Protecting Your Most Valuable Asset

Executive Compensation

While divorce is never an easy proposition, the division of assets often causes the highest level of contentiousness between spouses. The more financial complexities there are in the divorce, the more likely an expert valuator—as well as a highly knowledgeable New Jersey divorce attorney—may be necessary. When one or both spouses have executive compensation, the division can become even more complex and frustrating. Executive compensation includes such things as: deferred compensation plans, employee stock purchase plans, restricted stock, bonuses and stock options. Each of these will be briefly described below:

  • Deferred compensation plans allow employees to choose to defer some part of their current compensation until a future date, including salary, a bonus, or equity compensation. In some cases, the employer may match the deferred compensation. Because deferred compensation plans are voluntary, for the purpose of dividing marital assets, the total compensation prior to any deferrals will be used. If there are current balances in deferred compensation plans, these must also be analyzed. The reason deferred compensation plans are so carefully scrutinized is because some spouses may attempt to diminish the amount they will have to pay during the divorce by deferring a big chunk of their employee compensation.
  • Employee stock purchase plans allow employees to buy stock in the company they work for on a regular basis, and usually at a discounted price. Once an employee purchases company stock, he or she may decide to sell the stocks fairly soon, or hold the stocks for a year or more due to tax repercussions. For the purposes of a divorce, and the division of assets, the ability to immediately sell the stock translates into instant cash above the employee’s regular earnings, and these regular earnings are considered income in the division of assets.
  • Restricted stock may well be the type of executive compensation used most often. Restricted stock are shares of company stock which an employee receives. The restricted stock could be given as an incentive for future performance, or compensation for past performance. For the purpose of asset division in the divorce, you must know whether the restricted stock is an incentive or compensation as this has bearing on how it will be divided. Dividing restricted stock will depend on award dates, vesting schedules, and the dates of marriage and separation, therefore can be very difficult to calculate, and will need to be done by a specialist. If a spouse receives restricted stock shares on a regular basis, then future shares may be included in income projections when calculating alimony and/or child support.
  • Stock options allow an employee to buy stock at a discounted price, at some time in the future. The employee will be given the right to buy the stock, with no obligation attached. While stock option plans are not as common as they once were, they remain an issue during a division of assets in a divorce. Generally, Non-Qualified Stock Options are the type you will deal with, although occasionally, Incentive Stock Options may also be a part of executive compensation. If the stock option plan is partially vested at the time of your divorce, but are unable to be touched for an additional four years, it can be difficult to determine and divide their worth.
  • Bonuses are a bit easier to divide in a divorce, particularly if the bonus is a regular part of the employee’s compensation. As an example, one company pays employees a bonus at the end of each year which equals a percentage of the employee’s salary and is based on company profits. While the exact amount of this bonus may not be known during the divorce, it can be roughly estimated, as the bonus is a part of the employee’s normal compensation. On the other hand, if a company sometimes gives employees a Christmas bonus of $200, and sometimes does not, then the bonus is probably not considered a normal part of the employee compensation as it is considered speculative.

How the Williams Law Group Can Help

Overall, executive compensation is tied more closely to job performance than it once was, and while there may be many facets of executive compensation for any given employee, they are rarely treated equally. Cash compensation will be viewed differently when it comes to alimony or child support than stock options. If executive compensation is a factor in your divorce, the very best thing you can do is to speak to an experienced, knowledgeable divorce attorney from the Williams Law Group.

Having one of our highly skilled attorneys on board early, particularly prior to the discovery phase, is crucial in ensuring you receive an equitable asset settlement. Our attorneys will ensure your final settlement agreement will be written in a manner which properly reflects the way the executive compensation will be handled. We understand the many complexities associated with executive compensation, and we know that these assets can be substantial pieces of the marital asset settlement, therefore must be valued correctly.

The attorneys at the Williams Law Group have been handling complex divorces for many years. We are as comfortable negotiating or litigating a high net worth divorce as we are a simpler divorce. We are compassionate to what you are going through during your divorce, and will go the extra mile to help make the process easier. If you are facing a divorce, it would be extremely beneficial for you to speak to an attorney at the Williams Law Group. Call (908) 810-1083 today!