Stock Options and Differed Compensation in Divorce: In this video, Bob Powell interviews Philip Herzberg CFP®, CDFA®, CTFA, AEP®, and lead financial advisor at Team Hewins, a wealth management firm with offices in South Florida and the San Francisco Bay Area, about stock options and differed compensation in divorce.
The four common types of stock compensation offered by companies to attract and retain employees are:
Non-Qualified Stock Options (NQSOs)
Incentive Stock Options (ISOs) for a new employee
Restricted Stock
Restricted Stock Units (RSUs)
NQSOs and ISOs are variations of stock options. A stock option is the right to buy equity in the company that employs you at a set price, with profit potential if the stock value rises and you decide to sell after a certain time. Stock options are usually non-transferable in divorce. They are standard in privately-held businesses planning an Initial Public Offering (IPO), giving employees an extra incentive to join a company that might not be able to offer the same cash compensation as a mature organization.
Before exercising stock options, employees must follow a vesting schedule, which means you must work for the company for a specified period to buy these shares. -Once exercised, NQSOs add to your annual compensation and increase income taxes. In contrast, ISOs do not boost income but may trigger other taxes, such as Alternative Minimum Tax (AMT). Find more videos featuring Philip Herzberg at this link: https://www.finstream.tv/featured/philip-herzberg