Chief Executive Officers & Members of the Management Team
Your time is an extremely valuable commodity. As the Chief Executive Officer or Member of the Management Team of your company, you do not have time to be mired in minutia and need someone on point who has particularized experience and wherewithal to handle the nuanced complexities of your compensation package and overall dynamic. At Crowe & Dunn, we pride ourselves as strategists who work with our executive clients to formulate the right game plan and take the necessary steps to execute it in order to achieve the desired objective.
The grant of Restricted Stock Units (RSU’s), time vesting and performance vesting options, and various other forms of deferred compensation, are often key components of executive compensation packages. Separate and distinct from state and federal tax implications, there are various factors that court’s employ in determining how such compensation should be treated in a divorce action. For example, whether such compensation is treated as future income, subject to future child support or alimony orders, or deemed an asset of the marital estate, subject to division, can have a significant impact.
In addition to the statutory framework, Massachusetts court’s rely on case law as governing precedent. One such case is that of Baccanti v. Morton. Therein, the Supreme Judicial Court held that unvested stock options can, in fact, be divided as an asset of the marital estate pursuant to a divorce notwithstanding the fact that the “asset” has not yet vested. Recognizing that a portion of the grant is attributable to post-divorce employment, and thus unfair to treat as an asset of the marriage, the Court created a simple time based formula which (explained in general, simple terms) apportioned part of the option grant as a marital asset subject to division, and part as a future asset not subject to being divided. The time-based formula is a relatively simple mathematical equation: The time period between the grant date and date of the divorce (i.e., the numerator) is divided by the time period between the grant date and the vesting date (i.e., the denominator), and such fraction multiplied by the number of options in order to determine the number of shares that should be subject to division as a marital asset [e.g., Number of Days between Grant Date and Date of Divorce/Number of Days between Grant Date and Vesting Date x Number of Shares = Number of Shares Subject to Division]. This, however, is only part of the analysis.
As part of formulating the overarching game plan, it is vital to recognize the interplay between asset division and support orders, be it alimony or child support, to gauge the right approach. Because we have handled some of the largest divorces in Massachusetts, we can bring our experience to the fore.