Who Is Entitled to Executive Compensation After Your Divorce?
Who Is Entitled to Executive Compensation After Your Divorce? If you or your soon-to-be-ex-spouse are the recipient of executive compensation and are getting a divorce, determining the value of those assets is both important and complex. Here is an example: Executive compensation can be awarded for past performance that occurred during your marriage but then received after your separation. In a community property state like California, how much of that compensation belongs to the recipient? How much belongs to their spouse?
If executive compensation was awarded and vested during your marriage, it is considered marital property and must be divided equitably in divorce. Also important are the tax considerations of the executive compensation. For instance, if executive compensation is awarded to an ex-spouse in a lump sum, a large tax hit may ensue.
What is considered executive compensation?
Executive compensation may include: deferred compensation, nonqualified deferred compensation (NQDC), stock option plans, restricted stock and employee stock purchase plans. An individual may receive one or all of these types of compensation:
• Deferred compensation is a portion of an employee’s compensation set aside to be paid at a later date. Forms of deferred compensation include: retirement plans, pension plans and stock-option plans.
• Nonqualified deferred compensation is often used as an added incentive for executives and other highly compensated employees and is also payable in the future.
• Stock option plans give an employee the right to buy stock at a discount at some date in the future.
• Restricted stock is shares of company stock that has been given as either compensation for past performance or an incentive for future performance.
• Employee stock purchase plans allow individuals to buy company stock, usually at a price that is discounted from the current market price.
You need to call in an expert
If you are the recipient, or the spouse of someone who has received executive compensation, it is important to talk with a divorce attorney who understands how to determine its true value. Your attorney will be able to provide you with a list of documents to send to the employer to determine what employment agreements are in place and how much compensation has been accrued. A divorce attorney versed in executive compensation can effectively represent your interests in court. Your attorney will also be able to make sure that your Marital Settlement Agreement properly reflects the way the executive compensation will be handled to ensure that you get what you are entitled to.
If you are going through divorce and are either the recipient of executive compensation or the spouse of someone who is, Attorney Christina Sherman can help you understand your rights under California law. Christina is a Board Certified Family Law Specialist, and she holds a Masters of Laws in Taxation. Please contact our office for a consultation
Attorney Christina Sherman is a Marin County CA family law attorney and Certified Family Law Specialist, specializing in divorce, child custody and support, marital contracts and other family law issues.
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