How do you find a fair way to put a value on deferred stock?

On Behalf of | Apr 21, 2021 | Complex Property Division |

Successful professionals often have more complicated property to handle in a divorce. They may have more than one piece of real estate that they own jointly with their spouse, as well as retirement and investment accounts. There can also be benefits and non-standard compensation from their employer that can make setting the terms for a fair divorce a bit harder.

Deferred stock is a valuable tool for a company trying to motivate its workers and retain top talent because deferred stock helps them keep staff members at the company for longer and to motivate better performance.

A worker may not be able to cash out their deferred stock until they stay with the company for a certain amount of time or the company reaches certain milestones, possibly both. The future financial benefit of deferred stock with an employer can lead to complications with property division in a pending divorce. 

To handle deferred stock properly, you have to give it a reasonable value

Until the spouse who received deferred stock as part of their employment owns that stock or sells it, valuing deferred stock can be the biggest challenge of addressing it in your divorce.

If the company fails or the spouse who received the deferred stock does not meet the requirements necessary to convert their deferred stock into real stock, the ultimate value it holds is nothing. However, if the company succeeds, that stock could be worth significant amounts of money.

The prospects for the business, how close it is to the dates or conditions when the stock becomes accessible, and even the amount of deferred stock earned during the marriage could all influence what value is reasonable to assign to deferred stock when making an inventory of your property.

You can’t divide an asset that you don’t possess

In some cases, one spouse might agree to a future disbursement of income from their ex when they finally receive their deferred stock. Other times, it may be a better solution to use the value of one spouse’s share of that stock to influence the distribution of other property.

Whether you earned deferred stock during your marriage or your spouse did, integrating it into your property division strategy will likely help you secure an appropriate outcome.