Well-compensated professionals often earn more than just their salaries. They receive a variety of benefits as well as certain financial incentives from their employers.
Executive and others in high-demand roles sometimes have employment contracts that include deferred compensation. Deferred compensation agreements can provide bonuses based on job performance. They may reward people for retaining their positions or meeting certain sales metrics for the company.
The terms for deferred compensation may involve promises that extend over multiple years. Do professionals need to share their deferred compensation during the property division process of a high-asset divorce?
Future pay can’t always be determined
Deferred compensation can easily complicate property division. Spouses may need to estimate how much of the deferred compensation one spouse earned during the marriage. If they are three years into a contract that has a five-year retention bonus as part of a deferred compensation arrangement, the portion of the bonus accrued during the marriage is likely subject to division.
However, spouses cannot divide resources to which they do not yet have direct access. In fact, the amount of deferred compensation actually paid to the employee could depend on their future job performance or the company’s success over the next few years. Spouses may find themselves arguing over how to properly value deferred compensation and how to reasonably offset its value during divorce negotiations.
Those facing complex property division matters as part of a high-asset divorce may need legal insight as they identify, value and seek to divide their marital estates. Realizing that at least some deferred compensation could be marital property can help spouses ensure that they appropriately address their resources during divorce proceedings.