Separating the finances of divorcing spouses is often the biggest hurdle that couples face during divorce. The longer the marriage lasted and the more the spouses earned while married, the more difficult it may be to reach a fair and amicable settlement for the division of the marital estate.
Complex marital estates require thorough disclosures and lengthy negotiations. Spouses have to identify marital assets, determine what they are worth and then establish a reasonable way to divide them, along with any debts accrued during the marriage. Some assets can be difficult to address.
For example, if either spouse has an executive compensation package, their base pay may only represent a portion of what they actually receive from their employers. They may have a right to deferred compensation as well.
Is deferred compensation that is not yet paid to a professional potentially part of a marital estate?
Income earned during marriage is divisible
People sometimes assume that deferred compensation is separate property. After all, it is due to one spouse, and they may not receive it until several years after the divorce. However, any income that they earn during the marriage might be divisible during divorce proceedings.
As such, spouses have to review employment contracts carefully to try to establish how much deferred compensation one spouse earned during the marriage. Next, they have to place a value on that compensation.
Someone with the right to purchase stock options in the future may only be able to roughly estimate what the stock might be worth when that opportunity arises. Retention and performance-based bonuses may also have variable values depending on unique circumstances. As such, it can be difficult to determine what deferred compensation is worth.
Spouses may need to find creative solutions for addressing unpaid deferred compensation. As it may be years before a professional receives the deferred compensation, the spouses may need to look into ways to offset its value using other assets instead of attempting to directly divide it.
Obtaining support when trying to address stock options and other forms of deferred compensation during a high-asset divorce can help people push for a fair outcome. Those who enjoy a higher standard of living during the marriage can anticipate a relatively complex divorce process and may benefit from securing help as early as possible.