Post by downtoearth on May 13, 2019 14:33:49 GMT -5
Okay, so I'm in the middle of a separation/divorce and one of the things I don't understand (and STBX doesn't seem to be able to explain so I can understand) is his recent ESOP transition at his small company. They are on their first full year of a ESOP (Employee Stock Ownership Plan) and I know he is like #4/#5 up in his company of about 30 people. His company used to be owned by a family, but they are basically being bought out by the employees in this ESOP deal and 2018 was the end of family ownership and 2019 is the start of employee ownership. So I am trying to figure out his "worth" in the company and if he has assets essentially from this transition. The company hasn't been valued again since going into the process and for some reason he keeps saying they won't until like Oct/Nov of this year. Do I just consider his stock as negligible (he says about $500) from an asset POV?
I keep wondering that if they are buying out the owners and say the company is work $2million then out of 30 people, he has about $66k in "ownership" if all was equal (and before we were talking divorce - in late 2018/early 2019 he was looking at it as a huge stake that would essentially be his big retirement in the future since he is like #4 in the company), but I think I'm being too simple about it. Is that not how I should think of it b/c it's not a direct buy-out? Who do I talk to about this or should I just let it go and figure out our finance distribution without his ESOP asset included? I'd like to file soon, but this is one piece that I also don't want to mess up on if he is worth a bunch more and I'm discounting it, right?
Post by archiethedragon on May 13, 2019 15:01:05 GMT -5
Every ESOP is a little different, but typically the ESOP has to borrow money to buy the company from the prior owners. If the company is worth $2 million the ESOP might have to borrow close to $2 million to buy the company. So soon after an ESOP transaction, the ESOP might not have much value to the new employee owners. If it is a hot start up that is growing at 1000% a year, that might not be the case, but in a more traditional business it can take time for the ESOP to pay down the loan and grow organically to become worth something. Also, it is pretty common for an ESOP to only do annual valuations of the company.
Every ESOP is a little different, but typically the ESOP has to borrow money to buy the company from the prior owners. If the company is worth $2 million the ESOP might have to borrow close to $2 million to buy the company. So soon after an ESOP transaction, the ESOP might not have much value to the new employee owners. If it is a hot start up that is growing at 1000% a year, that might not be the case, but in a more traditional business it can take time for the ESOP to pay down the loan and grow organically to become worth something. Also, it is pretty common for an ESOP to only do annual valuations of the company.
Thank you. At least I know I can ask some questions now. I will see if they are vested immediately/bought out with loans and now are worth essentially less b/c they all share the loan amount or if they were/are buying with profit over time or what.
Post by ellipses84 on May 14, 2019 10:49:24 GMT -5
That is complicated. Definitely ask if/when he is fully vested. You could ask your lawyer if you could post date the settlement, like you get 50% of the ESOP when the 2020 statements are issued. I know of situations where retirement settlements in divorces didn’t payout a percentage until retirement was funded, sometimes decades in the future, but I don’t know if that is common anymore. I have an ESOP and 401k, but the ESOP has been set up for years so distributing it in a divorce would be similar.