Can I transfer my stock to my wife to avoid having to exercise?
July 27, 2001
Date: Fri, 6 Apr 2001
I have NQSO and want to transfer them to my spouse. The purpose is to allow me to leave the company without having to exercise the options within 90 days of leaving. I understand that I would have the tax liability of the exercise, but in this case, that’s OK. My company’s current stock plan has this clause:
1. Can I assign or transfer my option?
No. Your options generally cannot be assigned or transferred, except by the provisions of your will or the laws of inheritance following your death. However, one or more Non-statutory Options may be structured so that those options will be assignable in whole or in part during your lifetime to one or more members of your immediate family or to a trust established exclusively for one or more such family members. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. No such assignment will be permitted, however, unless in connection with your estate plan.
I can’t get a straight answer from my company but the language here is very ambiguous. The words “may be structured” is very vague and I can’t tell whether that refers to my structuring the options in a trust or estate plan of some kind, or the company structuring the options to allow for transferring. How would I find out the truth?
Please do not use my name, my company’s name on your WEB site.
Date: Wed, 25 Jul 2001
You might need to consult with a tax attorney to get a good answer.
It seems to me that the intent of the company’s language is to permit a transfer of the stock to a member of the employee’s immediate family for estate planning purposes. However, the options are intended to be subject to the same restrictions as those that apply to the employee, so the options would still lapse 90 days after you separate from service with your employer.
By the way, the 90-day lapse provision is not required for non-qualified stock options.