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  • Wording in a Consent Order

    Issues are settled, exs. lawyer has drawn up the consent order for property division and I am unsure of some wording.

    There are some stocks that were granted and have not vested yet and these were divided as property.

    If stbx leaves this employer voluntarily we have agreed that he will pay me cash for any un-vested stocks. If he continues to be employed by this company, these shares will vest in the next couple of years and be paid out and divided and this part of our property division will be complete.

    Currently the financial management company that holds these stocks withholds 40% of the stocks for tax purposes and then the remainder are divided between us.

    If stbx leaves this employer, these stocks disappear, which is why stbx agreed to pay me out for any un-vested stocks. He did not want to be forced to stay with this employer if he had an opportunity for other employment, I also agreed.

    Question:

    Is this correct when it says that if he leaves voluntarily the Plaintiff shall pay to the Defendant 50% of the net, after-tax value of the non-registered shares as set out in the property schedule and calculated at the Plaintiff's personal tax rate.

    I am trying to get this order granted before the end of the year so that the transfer of property can take place.

    Thank you

  • #2
    Originally posted by frustratedwithex View Post
    Currently the financial management company that holds these stocks withholds 40% of the stocks for tax purposes and then the remainder are divided between us.
    That witholding is irrelevant, since next spring the actual tax owing will calculated and the difference will be refunded/paid.

    Originally posted by frustratedwithex View Post
    Is this correct when it says that if he leaves voluntarily the Plaintiff shall pay to the Defendant 50% of the net, after-tax value of the non-registered shares as set out in the property schedule and calculated at the Plaintiff's personal tax rate.
    1) That's too vague: that could be average tax rate or marginal tax rate (you want to say marginal, and possibly indicate that it includes federal+provincial+surtaxes)
    2) Timing is bad: both rates will depend on how much he earns that year, so you won't know the rate until the tax is filed next year.
    3) Possible if this is capital gains, that the tax rate would be only HALF of the regular rate
    4) Possible if this is some small company, the tax rate may be even further reduced due to government business incentives/credits (not sure).

    Maybe say instead
    If he leaves voluntarily the Plaintiff shall pay to the Defendant 50% of the net, after-tax value of the non-registered shares, when the cash for shares are received. The actual tax owing will be determined on the next year's tax return. The tax rate will be presumed at 40% when cash for shares are received, and 50% of any excess after-tax amount will be paid in May of the year the stock income is declared.

    Comment


    • #3
      Originally posted by frustratedwithex View Post
      ...
      If stbx leaves this employer voluntarily we have agreed that he will pay me cash for any un-vested stocks. If he continues to be employed by this company, these shares will vest in the next couple of years and be paid out and divided and this part of our property division will be complete.
      If he doesn't receive the stock because he quits his work, he still has to pay you for half of the value that he would have received if he stayed?? That sounds unfair to him. Why do you think that is fair?

      As for the wording, 'personal tax rate' is not a defined term I believe. It should be his 'marginal tax rate' I would think.

      Comment


      • #4
        Originally posted by billm View Post
        If he doesn't receive the stock because he quits his work, he still has to pay you for half of the value that he would have received if he stayed?? That sounds unfair to him. Why do you think that is fair?

        As for the wording, 'personal tax rate' is not a defined term I believe. It should be his 'marginal tax rate' I would think.
        He received these particular shares during the marriage, and therefore they are part of matrimonial property.

        He continues to recieve shares each and every year since separation, and these are all his.

        Thanks for the 'marginal tax rate' wording.

        Comment


        • #5
          If he quits, does he receive cash or shares? If shares, then you also need to decide on the valuation date.

          If he DOESN'T quit, then how/when are those shares (accrued while you were together) split?

          Comment


          • #6
            Originally posted by frustratedwithex View Post
            ...
            If stbx leaves this employer, these stocks disappear...
            What do you mean by 'disappear'?

            Comment


            • #7
              The shares disappear because they would not be vested until a certain time.
              Lots of companies do this, especially for pensions.

              They may say shares are not vested for a year for example. This means they want an employee to stay with them for at least a year before they pay out in case employee just leaves...the idea being that employee would still be with them and building his shares/pension...or whatnot. The periods are usually a year or two before vested. Perhaps longer is possible but that doesn't make much sense, usually.

              Having said that...he does not have any shares until they are vested. If he left now...those shares do not belong to him.

              So I'm not sure why the OP would expect payout still if the employee has nothing, or why the employee would agree to that.

              Comment


              • #8
                OK, so if he decides to quit job, he gives up $X, but is still agreeing to pay you 50% of $X. Nice!!

                Just curious ... have you agreed on how to define the value of $X - since it is something that is actually never received or taxed?

                Are there also vested shares (accumulated while a couple) that you have decided how to split?

                Comment


                • #9
                  Originally posted by dad2bandm View Post
                  The shares disappear because they would not be vested until a certain time.
                  Lots of companies do this, especially for pensions.

                  They may say shares are not vested for a year for example. This means they want an employee to stay with them for at least a year before they pay out in case employee just leaves...the idea being that employee would still be with them and building his shares/pension...or whatnot. The periods are usually a year or two before vested. Perhaps longer is possible but that doesn't make much sense, usually.

                  Having said that...he does not have any shares until they are vested. If he left now...those shares do not belong to him.

                  So I'm not sure why the OP would expect payout still if the employee has nothing, or why the employee would agree to that.
                  You are correct. He doesn't have any shares until they vest.

                  This is just part of our property division.

                  This is only a provision if he leaves this employer.

                  The shares that were acquired during the marriage and not yet vested, will vest in the next couple of years. From his perspective, they are small potatoes compared to what he has been granted since we separated.

                  If he chooses to work somewhere else, he is leaving a substantial amount of shares behind. However, I do know that this will become a negotiated part of his new employment in the form of a signing bonus, or new shares with the new employer. He will not walk completely away from this very substantial amount of income. I don't care about these shares that he recieved after separation.

                  Originally posted by dinkyface View Post
                  OK, so if he decides to quit job, he gives up $X, but is still agreeing to pay you 50% of $X. Nice!!
                  This is just part of our property division. He is not giving up anything. The property division has other details and is fair to both of us.

                  Just curious ... have you agreed on how to define the value of $X - since it is something that is actually never received or taxed?

                  Are there also vested shares (accumulated while a couple) that you have decided how to split?
                  Yes we have defined the value below what the current value of the shares are worth.

                  Comment


                  • #10
                    Is this correct when it says that if he leaves voluntarily the Plaintiff shall pay to the Defendant 50% of the net, after-tax value of the non-registered shares as set out in the property schedule and calculated at the Plaintiff's personal tax rate.
                    I have done some research and now I am wondering if this should say 'Average Tax rate'?

                    I understand that the Average tax rate will be less than the Personal or Marginal tax rate.

                    Thanks

                    Comment

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