Successful individuals may commit so much to their careers that their family relationships suffer. Executives in high-pressure industries are theoretically at elevated risk of divorce because of their career demands. Even if they divorce for a reason completely unrelated to their profession, their career could impact what happens during the divorce.
Executives often sign employment contracts that include complex compensation. Companies may offer incentive bonuses, stock options and a variety of other types of deferred compensation. The goal is to make the job offer attractive and to motivate an executive to perform to the best of their capabilities. Yet retention bonuses and other forms of deferred compensation can potentially trigger intense conflict during property division negotiations.
Is the deferred compensation separate property?
An executive promised deferred compensation based on their job performance may view it as something they earned that they should not need to share. Especially given that they have not yet received the compensation, they may assume that they have the right to retain it without addressing it during the divorce.
However, they have likely accrued a certain amount of the deferred compensation during the marriage. Regardless of when they might receive that compensation, what they earned during the marriage is theoretically divisible. Spouses may need to negotiate to agree on how much of the deferred compensation they consider when addressing marital property.
What is the deferred compensation worth?
The actual value of deferred compensation can vary depending on the timing when a worker acquires it and even their job performance. Retention bonuses, performance-based pay and stock options can be very difficult to properly value during divorce proceedings.
Still, spouses do need to try to establish a reasonable value for deferred compensation to integrate it into their property division negotiations. They may not be able to divide the compensation directly. Instead, other assets and debts may serve to offset its value.
Executives and their spouses often need assistance trying to make sense of complex marital property when pursuing a fair or equitable property division settlement. Recognizing deferred compensation as a potential complicating factor with a skilled legal team can help people push for appropriate terms during high-asset divorce proceedings.