ESOP plan question

[drewindebt]

Hi all,

Can anyone tell me how an ESOP disbursement would be handled by a trustee? I will receive the first installment from a previous employer's ESOP plan in August. It will be $10000. I will then get another installment each year until the ESOP plan is paid out. I have no control over this. The disbursement will come whether I want it to or not. I planned on rolling it over into an IRA or using it to replace my roof and heat pump (if it makes it that long.) Would I be allowed to keep it if I am under a Chapter 13 or would the trustee take it? If so, I may be waiting until after I receive the disbursement to file.

Thanks,
Drew

[SANRA308]

If you roll it over that will probably be OK, but if your going to cash it, it will probably be viewed as income the trustee could take. And , if you fill after you recieve it, it will count toward your 6 month income if you dont roll it over.

[DebtSlave]

For those of us who don't know:
What is an ESOP plan?

[drewindebt]

For those of us who don't know:
What is an ESOP plan?

It is an Employee Stock Ownership Plan. In essence, the company gives you shares of stock each year based on your salary. You have no control over the funds, cannot contribute to the plan yourself and the plan value is strictly tied to the value of the company. Once you are fully vested, the money is yours, but you cannot touch it until you retire or (in my company's case) two calendar years after separation. At that point, they pay you yearly in $10,000 increments until you have divested yourself of all the company stock. It's a very popular investment tool for small companies to use to avoid paying income taxes while being able to use the money to benefit the company. For example, at the end of a fiscal year, the company would pledge say $1M of the companies before tax profits to the ESOP program. It would be allocated among the employees based on pay rate. They would then use the money to "buy" company stock for each employee. Thus raising tax free capital. This is an overly simplistic explanation, but it should give you an idea of what an ESOP is. It is not an ESPP (Employee Stock Purchase Plan) where employees of publicly traded companies can buy company stock at a discounted price.

I worked for the company a little over 10 years and have about $97,000 in ESOP monies right now. Of course, that could go down if the company suffers a bad year or years. Let's hope not.

P.S. Thanks for the advice folks.