When spouses divorce, they must take steps to separate their property. Generally speaking, assets acquired during marriage are subject to division. Spouses also share an interest in the income earned during the marriage.
Established professionals in demanding careers often have robust compensation packages. In addition to base pay and benefits, they may be eligible for deferred compensation. Stock options, performance bonuses and retention pay are all examples of deferred compensation. Spouses may need to identify and value that compensation as they navigate property division negotiations.
When people earn the pay is what matters
Employment contracts might force people to wait multiple years to receive deferred compensation. For the purposes of property division proceedings, what matters is when people earned the income, not necessarily when they actually receive the pay.
When either spouse has an employment contract that includes deferred compensation, reviewing the agreement is probably necessary. Spouses may need support in determining what portion of deferred compensation is marital. They may also need assistance valuing that deferred compensation.
Finally, they may have to come up with creative solutions for dividing the deferred compensation, as it may still be months or even years before a spouse receives their retention bonus or stock. Spouses can use other assets or debts to balance the scale when one spouse may receive deferred compensation long after the divorce. Alimony could also help make the retention of deferred compensation more reasonable.
Negotiating appropriate terms for complex assets, including deferred compensation, can be a critical aspect of securing a fair property division outcome. People preparing for high-asset divorces often need help understanding and asserting their rights, and that’s okay.
