Some couples preparing for divorce face a more complex process than others. The larger the marital estate is, the harder it may be to fairly divide property and financial obligations. Those who have enjoyed professional success throughout a marriage may face particularly challenging issues as they prepare for divorce.
One of the spouses may have an employment arrangement that includes deferred compensation. Deferred compensation can create several unique challenges for couples to overcome as they prepare for divorce proceedings. What issues can a couple anticipate if their marital estate includes deferred employment compensation?
1. Determining how much compensation is marital
When establishing what property is marital and what is separate, timing is a key consideration. Income earned by just one spouse is theoretically part of the marital estate so long as they earn it during the marriage.
Calculating how much deferred compensation a spouse may have accumulated prior to a legal separation can be one of the first challenges that spouses must address as they prepare to negotiate a property division settlement.
2. Estimating the value of compensation
Some deferred compensation is based on job retention or performance. In such cases, the exact amount of compensation provided may not be clear until the employer finally makes the distribution to the worker.
Spouses who may have the option of acquiring company stock in the future may need to estimate the value of that stock during a divorce. Trying to set a reasonable value for deferred compensation can be a major point of contention during complex divorces.
3. Addressing the value of deferred compensation
One of the reasons that deferred compensation can be difficult to address is that a worker may not be eligible to receive it for multiple years after the marriage ends. The spouses may need to identify other marital assets to offset the marital portion of the deferred compensation.
They may also decide to use debts to balance out the value of deferred compensation. If the compensation is not available to directly divide, then spouses or their lawyers must come up with creative but functional solutions.
Preparing for property division negotiations or litigation when the marital estate includes complex resources can prove challenging. Spouses who have proper support when fighting for a fair asset division outcome can potentially avoid common pitfalls, like overlooking deferred compensation.