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How does executive compensation affect your divorce?

On Behalf of | Jan 15, 2025 | High Asset Divorce, Property Division

Going through a divorce is one of life’s most stressful experiences. But if you have significant assets, the process only gets more overwhelming.

This is why divorce is usually more complicated for high-level executives. Since your executive compensation goes beyond a regular salary, it creates unique challenges when dividing marital assets.

What is executive compensation?

As an executive, your total compensation package looks very different from a standard salary arrangement. Companies generally reward top talents with a package that includes:

  • Stock options
  • Restricted stock units
  • Performance-based incentives
  • Long-term benefit plans
  • Deferred compensation plans

You may have benefits that vest over time or depend on reaching specific company goals.

How executive pay complicates asset division

There are two ways that executive compensation complicates divorce asset division.

First is identifying the contents of the compensation package. Generally, your pay slip won’t include the details of your executive compensation. Some might not even appear in your tax return, depending on what you receive.

Second is the timing of the pay and your divorce. Consider your unvested stock options you earned during the marriage but have yet to exercise. Or think about performance bonuses tied to work you completed while married—but will only receive after divorce.

Important questions to ask your legal counsel

Before moving forward, it is good to discuss the following questions with your divorce attorney:

  • Which portions of my stock options count as community property?
  • How does the court determine the value of unvested restricted stock units?
  • Will future performance bonuses still get split with my spouse?
  • Do I need to liquidate all non-cash benefits to split with my spouse?
  • Are there any tax implications from dividing these benefits?

Taking time to understand these aspects helps you approach negotiations with confidence and a clearer idea of how much you stand to gain or lose.

Seek professional assistance to ensure fair division

Essentially, there are a lot of moving parts involved if you receive executive compensation. These variables can make accurate valuation more difficult. As such, careful analysis is necessary to ensure a fair division between you and your spouse.

However, you don’t have to figure this out alone. Financial and legal professionals can help you understand the details and protect your interests.

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