For higher-earning professionals, compensation often involves far more than a regular paycheck. Bonuses, stock options, restricted stock units, deferred compensation, and other incentive-based benefits can all become significant issues during a divorce. These assets can be difficult to value because some have not yet vested, may depend on continued employment, or may fluctuate in value over time.
Understanding the full compensation package is often an important part of determining income, support, and property division in a Massachusetts divorce.
What Counts as Executive Compensation in a Divorce?
A salary may represent only one part of a spouse’s total compensation. Executive compensation can include:
- Annual or performance-based bonuses
- Restricted stock units (RSUs)
- Stock options
- Deferred compensation
- Equity awards
- Profit-sharing
- Incentive compensation
- Retirement benefits
Gathering and reviewing financial documents, including employment agreements, compensation statements, tax records, and benefits information, can help you develop a complete financial picture before addressing support or property division.
How Are Bonuses Treated in a Divorce?
Bonuses can raise questions because they often vary from year to year or depend on individual or company performance. A bonus may be relevant when calculating income for child support or alimony. Depending on the circumstances, it may also matter when the bonus was earned and whether it relates to work performed during the marriage. Past compensation history can help show whether bonuses are occasional or a regular part of a spouse’s earnings.
How Are RSUs and Stock Options Divided in a Divorce?
RSUs and stock options can be more complicated because they often vest over several years. Key questions on how assets are divided in divorce include:
- When was the award granted?
- When does it vest?
- Was it awarded for past performance or future employment?
- Was the award earned during the marriage?
- What restrictions apply before the shares can be sold?
- How should the asset be valued?
An award that has not yet vested may still need to be reviewed rather than automatically excluded simply because it cannot currently be sold.
What Is Deferred Compensation and Why Does It Matter in Divorce?
Some executives elect, or are required, to defer a portion of their compensation until a later date. These plans can involve significant amounts of money that do not appear in a traditional bank or investment account. Employment records and plan documents may be necessary to determine what has accumulated, when it becomes payable, and whether any portion should be considered when resolving the financial issues in a divorce.
Why Is Valuing Executive Compensation So Challenging?
Equity compensation can change significantly in value between the date it is granted, the date it vests, and the date it is exercised or sold. This timing makes valuation difficult. In some cases, financial professionals can help by reviewing compensation packages, tracing awards, or evaluating complex benefits. Tax timing may also need to be factored in when determining an award’s actual value.
What Records Should You Keep for Executive Compensation?
When executive compensation is involved, thorough financial disclosure often requires more than standard income records. In addition to tax returns and pay stubs, relevant documents may include:
- Employment agreements
- Offer letters
- Bonus plans
- Equity award statements
- RSU and stock option agreements
- Vesting schedules
- Deferred compensation statements
- Brokerage statements
Keeping complete records can help prevent important forms of compensation from being overlooked during a divorce.
Get Help With Complex Compensation Issues in Divorce
A divorce involving bonuses, stock options, RSUs, deferred compensation, or other executive benefits can raise complicated questions about income, valuation, taxes, support, and property division. At Fleischer Law Solutions, we help clients navigate complex financial issues in divorce and work with financial professionals when additional analysis is appropriate.
Contact Fleischer Law Solutions to schedule a consultation if you or your spouse receives executive compensation or you have questions about how bonuses, equity awards, or deferred compensation may be addressed in your divorce.