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The impact of executive compensation on your divorce

On Behalf of | Aug 1, 2023 | Family Law

The divorce process can become complex when the distribution of assets comes into play. This complexity increases when one spouse is a high-level executive with a large compensation package.

You need to understand how executive compensation can affect your divorce, especially if you are dividing assets and determining spousal support.

Executive compensation explained

Executive compensation typically includes base salary, bonuses and long-term incentives such as stock options, grants or retirement benefits. You need to understand these elements to identify what counts as marital property. For instance, stock options granted during the marriage but vesting after separation might still count as marital property.

Implications for asset division

The division of assets can become complex due to the intricate nature of executive compensation. Certain components like deferred compensation plans or retirement benefits can affect how assets divide. For example, an executive’s 401(k) plan can be a substantial asset that requires careful consideration during a divorce.

Effects on spousal support

Executive compensation can also influence the calculation of spousal support. Courts typically consider the earning capacity of both parties when determining spousal support amounts. If one spouse is a high-earning executive, that can significantly impact the level of spousal support the other spouse might receive.

Potential tax consequences

Tax consequences are another aspect to consider. Certain forms of executive compensation, such as stock options, have specific tax implications. When dividing these assets in a divorce, you must understand the potential tax consequences to avoid unexpected liabilities.

When you are facing a divorce involving executive compensation, it is important to understand the complexities involved to ensure that you receive a fair settlement.