How Can Attorneys for Nonparticipants Prevent an Unfair Shifting of the Tax Burden to Their Clients?
When drafting a QDRO for a stock plan, such as an ESOP, be sure to include language that directs the plan administrator to maintain an equivalent tax basis for the alternate payee when segregating the participant’s account. Absent such instructions, a plan administrator could transfer 50 percent of the participant’s total number of shares in such a way that the alternate payee’s eventual tax liability is significantly greater than that of the participant’s.
