Did you know that yesterday was unofficially dubbed "Divorce Day"? Neither did I...
Apparently it's due to the dramatic increase in Google searches and inquiries to divorce lawyers after a long holiday season. As a child of divorce myself, that's sad to hear, but if you or someone you know is going through the divorce process it's a smart move to understand how splitting stock compensation and executive compensation is of critical importance.
Every Divorce is Really Just a Contract Negotiation.
As raw and almost insulting as it sounds, every divorce is really just a contract negotiation. The sooner you realize that, the quicker you can make decisions, take decisive action and get on with you taking care of you. When it comes to the financials, everything is on the table and everything is a negotiation. Rip off the band-aid, cut the financial ties and move your life in a positive direction.
Where this concept is particularly impactful is when determining what you really want to retain and what you're willing to forgo in your life beyond divorce. It can be a theraputic process to assess what will be important for you after the split (hint: it might not be what was important in your marriage). We've worked with plenty of folks who realize that the big house, the boat or fancy cars might have been more important to their spouse while they carried the financial weight of paying for it all.
As you negotiate your split of assets, a simple and common way is to break everything 50/50. You might instead choose to let your spouse keep the boat and vacation home while you retain more of your equity compensation because you value those material items less and feel you'll have more upside in the company stock.
For successful executives particularly, there are tax and strategic asset considerations that are of critical importance. How you split or retain your employer stock, different stock grants and grant types, as well as deferred compensation and other benefits can have a profound impact to your taxes and future wealth. There's also going to be emotional considerations to work through which might outweigh financial. We've advised clients to "overpay" up front in order to cut the financial cord, while others want to continue supporting a spouse they made a commitment to.
One of the most rewarding things I've heard from any client was something I feel so fortunate to have received more than once last year. It was comments from three different women, all un-related. They made comments that they were so thankful to have met Ted (my business partner) and I, saying things like "where have you two been all my life?". As a man, a husband and a father to two amazing little girls, it makes me proud that we're creating an environment where women feel safe and supported enough to let down their guards and be empowered. This screams of the importance of putting a team around you that is both highly skilled in your unique needs and who you can build a truly trusting relationship with. Those team members are who will help you get through this process and launching forward to the next chapter in your life.
-Tim Golas, Partner @ Spurstone - Architects of Executive Wealth