ESOP Lawyer | ESOP Transaction Attorneys | ESOP Advisors

What is an ESOP?

An ESOP can be a highly effective liquidity and diversification strategy for business owners, while also providing additional employee incentives and sustaining local operations. The ESOP lawyers at Devine Millimet are uniquely qualified to assist owners of companies in assessing the feasibility of ESOPs in light of their personal objectives and the financial capability of their company. We counsel businesses in all industries to understand the benefits, the pros, and the cons of establishing an ESOP. Additional benefits of entering into an ESOP can be significant federal tax advantages to the owners and to the underlying company. 

ESOP transactions require extensive understanding of the tax and business considerations, rules, and regulations.  Our experienced Team has guided many companies and their owners throughout New England and across the US with their personalized ESOP investigation, feasibility, and transaction process. 

The Devine Millimet Team also has extensive experience representing both individual and institutional ESOP trustees in connection with their fiduciary role in an ESOP’s sale or purchase of company stock and with ongoing decisions. In a time when there is more focused attention by the regulatory agencies that oversee ESOPs, it’s important for ESOP trustees to have access to experienced ESOP legal counsel.

Beyond the flexible nature of the ESOP as an ownership transition strategy, the ESOP serves as an additional retirement benefit plan for employees participating in the ESOP. Our Team can assist companies ensure the ongoing compliance of the ESOP to ensure it remains a qualified retirement plan eligible for tax deferral.

Please call a member of the Devine Millimet ESOP Team today to explore whether an ESOP might be the right ownership transition solution for you!

We Can Help You

Contact us today to learn more about how the attorneys at Devine Millimet can help you with your legal needs.

            Common Questions About ESOPs

            Q:  One of our employees is seeking a divorce and they have asked for a distribution to their ex-spouse of 50% of their vested ESOP account value.  Can we transfer 50% of the ESOP account value to the ex-spouse?
            A:  Generally a participant’s ESOP account is not assignable, meaning it cannot be transferred; however, a qualified domestic relations order (QDRO) is an exception to the antiassignment rule which permits the ESOP to pay benefits to someone other than a participant pursuant to the terms of the QDRO.  In the absence of a QDRO or if the domestic relations order is not qualified, any payment of benefits to someone other than the participant results in disqualification of the ESOP and possible fiduciary liability.  A DRO must meet a list of requirements to be considered qualified and every ESOP should have QDRO procedures.

            Q:  An employee is filing bankruptcy and is concerned about access to his/her vested ESOP account balance.  Is a participant’s ESOP account excludable from his/her bankruptcy estate under Bankruptcy Code section 541?
            A:  Yes, the Supreme Court has held that the antiassignment provision in ERISA Section 206(d) is enforceable, which results in the exclusion of the ESOP benefit from the bankruptcy estate of the plan participant.


            Q:  Can an ESOP participant’s account be assigned or levied against?
            A:  An ESOP participant’s account as a qualified plan accrued benefit is protected from assignment or alienation under IRC Section 401(a)(13)/ERISA Section 206(d).  The two exceptions to this are a Qualified Domestic Relations Order and a federal tax levy.  The IRS may enforce a tax levy against a participant’s ESOP account; however, the IRS generally can’t demand payment from the ESOP until the time the participant is entitled to a distribution from their ESOP account.  This exception does not extend to state tax levies.
            The ESOP account is also protected from the company’s creditors because the ESOP assets are held for the exclusive benefit of the participants and their beneficiaries and are not part of the company’s general assets.


            Q. Why does the independent trustee in an ESOP transaction need separate legal counsel?

            A. The ESOP Trustee’s attorney is serving the role as Buyer’s counsel in a typical M&A transaction – the ESOP is the Buyer (or seller in some cases).  The Trustee’s attorney will review and negotiate the transaction documents on behalf of the Trustee and should be engaged in a review of the legal due diligence information.  When we serve as Trustee’s legal counsel we prepare a lengthy diligence memo for the Trustee and also ensure that all formal meetings of the Trustee are documented in minutes.  Trustee’s counsel should have sufficient experience and knowledge to be awareness of the requirements and expectations that the Department of Labor and Internal Revenue Service have regarding the Trustee’s process and assist the Trustee in procedurally complying with those requirements and expectations, which will enable the Trustee and the Company to provide acceptable responses in any audit post-closing.
            Depending on the attorney’s billing rate, it would be very difficult to adequately complete a transaction as Trustee’s counsel for $25,000, and there are very few ESOP lawyers that will fix the fee due to the number of unknowns that are out of their control, such as what information will be uncovered during the due diligence review process.