An executive’s career can influence what occurs if they divorce. Their demanding position may contribute to the decline of the marital relationship and might affect the custody arrangements established for their children.
The financial success that comes with an executive position can also complicate a divorce. Their current and likely future earning potential can impact what the courts believe is fair when addressing property division matters and financial support disputes.
In some cases, there may even be disagreements related to income that they have not yet technically received from their employers. Executive compensation packages may include arrangements for deferred compensation. Addressing deferred compensation can be a challenging process during divorce negotiations.
How much is actually divisible?
One of the first issues the spouses have to address relates to what portion of the deferred compensation is actually divisible. Many employment contracts that offer deferred compensation impose long-term obligations that the executive must fulfill to receive the promised compensation.
Frequently, deferred compensation relates to job performance or the profitability of the company. The goal may be to incentivize the best performance possible by providing differing compensation amounts depending on a professional’s performance.
Other times, the company may offer retention bonuses. The longer the executive retains their position, the more they may ultimately receive. Spouses may need to determine what portion of the deferred compensation the executive accumulated during the marriage. They may also need to negotiate the value of that compensation.
How can the spouses offset deferred compensation?
Typically, an impending divorce does not compel employers to distribute deferred compensation ahead of the contractual schedule. The divorcing spouses may need to look carefully at the contents of the marital estate to find reasonable ways to offset the value of stock options and incentive bonuses to make property division as fair as possible.
They can negotiate terms that are fair given the assets and debts that they share. The retention of certain financial obligations, concessions related to the distribution of other assets and even arrangements for alimony or spousal support can all be part of a strategy to address deferred compensation fairly in a divorce settlement.
Addressing deferred compensation can prove challenging during high-asset divorce negotiations if spouses do not properly prepare in advance for that process. Successful executives and their spouses often need help navigating the complexities of property division when the marital estate involves a variety of high-value resources, and that’s okay.