spouse is willing to accept the risk that future stock prices will not turn out as expected and this is a significant risk in the majority of all fact situations then it is necessary to use some form of deferred distribution.
Some courts have avoided the need to predict future stock prices by using the value of the stock at the time of divorce, minus the strike price for the option. See Richardson v. Richardson, 280 Ark. 498, 659 S. W.2d 510 (1983); Wendt v. Wendt, 1998 WL 161165 (Conn. Super. Ct. 1998), judgment aff’d, 59 Conn. App. 656, 757 A.2d 1225 (2000); Knotts v. Knotts, 693 N. E.2d 962 (Ind. Ct. App. 1998); Fountain v. Fountain, 148 N. C. App. 329, 559 S. E.2d 25 (2002); Banning v. Banning, 1996 WL 354930 (Ohio Ct. App. 1996); Maritato v. Maritato, 275 Wis. 2d 252, 685 N. W.2d 379, 385 (Ct. App. 2004) (option has no value if market value is less than exercise price on date of valuation). The problem with this approach is that it depends too much upon short-term market fluctuations. For example, the same stock options might be worthless when market prices are at a low point (e. g., late 2001) and very valuable when the market is at a high point (e. g., late 1998). The better approach, and the majority rule, is to divide the profit made at the time when the option is exercised, using a coverture fraction to exclude value attributable to postdivorce efforts.
One case makes an immediate offset using a valuation computed by an expert using the Black/Scholes valuation model. Davidson v. Davidson, 254 Neb. 656, 578 N. W.2d 848 (1998). This model, which is based upon an entire series of factors, produces a better value for stock options than is obtained by subtracting the strike price from the market price on the date of valuation. But the method is not easily applied, and any value reached remains highly speculative. See generally Wendt; Chammah v. Chammah, 1997 WL 414404 (Conn. Super. Ct. 1997) (both criticizing the Black/Scholes method); see also Fountain (trial court had discretion to reject Black/Scholes on the facts, as no specific valuation method is required; not criticizing the method itself). A clear majority of the cases use some form of deferred distribution.
Federal law clearly does not prohibit divorce-related transfers of stock options. Provisions prohibiting transfer are nevertheless common, because they are conditioned upon optimal tax treatment. But the only federal case to consider the issue, DeNadai, rejected the argument that the tax statutes are antiassignment provisions. ERISA’s more express antiassignment and QDRO provisions are not relevant to the issue, as stock option plans are clearly outside ERISA.
Nontransferability provisions included in stock option plans for tax reasons are enforceable under state law. But they will be construed very strictly, and they will not bind a divorce court unless their language is very clear. At a minimum, they probably must apply to involuntary transfers, and they might have to mention divorce-related transfers specifically.
While it may be possible to force the employer to accept a direct transfer order in individual cases, this should be a remedy of last resort for qualified stock option plans. The IRS has clearly taken the position in Rev. Rul. 2002-22 that any direct transfer destroys the qualified status of the share so transferred, resulting in adverse tax treatment. There is also a clear possibility that the IRS will raise unforeseeable assignment-of-income doctrine arguments in response to direct transfers of unvested options. Until tax law is more settled, the direct transfer of qualified stock options poses significant tax risks.
For vested nonqualified options, Rev. Rul. 2002-22 clearly opens the door to transfer without additional adverse side effects. Loss of favorable tax treatment is not an issue in this setting, as there is no such treatment to lose. Where state law permits, the direct transfer of nonqualified vested options may be a useful method of division.
Even nonqualified options, however, are still risky to divide by direct transfer when they are unvested. Rev. Rul. 2002-22 clearly falls short of accepting that 1041 overrules the assignment-of-income doctrine in the context of unvested options. Since commentators have generally rejected the Service’s position on this point, it is hard to know exactly what arguments the Service would make, and there is a risk that individual transfers will become expensive test laboratories for new tax law theories.
All of the tax law problems can be avoided to some extent by appropriate hold-harmless provisions in private settlement agreements. The problem is that there is no way to determine in advance the amount at issue (or the amount of attorney’s fees necessary to fight the IRS to determine the amount at issue). "At the very least, the extent of any award will have to be reduced to reflect the transferor’s deferred liability, assuming we have even the vaguest notion of what that might amount to." Rosettenstein, supra, 37 Fam. L. Q. at 207. To the great majority of litigants who prefer to avoid income tax quandaries, the clear message is to avoid any direct transfer of qualified stock options incident to divorce.
Finally, as Rosettenstein notes, even if direct transfer is permitted and not accompanied by burdensome tax consequences, it should not immediately be assumed that direct transfer is necessarily in the interest of the nonowning spouse. Unlike retirement benefits, stock options generate maximum value only if they are competently managed by the holder. The option must be converted into stock at the right time, and the stock itself must be sold at the right time. In many situations, the employee spouse may have a better ability to identify the right time, so that the nonowning spouse may actually do better to receive only a share of the profits and not actual ownership of the options. Also relevant are the spouses’ personal tolerances for investment risk, their willingness to adopt tax law positions which might be challenged by the IRS, and the degree to which each trusts the other to manage a jointly held asset for mutual benefit. When all of these factors are considered, direct transfer may not always be the best division method, even in situations in which it is legally permitted.
The state court cases generally prefer direct transfer as a division method wherever possible on the facts. Most of the cases find, however, that direct transfer is not permitted by the plan.
The method most often used to divide stock options is a deferred distribution of profits. The second most common method is an immediate offset based upon the difference between the market value and the option strike price on the date of valuation. This method is overly simplistic, and tends to reach extreme results when market conditions are unusually high or low. A better method could be reached by relying less upon immediate market conditions, but any attempt to reduce stock options to present value is inherently speculative. Deferred distribution is clearly the better division method.
A clear majority of the deferred distribution cases make a distribution of profits rather than awarding equitable ownership. This point makes an interesting contrast with the equally clear tendency to favor direct transfer where that is a feasible option on the facts. Minimizing the burden upon the owning spouse is clearly a very important factor; the courts are consistently favoring division methods which limit postdivorce connections between divorcing spouses. The result is to leave the owning spouse with complete control over when the options are exercised, subject only to the general supervisory jurisdiction of the court to avoid clear instances of misconduct. Whether this approach avoids litigation will ultimately depend upon the behavior of owning spouses. If owning spouses abuse the control which the courts are tending to give them, awards of equitable ownership may become more popular.
The Need for Reform.
State court decisions often suggest that direct transfer of stock options should be the primary method of division when such a transfer is legally permitted. No court or commentator in recent years has suggested any federal or state interest which benefits if divorce-related transfers are forbidden, and the consistent trend in federal law over the past two to three decades has been to allow divorce-related transfers. Federal law should be amended to recognize a QDRO-like device for transferring stock options, and to provide that such transfers do not result in the loss of qualified status for income tax purposes.

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Xnxx vedios.
Trazer de volta o layout antigo com pesquisa de imagens.
sim: a única possibilidade (eu acho) enviar todas as informações para (alienvault.
Desinformação na ordem DVD.
Eu pedi DVD / Blueray "AL. A confidencial" tudo que eu consegui foi Blue ray & amp; um contato # para obter o DVD que não funcionou. Eu encomendo minha semana com Marilyn ____DVD / blue ray & amp; Eu peguei os dois - tolamente, assumi que o mesmo se aplicaria a L. A. ___ETC não. Eu não tenho uma máquina de raio azul ----- Eu não quero uma máquina de raio azul Eu não quero filmes blueray. Como obtenho minha cópia de DVD de L. A. Confidential?
yahoo, pare de bloquear email.
Passados ​​vários meses agora, o Yahoo tem bloqueado um servidor que pára nosso e-mail.
O Yahoo foi contatado pelo dono do servidor e o Yahoo alegou que ele não bloquearia o servidor, mas ainda está sendo bloqueado. CEASE & amp; DESISTIR.
Não consigo usar os idiomas ingleses no e-mail do Yahoo.
Por favor, me dê a sugestão sobre isso.
Motor de busca no Yahoo Finance.
Um conteúdo que está no Yahoo Finance não aparece nos resultados de pesquisa do Yahoo ao pesquisar por título / título da matéria.
Existe uma razão para isso, ou uma maneira de reindexar?
consertar o que está quebrado.
Eu não deveria ter que concordar com coisas que eu não concordo com a fim de dizer o que eu acho - eu não tive nenhum problema resolvido desde que comecei a usar o Yahoo - fui forçado a jogar meu antigo mensageiro, trocar senhas, obter novas messenger, disse para usar o meu número de telefone para alertar as pessoas que era o meu código de segurança, receber mensagens diárias sobre o bloqueio de yahoo tentativas de uso (por mim) para quem sabe por que como ele não faz e agora eu obter a nova política aparecer em cada turno - as empresas costumam pagar muito caro pela demografia que os usuários fornecem para você, sem custo, pois não sabem o que você está fazendo - está lá, mas não está bem escrito - e ninguém pode responder a menos que concordem com a política. Já é ruim o suficiente você empilhar o baralho, mas depois não fornece nenhuma opção de lidar com ele - o velho era bom o suficiente - todas essas mudanças para o pod de maré comendo mofos não corta - vou relutantemente estar ativamente olhando - estou cansado do mudanças em cada turno e mesmo aqueles que não funcionam direito, eu posso apreciar o seu negócio, mas o Ameri O homem de negócios pode vender-nos ao licitante mais alto por muito tempo - desejo-lhe boa sorte com sua nova safra de guppies - tente fazer algo realmente construtivo para aqueles a quem você serve - a cauda está abanando o cachorro novamente - isso é como um replay de Washington d c
Eu não deveria ter que concordar com coisas que eu não concordo com a fim de dizer o que eu acho - eu não tive nenhum problema resolvido desde que comecei a usar o Yahoo - fui forçado a jogar meu antigo mensageiro, trocar senhas, obter novas messenger, disse para usar o meu número de telefone para alertar as pessoas que era o meu código de segurança, receber mensagens diárias sobre o bloqueio de yahoo tentativas de uso (por mim) para quem sabe por que isso acontece e agora eu recebo a nova política em cada turno - as empresas costumam pagar muito pela demografia que os usuários fornecem para você ... mais.

Stock options divorce new york

The general rule in New York is that all property acquired during a marriage and before the commencement of a matrimonial action or signing of a Separation Agreement is subject to “equitable distribution.” In other words, marital property. How property is titled is immaterial. Also, property acquired after the commencement of a divorce action can be characterized as marital property if you used marital funds to purchase this property.
Early on in the case the lawyers and/or the Court need to value the property. In the case of a marital residence or deferred compensation this is a fairly simple procedure. Valuing a business, or artwork, or a license is more difficult.
If stock is publicly traded, valuation is the fair market value of the stock or the amount at which the share of stock is being traded at, usually at the date of trial (not commencement of the legal action). Valuation of stock of a privately held company is more problematic. Then the valuator must examine the type of business, prior sales of company stock, the future outlook for the company, good will, etc.
What then of stock options? Both employers and employees like stock options. There is no cost to the business unless the company appreciates in value. And the employer has not risked his or her own money. If the stock has appreciated in value then the employer can achieve a return. If not, the employee simply does not exercise the option.
How do the lawyers determine if the options were granted as reward for past services? They examine the Plan documents, e. g., the Stock Options Plan and the Options Statement. These documents should address such issues as how the options are treated, whether they provide for divorce, what is the exercise price and when do they expire.
The attorney for the non-propertied spouse should remain vigilant for chicanery. Particularly in small companies, the executive can negotiate, sometimes orchestrate, his compensation package. Is he being granted stock options as a reward in addition to his normal compensation? Or is he receiving the options in lieu of a raise?

DIVORCE SALOON® INTERNATIONAL.
By Brenda Monteau on October 15, 2009 Comments Off on CONNECTICUT: Stock options and divorce: A look at UTC chairman George David’s divorce action.
Originally published 12/31/08, and 05/02/09.
What a sexy topic, huh? Opções de ações. Who cares about stock options? You know? Why don’t we just have an in-depth conversation about card board or dirt, or something equally thrilling, huh? Well, if you are married to someone who has received stock options as part of a compensation package due to employment, or if you are someone who has received such compensation you may want to think about this issue a little bit. You may hear something that is useful to you.
Let’s try to do it quick and easy. Who can we use as an example? Former CEO of GE Jack Welsh when he divorced Jane Welch? No. Let’s use United Technologies Corporation chairman George David. He is in the throes of a divorce from his beautiful Swedish countess/wife Marie Douglas David and so I think his case is more apropos.
George David is said to be worth in excess of $300 million (admittedly not all that much when you think about guys like Bernie Ecclestone and Henry Silverman are worth billions) and a part of his assets includes these “un-exercised stock options.” Yum Yum
What should his wife Marie Douglas be concerned about with these babies? Well, she needs to know whether the options are vested. If they are vested, then the portion that vested during the marriage is marital property. George was the CEO of United for about fourteen years. He was only married six years. So if the stock options, though un-exercised, vested during that six year period, that portion would be marital property, and the rest of it is off the table.
Marie and her attorneys also have to figure out whether these stock options were incentives for future and continued employment with United Technologies, or whether they were past compensation for work already performed. If the stock options are compensation for future services, they are not marital property, except for the portion that vested, if any, during the six years of marriage. However, if the stocks were a form of deferred compensation for work completed during the marriage, they are marital property for those six years and she gets a piece.
Did that make any sense? Espero que sim. It was as simple as I could make it. The New York case that deals with this is the Dejesus v. Dejesus case, 90 NY 2d 643 . That case went all the way to the highest court in New York State, the Court of Appeals. The Court of Appeals used a California case, In re Marriage of Hug to make it’s decision.
OK. That’s all for now on this topic. Here, have a glass of wine. Relax….it’s going to be fine…
CONNECTICUT: Stock options and divorce: A look at UTC chairman George David’s divorce action added by Brenda Monteau on October 15, 2009.

The Equitable Distribution of Stock Options.
Employee stock options are considered marital assets that are subject to equitable distribution. These include both vested and unvested stock options. Even stock options awarded shortly after the divorce complaint was filed are considered subject to equitable distribution if they were awarded as a result of efforts expended during the marriage. On the other hand, if the options were awarded shortly after the marriage ended but are incentives for future performance (i. e. to keep the employee spouse at the company) then they are not eligible for equitable distribution.
The issue as to whether stock options obtained after the divorce complaint was filed were awarded for past performance or for future performance is often an issue in divorce cases. Usually the documents granting the options do not spell out the reason(s) for the award, which must then be inferred from the nature of the employment and the other facts of the case.
The speculative nature of a stock option’s value makes it one of the most difficult assets to value at the time of the divorce. This is because it is impossible to predict the exact future value of the stock at the time the option will be exercised, which may be years later; in fact, there is no guarantee that the option will be worth anything at all at the time that it becomes exercisable.
There are two methods for equitably distributing stock options. The first, and by far less common, method is the Present Value Method which utilizes a mathematical formula to try to calculate the present value of the stock options. The most widely accepted present value formula is the Black-Scholes formula which combines a variety of factors, such as the exercise price of the stock, the share price on the valuation date, the length of time until maturity, interest rates and a standard deviation formula to account for the volatility of the share price.
The Present Value Method allows the parties to divide the value of the stock option(s) at the time of the divorce, with the non-employee spouse receiving monetary compensation (or an equivalent offset of assets) for his/her share of the other party’s stock options. The benefit of using the Present Value Method is the finality of the distribution of the stock options at the time of the divorce. The downside is the cost of having the options valued as well as the speculative nature of the Present Value Method as it applies to stock options. In fact, some state courts have held that the speculative nature of stock options makes them unsuitable for present value calculations.
The more common approach to dividing stock options is the Deferred Distribution Method. Using this method, the parties’ Marital Settlement Agreement or the Final Judgment of Divorce contains language which imposes a “Constructive Trust” over the non-employee spouse’s share of the stock options. The Constructive Trust requires the employee spouse to hold the options for the benefit of the non-employee spouse. The employee spouse holds on to the options until they vest, are exercisable (if unvested and/or non-exercisable at the time of the divorce) and non-employee spouse directs the employee spouse to exercise them. It is important that there be language in the Agreement requiring the employee spouse to notify the non-employee spouse prior to the options lapsing. Once the options are exercised, the employee spouse sells the stock and gives the sale proceeds to the non-employee spouse after the payment of taxes at the employee spouse’s tax rate.

Employee Stock Options and Divorce.
Learn how to determine the value of a stock before you decide whether or not to purchase it or take advantage of your employers stock option incentive. Expert accountant explains how the stock system works and formulas used to predict its future.
Updated: February 25, 2015.
As the stock market continues to rise, divorce attorneys are involved in more and more cases involving stock options. The grant of stock options to key employees is now common in high technology companies and is becoming popular in many other industries as part of an overall equity compensation strategy. Larger, publicly traded companies such as Pepsico, Starbucks, Travelers Group, Bank of America, Merck and the Gap now give stock options to almost all of their employees. Many non-high tech closely held companies are joining the ranks as well.
Traditionally, stock option plans have been used as a way for companies to reward top management and "key" employees and link (golden handcuff) their interests with those of the company and other shareholders. More and more companies, however, now consider all of their employees as "key." As a result, there has been an increase in the popularity of broad-based stock option plans, particularly since the late 1980s. More than a third of large United States companies now have broad-based stock option plans covering all or a majority of their employees--more than double the rate that existed in 1993. In a 1997 survey of 1,100 public companies conducted by Share Data, Inc. and the American Electronics Association, it was found that 53% of respondents provide options to all employees. In companies having 500 to 999 employees, the study found that 51% offer options to all employees, as compared to 30% in Share Data's 1994 survey and 31% in Share DataÕs 1991 survey. Forty-three percent of companies with 2,000 to 4,999 employees offer options to all, as compared to 10% in 1994. Forty-five percent of companies with 5,000 or more employees offer options to all, compared to 10% in 1994.
Since this trend shows no apparent sign of slowing down, matrimonial attorneys must be ready to address the unue issues that arise therefrom. This article will explain the basic nature of employee stock options, how they are valued, taxed and ultimately distributed incident to divorce.
What is an Employee Stock Option?
There is no question that "stock options" are assets subject to equitable distribution. However, simply to say that they are assets is not enough to guide the matrimonial litigator. We must first understand the basic nature and definition of a stock option. Basically, a "stock option" is "the right to purchase a specified number of shares of stock for a specified price at specified times, usually granted to management and key employees. The price at which the option is provided is called the "grant" price and is usually the market price at the time the options are granted.
Generally, stock options are an incentive to stimulate the efforts of key employees and to strengthen the desire of employees to remain in the employment of the corporation. Such incentives do not apply to retired employees. Stock option plans can be a flexible way for companies to share ownership with employees, reward them for performance, and attract and retain a motivated staff. For growth-oriented smaller companies, options are a great way to preserve cash while allowing employees a piece of future growth. They also make sense for public firms whose benefit plans are well established, but who want to include employees in ownership. (Note: By issuing stock options, a company potentially dilutes the value of existing shares.)
Whether a stock option is granted for money, for past services, as an incentive for future services, or for no consideration at all, an option holder must exercise the option within its terms or he is subject to the loss of his/her right to do so. In an option contract "time is of the essence." Generally, expiration provisions and stock option agreements are strictly enforced. The courts reject the inevitable breach of contract and forfeiture claims that employees, former employees and other stock option holders press when they fail to timely exercise their options. Although this rarely becomes an issue in divorce litigation, it is something to keep in mind in order to avoid severe economic loss to either party or a potential malpractice claim.
Are there different kinds of stock options, and how are they taxed?
Generally, stock options come in two basic categories: (1) incentive stock options (commonly referred to as ISOs) which are qualified or statutory options and (2) non-qualified stock options (which are commonly referred to as NQSOs). Simply put, the difference between an ISO and a NQSO turns on its compliance with specific Internal Revenue Code requirements at the time of grant which ultimately effects how the option is taxed.
Incentive stock options are granted to individuals for reasons connected to their employment. As a result they may only be granted to employees. They must also be approved by the shareholders of the corporation and granted at fair market value.
NQSOs, on the other hand, may be granted to both employees and independent contractors, and their beneficiaries.
An employee will not realize any taxable income upon the grant or exercise of an ISO. Concomitantly the corporation is not entitled to a deduction upon the exercise of the option. If the employee sells the stock within two years after the option is granted and within one year after the option is exercised, ordinary income will be realized in an amount equal to the lesser of 1) the excess of the fair market value of the shares at the date of exercise over the option price, or 2) the excess of the amount realized on the disposition over the option price. If the individual holds the shares for two years after the grant of the ISO and one year after exercise of the ISO, the difference between the sale price and the option price will be taxed as a capital gain or a loss. If the stock is sold after the two-year/one-year period, that gain will also be an alternative minimum tax preference item subject to the26/28 percent tax rate.
Regarding a NQSO, the holder "employee" of a non-statutory option must recognize income at the time the option is granted if the option has a "readily ascertainable fair market value" at the time of grant. If the option is not transferable and does not have a "readily ascertainable fair market value," no income will result to the individual upon the granting of the option. When the non-qualified stock option is exercised, the individual is taxed at ordinary income rates on the difference between the fair market value of the stock and the exercise price of the option. When the individual sells the stock, a capital gain or loss will be incurred on the difference between the amount received for the stock and its tax basis. Typically the tax basis is equal to the fair market value at the time of the exercise of the option. The capital gain would be either long term or short term depending on the length of the time the shares were held after exercise.
If the option is "actively traded on an established market" the code considers the option to have a "readily ascertainable fair market value." If there is no "readily ascertainable fair market value" at the time of the grant, the optionee recognizes income at the time of the option either: (1) becoming "substantially vested" or (2) is no longer subject to a "substantial risk of forfeiture". Any profit is a short term capital gain, taxable at ordinary income rates. The code establishes four conditions necessary for an option that is not "actively traded on an established market" to meet the "readily ascertainable fair market value" standard: (1) the option is transferable by the optionee (2) the option is exercisable immediately in full when granted (3) there can be no condition or restriction on the option that would have a significant effect on its fair market value, and (4) the market value of the option privilege is readily ascertainable. All four conditions must be met. Since these conditions are seldom satisfied, most non-qualified, non-statutory stock options not traded on an established market, do not have a readily ascertainable value.
There is another factor to consider that can apply to both incentive and non-qualified stock options. Some companies are offering options with a reload feature. A reload option provides for automatic grants of additional options whenever an employee exercises previously granted options.
If the stock that is received upon the exercise of the option is restricted property, the taxation is deferred until the restrictions lapse. Frequently employees receive restricted stock for services. The stock is not freely transferable and is subject to a risk of forfeiture based on the individualÕs performance or continued employment for a period of time. Pursuant to Internal Revenue Code Section 83(b), an individual can elect to recognize the fair market value of the shares, ignoring the restrictions, as income at the time of the award; if a Section 83(b) election is made, the holding period for capital gains purposes commences at the time of the election, otherwise the holding period begins to run at the conclusion of the restriction.
Based upon the foregoing, it may be appropriate to tax effect executive stock options for purposes of equitable distribution. This is because executive stock options have a fixed expiration date and therefore must be exercised and sold. The resulting tax is inevitable and therefore should be considered.
How are Stock Options Valued?
There are various methods to arrive at a present value for stock options. The two most popular are the "intrinsic value" and the "Black-Scholes" method. In 1995 the accounting profession formally recognized that executive stock options have value beyond their intrinsic value. In addition, the Black-Scholes Option Pricing Model was recognized as an appropriate method to calculate the value of executive stock options by the accounting profession. Interestingly, the Financial Accounting Standards Board (FASB) specifically stated that, "an employee's stock option has value when it is granted regardless of whether, ultimately (a) the employee exercises the option and purchases stock worth more than the employee pays for it or (b) if the option expires worthless at the end of the option period.
In the intrinsic value method, the value of the stock option is equal to the difference between the option exercise price and the fair market value of the stock. For example, if you had an option to purchase stock "x" for $5, and the stock was currently trading for $27 per share, the intrinsic value of the option would be $22 ($27 - $5 = $22). However, the intrinsic value method does not consider the value to the holder of having the right to buy the stock at some point into the future at a predetermined price. It also does not consider the volatility of the underlying stock as well as the incumbent advantages and disadvantages of same. Moreover, it does not consider the advantages and disadvantages of the option holder not receiving the stock's dividends as well as the opportunity cost of purchasing the stock and forgoing the lost interest on the acquisition funds.
One method that considers the above-referenced items is the Black-Scholes Method. You can see the Black-Scholes formula by clicking here.
The explanations of the letter designations for the other variables in the Black-Scholes formula are:
C = SN (ln(S/K) C = theoretical call premium N = cumulative standard normal distribution e = exponential function log = natural logarithm.
The first part of the calculation determines the expected benefit of purchasing the stock outright. The second part of the calculation determines the present value benefit of paying the exercise price in the future. The difference is the fair market value of the option.
However, an underlying problem with the Black-Scholes Method is that it makes assumptions concerning the volatility of the stock, future dividend rates, and lost interest. A change in these underlying assumptions can affect the value of the option calculated pursuant to this method.
The following table provides a summary of how a change in one of these assumptions will affect the value of the stock options calculated under the Black-Scholes Method.
Increase in Variable.
Decrease in Variable.
Comércio livre de risco.
A common misconception in the valuation of long term options is that an option value is best represented by its intrinsic value. In fact, based on the various Black-Scholes factors, stock options which are "out of the money," i. e., the strike price exceeds the current fair market value, are actually traded with various dollar values. For example, a Dell Computer stock option with a strike price of $50.00 and a market value of $37.3125 as of May 24, 1999 traded for $8.75. This is so even though the option was almost $13.00 out of the money when the option was valued. The disparity in the value is due to investor optimism that the Dell shares would rise and be worth more than $58.75 before the expiration of the option.
How Are Stock Options Distributed In Matrimonial Matters?
Generally, the methods to distribute stock options usually fall into two categories:
Deferred Distribution Upon Exercise of Options (Constructive Trust); Present Valuation with off-set against other assets.
(Where one party argues that a portion of the stock options are non-marital, then an issue arises as to what portion of the stock options whether distributed through method 1 or 2 above, should be granted to the non-employee spouse. This is dealt with in more detail under the next section of this article.)
Deferred Distribution Method.
The Deferred Distribution Method is likely the most common manner in which options are distributed and was utilized in one of the earliest New Jersey cases dealing with stock options incident to divorce, to wit: Callahan v. Callahan. In that case, the trial court ruled that stock options acquired by a husband during the course of the marriage were subject to equitable distribution notwithstanding the fact that the options would terminate if the husband left the company within a certain period of time and the fact that they were subject to various SEC regulations. The court impressed a constructive trust on the husband in favor of the wife for a portion of the stock options owned by him in order to best effect the distribution of property between the parties without creating undue financial and business liabilities. It should be noted that all of the options were granted during the course of the marriage. However, although not specifically stated, it appears that some or all of the options were not fully vested since they were subject to divestiture under certain circumstances. This may have been why the wife was awarded only 25% of the options when they matured." (See section below regarding determining distributive shares.)
The second mode of distribution is the Present Valuation Method. In this method, the stock options must be valued with the non-employed spouse receiving her share of the marital portion in cash or cash equivalent. Such a method should use discounts for mortality, interest, inflation and any applicable taxes. The downside of this "off-set method" is that it may become inequitable in the event that the employee spouse is either unable to exercise the options or, on the date they become exercisable, they are "worthless" (i. e., the cost of the option exceeds the fair market value.)
A review of out-of-state authority indicates that matrimonial courts differ on the method of distribution of stock options depending upon the nature of the options themselves, whether they are vested or unvested, transferable or salable. If the options are able to be transferred to the non-employee spouse, that is the preferred method of distribution, since it effects a clean break between the parties; there is no need for further communication between the parties and there is no need to use valuation methodologies. However, transfer of stock options is rarely permitted by employee stock option plans. Some courts have devised other methods, including but not limited to allowing the parties to be tenants-in-common, or allowing the non-employee spouse to order the employee spouse to exercise his or her respective portion of the options, upon furnishing the capital to do so. This is similar to the constructive trust solution devised in the Callahan case previously discussed. Trial courts are accorded broad discretion in fashioning an approach to fit the facts of the individual case. (Caveat: all of these methods still assume that there is no exclusion of options based upon the argument that they are unvested or were otherwise not earned during the marriage.)
As a practice point, please note that when distributing options in kind, consideration should be given that neither party violates any insider trading rules. For example, it may be a violation if the participating spouse advises the non-participating spouse that he or she intends to exercise his options in the near future. Another concern about the distribution of options in kind is that they can lapse if the individual's employment with the company is terminated, either voluntarily or involuntarily.
Determining the non-employed spouse's distributive share.
What happens when the employed spouse argues that some of the options are unvested or were otherwise "not acquired during the marriage" and therefore not distributable to the other spouse?
New Jersey courts have made it clear that it is necessary to balance the need for definitiveness embodied in the date of complaint rule (i. e., the cutoff date for determining which assets are subject to distribution) with the need for flexibility inherent in equitable distribution when addressing stock options incident to divorce. Whereas courts of many other states have employed the "time-rule formula" approach to determine what portion of stock options should be subject to distribution (see below), New Jersey courts have laid the groundwork in a more general fashion. Basically, assets or property acquired after the termination of the marriage, but as a reward for or result of efforts expended during the marriage, normally will be includable in the marital estate and thus, subject to equitable distribution. The law in New Jersey recognizes that assets acquired by gainful labor during the marriage or as a reward for such labor are distributable while assets acquired after dissolution due solely to the earner's post-complaint efforts constitutes the employed spouse's separate property.
The seminal case in the State of New Jersey regarding the distribution of stock options is the Supreme Court case of Pascale. In that case, the parties were married on June 19, 1977. A complaint for divorce was filed on October 28, 1990. The wife began her employment with the Liposome Company on April 14, 1987 at which time she was immediately granted the option to purchase 5,000 shares of stock in said company. As of the date of trial, the wife owned 20,069 stock options awarded between April 14, 1987 and November 15, 1991. 7,300 of the stock options were granted after the complaint for divorce was filed.
There were two blocks of stock options in dispute (i. e., 4,000 and 1,800), both granted on November 7, 1990. These were granted approximately ten days after the wife filed for divorce. (There was no indication of whether the options were vested in whole or in part, however, it is assumed that these options were "unvested".) Her position was that these options were not subject to distribution because the 1,800 were issued in recognition of past performance and the 4,000 options were awarded in recognition of a job promotion that imposed increased responsibility on her in the future. The wife relied on the transmittal letters from her company to support her arguments. The trial court found that neither of the two blocks of options granted on November 7, 1990 could be excluded from equitable distribution and were to be divided equally.
However, the Appellate Division found that one of the two sets of options awarded on November 7, 1990 should have been included in the marital estate while the other should have been excluded. The Appellate Division based that decision on its interpretation of the facts, finding that the block of 4,000 options granted in recognition of a promotion in job responsibility and an increase in salary was "more appropriately . designed to enhance future employment efforts" and should not have been included in the marital estate. However, as to the block of 1,800 options, the Appellate Division found that these options were granted in recognition of past employment performance. Therefore, these options were properly includable in the marital estate notwithstanding the date of complaint rule.
In reversing the Appellate Court, the Supreme Court in Pascale concentrated on N. J.S. A. 2A:34-23 and the guiding principles enunciated in Painter v. Painter, that "property clearly qualifies for distribution when it is attributable to the expenditure of effort by either spouse during the marriage." The Supreme Court in Pascale made it clear that the focus in these cases becomes whether the nature of the asset is one that is the result of efforts put forth "during the marriage" by the spouse jointly, making it subject to equitable distribution. To refute such a presumption, the party seeking exclusion of the asset must bear "the burden of establishing such immunity [from equitable distribution] as to any particular asset."
The Pascale court concluded that "stock options awarded after the marriage is terminated but obtained as a result of efforts expended during the marriage should be subject to equitable distribution. The inequity that would result from applying inflexibility to the date of complaint rule is obvious." Note that no distinctions were made as to vested or unvested options. Therefore, it appears that the Supreme Court agreed with the goals sought to be achieved by the Appellate Division, but did not agree with their conclusions based on the record below. The Supreme Court gave greater weight to the "credible finding" made by the trial court after listening to many days of testimony that the promotion came about as a result of the excellent service that the wife had provided to the company during the marriage.
Query, what would the NJ Supreme Court have done if it determined that a block of options were awarded for a mix of pre and post marital efforts? What if there is no clear indication as to why the options are granted? What if the options are unvested and require future work effort to fully vest? These circumstances often exist and are where things get murky. New Jersey has not adopted a clear and precise method to determine what portion of options which have yet to be fully earned should be distributed. New Jersey's approach provides for a much more subjective analysis (and room for advocacy) than in other states which utilize various formulaic approaches including a coverture factor or time-rule usually taking into account vesting schedules.
Like New Jersey, the majority of states in this country do consider unvested stock options to be property subject to distribution in marital dissolution proceedings. Such was the recent ruling of the appellate court in Pennsylvania in the case of MacAleer. The Pennsylvania Appellate Court addressed the issue of whether stock options granted to a spouse during the marriage, but not exercisable until after the date of separation, constitutes marital property to be divided during the divorce. That court's reasoning parallels, to a large degree, the majority of the other states which hold that unvested stock options are marital property. Analogizing their prior decisions determining that unvested pensions were subject to distribution, the court noted that benefits resulting from employment during marriage are marital, since these benefits are received in lieu of higher compensation which would have been utilized during the marriage to acquire other assets or to raise the marital standard of living. Only a handful of states have specifically held otherwise. These states are Indiana, Colorado, Illinois, North Carolina, Ohio and Oklahoma. North Carolina and Indiana do not divide unvested stock options on the basis of the state's statutory definition of "property." Oklahoma does not consider unvested stock options to be marital property based on the common law foundation of the stateÕs statutory scheme. These states award the unvested stock options to the employee spouse as separate property not to be considered for equitable distribution. These decisions are distinguished upon the fact that they are heavily influenced by statutes which define property in those jurisdictions. However, the remaining states which have addressed the issue, do find unvested stock options to be marital property and generally follow the same procedure for determining how much, if any, of the options constitute marital property.
Many jurisdictions, like New Jersey, view the first consideration to be a determination of whether the options were granted for past, present or future services. However, most courts have learned that employee stock options are not usually granted for any one reason, and could be compensation for past, present and future services. As a result, these courts sought some structure to determining the distributable share.
Remember: The options that are clearly given to the employee spouse as compensation or incentive for future services are wholly non-marital property. The options clearly granted exclusively for past or present services are fully marital property. There is no need for the court to utilize a coverture factor or time rule fraction for either category in order to determine the marital interest since they are wholly marital or non-marital property as the case may be. The problems arise when the reasons are unclear, where the options are unvested or include an indiscernable mix of pre and post marital efforts.
"Coverture Factor" or "Time-Rule Fractions"
Most out-of-state courts which have addressed distribution of unvested stock options use a "coverture factor" or "time rule fraction" to determine how much, if any, of the unvested stock options constitute marital property. The most prevalent time rule fraction has evolved from that which was used by the California Court of Appeals in Hug. The trial court in Hug found that the number of options that were community property were a product of a fraction; the numerator was the period in months between the commencement of the spouse's employment by the employer and the date of separation of the parties, and the denominator was the period in months between commencement of employment and the date when the first option is exercisable, multiplied by the number of shares that can be purchased on the date that the option is first exercisable. The remaining options were found to be the separate property of the husband.
The husband in Hug agreed that the options were subject to division according to the time rule; however, he contended that the trial court used an erroneous formula. He argued that the proper time rule should begin as of the date of granting the option, not the date of commencement of employment, since the options were not granted as an incentive to become employed. He argued further that each annual option was a separate and distinct option which is compensation for services rendered during that year, and as it was to accrue after the date of separation, it was totally his separate property. The court examined the various reasons why corporations confer stock options to employees, and found that no single characterization could be given to employee stock options. Whether they can be characterized as compensation for past, present, or future services, or all three, depends upon the circumstances involved in the grant of the employee stock option. By including the two years of employment prior to the granting of the options in question, the trial court implicitly found that period of service contributed to earning the option rights at issue. The appellate court found that this was supported by ample evidence in the record.
Various versions of coverture factors have evolved as courts addressed different factual circumstances. The recent Wendt case out of Connecticut entails a voluminous decision in which the court surveys the states which addressed the issue of division of unvested stock options, and notes the competing arguments and the most common numerators and denominators in diverse forms of the coverture factors. A brief summary of the Wendt court's decision as to stock options is helpful to understanding the approach of many courts to the issue of unvested stock options.
According to the December 31, 1996 unaudited financial statement prepared by KPMG Peat Marwick, LLP, the husband owned 175,000 shares of General Electric Vested Stock Options and Appreciation Rights in the following amounts: 100,000 units granted November 20, 1992 with a $40 per share exercise price, 70,000 units granted September 10, 1993 with an exercise price of $48.3125 and 5,000 units granted June 24, 1994 with an exercise price of $46.25. The unaudited financial statements used the "intrinsic value" method, with a December 31, 1996 New York Stock Exchange price of G. E. common stock at $98 7/8 per share. On May 12, 1997, G. E. common stock split two for one and, thus, the number of options doubled to conform to the stock split. As of the date of separation, December 1, 1995, G. E. was trading at $72 per share. As of October 7, 1997, G. E. was trading at $72 per share in its split status or $144 per share at the pre-May 12, 1997 stock split number of stock options. Based on the facts found, the court divided the 175,000 vested stock options and appreciation rights based on the date of separation, December 1, 1995. In rejecting a Black-Scholes approach in favor of the "intrinsic value" method, the trial court valued the vested options as follows: 175,000 stock options at $3,200,000 for the November 20, 1992 grant; $1,658,125 for the September 10, 1993 grant and $128,750 for the June 24, 1994 grant for a total Ôintrinsic value" of $4,986,875. The court noted that this amount was before taxes. The court additionally noted that the options had no cash value until exercised at which point there would be tax due at short term capital gains tax rates, i. e., ordinary income tax rates. The court assumed maximum rates for the IRS, Medicare and Connecticut tax and calculated the net after tax of the intrinsic value to be $2,804,219. The court distributed one-half of that sum to the wife. The court found that the doubling of the G. E. stock after the date of separation was not due to the efforts of the wife, but that "she should share in the general increase in the investment community."
The Wendt court then proceeded to address the 420,000 unvested stock options differently. The court had already concluded that only a portion of these unvested stock options was marital property. The court had also concluded that the unvested stock options were granted for future services. Therefore, a coverture factor was required. The coverture factor was determined by a fraction as follows:
Number of Months from the Date of Grant to December 1, 1995.
Number of Months from the Date of Grant to the Date of Vesting and are not Subject to Divestment.
Number of Shares to be Vested at that Date of Vesting.
Since there were eight separate dates of vesting, eight separate coverture factors had to be calculated. For example, the coverture factor utilized for the 70,000 units granted on September 10, 1993 which vested on September 10, 1998 was as follows:
27.7 / 60 = 44.5% x 70,000 units = 31,150 units to be divided.
The court then took the price of the G. E. common stock on the date of separation (i. e. $72 per share) to calculate the intrinsic value and thereby determine the dollar amount owed to the wife for the marital portion of the unvested options. This was represented as follows:
$72.0000 -48.3125 (exercise price) = $23.6875 intrinsic value per share x 31,150 units = $737,866.
The "$737,866" represents the pre-tax dollar value of the marital portion of the unvested shares as determined by the coverture factor.
After all eight coverture factors were performed, the total dollar values of the marital portion of the unvested stock options was $1,626,273. The court then explored the various risk factors associated with the unvested stock options. It is helpful to review the various scenarios explored by the Connecticut court concerning what could happen to effect the unvested stock options.
The court had basically rejected the wife's expert's valuation methodologies (which included "Black-Scholes") and opted to use the "intrinsic value" to obtain the appropriate value. Specifically, the court rejected the wife's expert's use of the Black-Scholes model which actually resulted in a value 10% lower than the "intrinsic value" ultimately used by the court. The court then determined the wife's share of the intrinsic value of the unvested stock options (i. e., $1,626,273). The court noted that this amount was before taxes. The court proceeded to assume current maximum rates for the IRS, Medicare and Connecticut and found that the net after tax value of the gross intrinsic value would be $914,486. The court then proceeded to award the wife half of this sum. The court ordered the husband to pay the sum in cash and not in any portion of the options.
A similar approach was taken in the case of In re Marriage of Short. In this case, the court held that the inclusion of the unvested stock options in the pool of distributable assets depended on whether the options were granted to compensate the employee for past, present or future employment. The court held that unvested options awarded for past and present services were marital property regardless of the continuing restriction on transfer or vesting. Unvested options granted for future services were deemed to be acquired periodically in the future as the options vest and are subject to a time rule division to allocate the shares between marital (community) and non-marital (separate) property. A different time rule than in the Hug case was used to differentiate between vested options that are clearly separate property for which no time rule would be applied, and those which include both a community effort and separate effort.
Just recently, New York joined the substantial majority of states holding that "restricted stock and stock option benefit plans provided by a spouse's employer constitute marital property for the purposes of equitable distribution, where the plans come into being during the marriage but are contingent on the spouse's continued employment with the company after the divorce." New York's highest court, in a seven-judge panel, unanimously joined the majority of jurisdictions that use a time rule to divide such contingent resources. The DeJesus court laid out the following four-step procedure to guide courts in dividing such options:
1. Trace shares to past and future services; Determine the portion related to compensation for past services to the extent that the marriage coincides with the period of the titled spouseÕs employment, up until the time of the grant. This would be the marital portion; Determine the portion granted as an incentive for future services; the marital share of that portion will be determined by a time rule; and Calculate the portion found to be marital by adding: i) that portion that is compensated for past services; and ii) that portion of the future services deemed to be marital after application of the time rule.
The sum result will then be divided between the parties using the equitable distribution criteria.
This was the method utilized in Colorado in the case of In re Marriage of Miller. The DeJesus court was persuaded that the Miller type analysis best accommodated the twin tensions between portions of stock plans acquired during the marriage versus those acquired outside of the marriage, and stock plans which are designed to compensate for past services versus those designed to compensate for future services.
However, notwithstanding the complexity of these methods, the danger of rigidity and resulting unfairness from a blind application of a formulaic approach still exists. Such issue was addressed by an Oregon Court which stated that "No one rule will produce a just and proper result in all cases and no one rule will be responsive to many different reasons why stock options are granted." This was, more than likely, the reason that New JerseyÕs Supreme Court ruled as it did in Pascale.
Can stock options be viewed as income to the employee for support purposes?
There is little doubt that stock options constitute a form of compensation earned by the employed spouse during the marriage.
In February of 1999, an Ohio appeals court agreed with Susan Murray, the former spouse of Procter & Gamble Company executive Graeme Murray, that unexercised stock options should be used in calculating the value of child support for the couple's 16-year-old son. This decision was the first by an Appellate Court to say that parents cannot shelter income from their children Ð intentionally or unintentionally, by postponing the exercise of stock options until the kids are grown. Note that options granted in consideration of present services may also be deemed a form of deferred compensation. (See In Re Marriage of Short, 125 Wash.2d 865, 890 P.2d 12,16 (1995).
A Wisconsin Court of Appeals pointed out that a stock option is not a mere gratuity but is an economic resource comparable to pensions and other employee benefits. The Appellate Court of Colorado held that for purposes of determining child support, income includes proceeds received by father from actual exercise of father's stock options. The Supreme Court of Colorado held, in the Miller case already referenced above, that "under the Internal Revenue Code, the optionee of a non-statutory employee stock option must recognize income at the time the option is granted if the option has a "readily ascertainable value" at the time of the grant. If the option does not have a readily ascertainable value at the time of the grant, the optionee recognizes income at the time the option becomes "substantially vested" or no longer subject to a "substantial risk of forfeiture," which generally does not occur until the option is exercised.
The Miller Supreme Court found that unlike pension benefits, employee stock options may well be considered compensation for future services as well as for past and for present services.
It is clear that there is a growing trend among the courts of this nation to distribute unvested or non-exercisable stock options that were granted during the marriage. The key factor in such distribution is a determination as to the purpose for which the options were granted, i. e., whether the options were granted for past or future performance. Where an option is granted for a mixed purpose and/or requires continued employment past the termination date of the marriage (as determined by local law), many states are employing a time-rule fraction which may be modified by the trial court based upon the particular facts and circumstances of the case. Matrimonial practitioners must be aware of the various forms of time-rule fractions that can be used and the factors that can modify the fraction. Such factors include, but certainly are not limited to the following: (1) when the option was granted; (2) whether the option was granted for past or future performance (if "past" how far back); (3) whether or not the option was granted in lieu of other compensation; (4) whether or not the option was a qualified incentive stock option or non-qualified stock option; (5) when the options will expire; (6) the tax effect of the grant of the option; (7) the tax effect of exercising the option; (8) whether or not the option has a "readily ascertainable fair market value;" (9) whether or not the option is transferable; (10) whether or not the option is restricted property; (11) the extent to which the option is subject to risk of forfeiture; and (12) any other factors that the parties or court may deem fair and equitable to consider.
Since the majority of employee stock options are non-transferable and cannot be secured as with qualified pensions under federal laws such as ERISA, matrimonial attorneys should specifically tailor their language when drafting agreements concerning such assets. These agreements should include: (1) a list of all options granted and an explicit description of which options are marital and which are not; (2) if a Deferred Distribution Method is employed, a resortation of whether and under what terms the non-owner can compel the owner to sell options after they are vested; (3) provision for payment of the "strike price" by the non-employed spouse and taxes resulting from the exercise of options; (4) a description of how and when distribution is to be made to the non-owner spouse and (5) precise notification and document exchange provisions.
The matrimonial attorney involved in a case concerning stock options, especially when representing the non-employed spouse, should be sure to obtain the following information and documents: (1) a copy of the stock option plan; (2) copies of any correspondence or internal memorandum which were issued by the company at the time of the grant of any stock options; (3) a schedule of granted options during the employees period with the company; (4) the date of each option granted; (5) the number of options granted at each date; (5) the exercise price of options granted at each date; (6) the expiration date of each set of options granted; (7) the date of vesting for each set of options granted; (8) the date and number of options exercised; (9) all short term or long term employee incentive plans covering the employed spouse; (10) all Employment Agreements between the employed spouse and his or her employer; (11) all company plans, handbooks and option award letters related to stock options granted; (12) copies of the firm's 10K and 8K for the entire period that the employed spouse is with the company; (13) dates of promotions and positions held by the employee; (14) a brief job description of each position; (15) the salary history of the employee indicating all forms of compensation; (16) the grant date of exercised options and (17) copies of any corporate minutes or proxy statements referencing the award of options. The information listed herein provides the core information from which option values can be calculated and agreements intelligently reached concerning their distribution.
As we enter the 21st Century, it is clear that matrimonial attorneys will need to become as knowledgeable as possible regarding this unue kind of asset. Hopefully, this article has given some insight into the complexities involved when dealing with Employee Stock Options and Divorce.
Charles F. Vuotto, Jr., Esq. is a family law attorney in New Jersey.

EARNING IT; In a Divorce, Who Gets Custody of Those Stock Options?
KIM HISLOP vividly remembers sitting with her husband, John, on the deck of their home in Hyannis, Mass., one day in 1993. She recalls him referring to the stock options being dangled by Telex Communications Group, a maker of communications products, which was recruiting him for chief financial officer at the company headquarters in Minneapolis.
''This is going to be our brass ring,'' Mrs. Hislop heard him say of the options to buy 12,000 Telex shares. And, indeed, it was quite a payoff: When the company redeemed those options in a recapitalization prompted by a takeover last year by Greenwich Street Capital Partners, a private equity fund based in New York, the stake was worth an estimated $5.6 million.
But the Hislops, who had been married 22 years, divorced in 1994 and are now battling over some of these options, which represented the couple's biggest asset. ''Now he wants it to be his brass ring,'' said Mrs. Hislop, 49, a homemaker and mother who was awarded nearly $2 million of the options but has sought a 50-50 split, or about $800,000 more. The dispute, she said, ''is about a woman's contribution to marriage.''
Mr. Hislop would not comment on the case. His lawyer, Alan Eidsness, said: ''These were options that Mr. Hislop had to earn by continuing to do a good job. They were for future performance. If he didn't work, he didn't get them.''
Such battles are increasingly common now that stock options have become almost as ubuitous in corporate America as casual Fridays.
Since they are a form of deferred compensation -- giving the holder the right to buy stock at a set price, no matter how high it rises -- options have historically not been recognized as a marital asset. But with no Federal law to govern the issue, just how to divide options is being thrashed out in state courts across the nation.
The most notable case was decided this spring, when Lorna Wendt was awarded $20 million by a Connecticut court in a case dealing in part with the General Electric options of Gary C. Wendt, her former husband and the chief executive of GE Capital.
It is difficult to determine just how often stock options are coming up in divorce proceedings, but Michael McCurley, a Dallas lawyer who is president of the American Academy of Matrimonial Lawyers, called them ''more and more an item of property division.''
Stock options now figure in about 85 percent of his cases these days, he said, about twice the proportion 10 years ago. About three-quarters are negotiated in settlements, he added, while the rest are litigated.
In California's Silicon Valley, where shares in fledgling companies often loom larger than paychecks in household assets, ''it's becoming an increasing bone of contention'' in divorce cases, said Lynne Yates-Carter, a lawyer in San Jose.
In California, at least, the status of stock options is fairly well-established: they are included among employee benefits considered household assets. James Cox, family court settlement officer for Santa Clara County Court, said, ''there is no end'' to the type of option deals he has seen, adding that he handles about 250 divorce cases annually that involve options.
In other states, though, much remains unsettled. First, the court must agree that options are an asset to be divided; courts in Indiana, South Carolina and Wisconsin have ruled that their statutes do not provide for such treatment. But elsewhere, agreement is emerging that stock options are an asset subject to distribution in a divorce settlement.
The next issue is whether the options were acquired during the marriage. While that may seem a simple matter, determining the calendar of an option's award is a vast and poorly charted legal battlefield.
For example, an employee may be ''vested'' -- meaning that the option has been awarded -- well before the start of divorce proceedings. But the option may not have ''matured,'' or reached the date when it may be exercised. And its terms may provide for exercise at a price below the market -- making it immediately profitable -- or at a higher price that the stock would presumably reach sometime in the future.

Stock options divorce new york

Respondent Nancy DeJesus filed for divorce in July 1994. The trial court held that although the rights to the stock plans did not vest during the marriage and may never vest, they were "tangible benefits which were bestowed on [Appellant] during the marriage and [were marital property to be divided equally.]" The Appellate Division affirmed the trial court, holding that the benefit plans constituted deferred compensation for employment during the term of the marriage and were marital property.
ISSUE & DISPOSITION.
Disposition.
AUTHORITIES CITED.
Cases Cited by the Court.
Burns v. Burns, 84 N. Y.2d 369 (N. Y. 1994) Olivo v. Olivo, 82 N. Y.2d 202 (N. Y. 1993) O'Brien v. O'Brien , 66 N. Y.2d 576 (N. Y. 1985) Majauskas v. Majauskas , 61 N. Y.2d 481 (N. Y. 1984) In re Marriage of Miller , 915 P.2d 1314 (Colo. 1996). In re Marriage of Frederick , 578 N. E.2d 612 (Ill. App. Ct. 1991). Salstrom v. Salstrom , 404 N. W.2d 848 (Minn. Ct. App. 1987). In re Marriage of Nelson, 177 Cal. App. 3d 150 (Cal. Ct. App. 1986) In re Marriage of Hug, 154 Cal. App. 3d 780 (Cal. Ct. App. 1984)
Other Sources Cited by the Court.
RELATED SOURCES.
In re Marriage of Short , 890 P.2d 12 (Wash. 1995). Kapfer v. Kapfer , 419 S. E.2d 464 (W. Va. 1992). Hall v. Hall, 363 S. E.2d 189 (N. C. 1987). Green v. Green , 494 A.2d 721 (Md. 1985). Ettinger v. Ettinger, 637 P.2d 63 (Okla. 1981). Garcia v. Mayer, 920 P.2d 522 (N. M. Ct. App. 1996). Goodwyne v. Goodwyne, 639 So.2d 1210 (La. Ct. App. 1994). Hann v. Hann, 655 N. E.2d 566 (Ind. App. 1995). Chen v. Chen , 416 N. W.2d 661 (Wis. Ct. App. 1987). Smith v. Smith , 682 S. W.2d 834 (Mo. Ct. App. 1984).
COMENTÁRIO.
State of the Law Before DeJesus.
Effect of DeJesus on Current Law.
The court adopts a four-tiered analysis for determining spousal rights in unvested stock option plans. The four steps are: 1. Differentiate shares traceable to past services from those traceable to future services. 2. Label as marital property portions of compensatory stock plans earned by the titled spouse during the marriage and before the time of the grant. 3. Label as marital property portions of incentive stock plans by a time rule like that employed in In re Nelson. Nelson time rule:
numerator = time from date of the grant to the date of separation.
denominator = time from date of the grant to the date of exercisability 4. Equitably distribute marital property. Thus, a court must first determine whether interests in stock plans were given as compensation for past employment services or as an incentive for future services. DeJesus at para. 22. Considerations include whether the stock plans were offered as a bonus, as an alternative to a fixed salary, have value tied to future performance, or aim to attract employees from other companies. Id.
Once the court classifies each portion as either compensation or incentive, two different time rules apply to offset value accrued as compensation before the date of the marriage and value of incentives that will vest after the end of the marriage. The portion of the stock offered as compensation is offset by defining the numerator of the time rule as the time period between the beginning of the employment or the date of the marriage, whichever is later, and the time of the stock grant; the denominator is the time period between the date of employment and the date of the grant.
For the portion granted as incentive, the numerator is the time period from the date of the grant to the end of the marriage (the earlier of either the date of the separation agreement or the commencement of the matrimonial action), while the denominator is the period of time from the date of the grant until the maturation of the stock plan. DeJesus at para. 23. These time rules determine what is considered marital property for purposes of equitable distribution. DeJesus at para. 24
Unanswered Questions.
Also unresolved is what formula trial courts should apply to apportion the stock plans where it appears from the relevant evidence that the stock options were offered to the employee as both deferred compensation for past services and an incentive for future effort. While the court mentions that each plan within a particular employee's package may have a different purpose, it does not address the possibility that an employer could offer one plan with a dual purpose.