CALL US TODAY

“Effective April 10, 2023, we are pleased to welcome Attorney Carol Weinstein Boileau Esq. , as Of Counsel to the Firm.”

Is deferred compensation part of a marital estate?

On Behalf of | Oct 24, 2024 | Divorce |

Finding ways to divide marital property can be one of the most difficult aspects of divorce. Couples either need to negotiate with one another or present information to the courts so that a judge can divide their resources. Typically, each spouse gets to retain their separate property and must prepare to divide marital resources.

Separate property often includes assets acquired before marriage or after separation, as well as property received by one spouse as a gift or inheritance. Some assets fall into a gray area and can be difficult to classify as marital or separate property. The more complex the estate is, the more likely the spouses are to question what is actually marital or separate.

Does a spouse with a complex compensation package have to worry about dividing their deferred compensation if they divorce?

Deferred compensation can be partially marital

Employers negotiating contracts with skilled and highly educated professionals often offer complex compensation packages that may include benefits, stock options, bonuses and other forms of deferred compensation. Deferred compensation involves a promise to provide a worker later for continuing their employment for a set amount of time or meeting certain performance mattress.

An executive might agree to a five-year compensation package when onboarding at an organization. If they divorce in the middle of that 60-month time frame, part of their deferred compensation may be subject to division. Even though they are not yet eligible to receive it and do not have the assets on hand, they earned a portion of their deferred compensation during the marriage.

It can be relatively difficult determine how much of the deferred compensation is subject to division and may also be challenging to value that as-of-yet unpaid income. Particularly in scenarios involving stock options or performance-based bonuses, people may struggle to accurately predict what the well-compensated spouse might ultimately receive from their employer.

Stock options, bonuses and deferred pay can be worth tens of thousands of dollars. It is therefore important for spouses to factor those valuable resources into property division negotiations or to report on them honestly when providing an inventory of assets to one another and the courts.

Those with complex marital estates comprised of various financial and physical resources often need help determining what is subject to division, what it is worth and how to integrate non-liquid resources into their property division settlement. Accounting for all high-value marital resources is crucial for a fair outcome during divorce proceedings. Seeking legal guidance is a good way to get started.