Highly compensated individuals may have a laundry-list of deferred compensation awards going out over many years. Sometimes these compensation methods require negotiation transactions during a divorce that may or may not be legally permitted without full transparency. In most Texas courts, there are “standing orders” that automatically apply to every divorce that prohibit certain types of transactions. It is important to understand the marital assets in order to prevent the client from inadvertently violating one of these rules.

Some types of non-cash compensation include incentive or employee stock options, employee stock purchase plans, and restricted stock options. Understanding the nuances of each of these types of awards is critical and hiring a financial expert may be warranted.

Stock option exercise patterns vary but typically are exercises at least annually but can be as often as quarterly. Consider whether the client has the authority under the prevailing orders to exercise the options or execute a sale of the newly acquired stock. Having knowledge of the vesting schedule and marking the dates for discussion with the client may be critical to keeping the client out of hot water with the court. It may be necessary to preemptively file and set a motion for hearing to address these matters and get early permission to act.

It may be necessary to have a plan and strategy in place to advise the client in the event of market volatility, especially if the client is heavily invested in one particular stock.

Sometimes it may be easiest to seek spousal consent to the actions necessary to protect the marital estate. Reaching an agreement is usually less costly than litigating when possible.


Hat tip to Vincent J. Fiorentino and Alexandra Mililli for their article 6 Ways to prepare clients with non-cash compensation in the Family Lawyer Magazine.