Employer Incentives - How to Value and How to Divide

Examples of employer incentives: bonuses, stock options, restricted stock units (RSUs), employee savings plan programs (ESPPs)

Special Considerations of Employer Incentives:

• Difficult to value
• Speculative in nature
• Long-term timelines
• Complicated rules

Bonuses:

• Various forms: cash bonuses, stock options, or other incentives
• Determine if property to be divided or part of income for cash flow analysis
• Various types:
  • Year-end bonus
  • Performance bonus
  • Signing bonus
  • Retention bonus

Equity Compensation Units:

• Stock Options
  • Right to purchase a number or shares at particular price
  • Two common types:
    • Incentive stock options (ISOs)
    • Non-qualified stock options (NSOs or NSQOs)
• Restricted Stock Units (RSUs)
  • Grants of company stock that vest over time
• Both stock options and RSUs have vesting periods, market conditions and taxes

Employee Stock Purchase Plan (ESPP)

• Company stock available at a discount
• Shares owned are commonly property but future benefit is commonly part of cash flow analysis

May be other unique employer incentives

First: Gather the Facts

• Gather documentation showing grants, vesting schedule and potential value
• Obtain plan documents from employer to learn more
• Consider tax implications - some may be taxed as income and others as capital gains (or combination)

Second: Understand the Law

• Bonuses and ESPPs can be property, cash flow, or a combination
• Stock options and RSUs can be bought out or continue to share the benefit for remaining vesting schedule (proportionate division is common)
• Emotional attachments are common