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Dividing executive compensation in a divorce

On Behalf of | Jul 20, 2021 | Divorce, High-Asset Divorce

Since California is a community property state, if you get a divorce there, your marital assets supposed to be divided equally. This can be more complex than it appears on the surface. There may be taxes and other considerations when it comes to property division.

Stock options

In a high-asset divorce, one or both spouses might have some form of executive compensation. For example, this might be stock options, and they may come with a vesting period. Restricted stock awards also have a vesting period. This means that the employee must wait a certain amount of time to purchase the stock but when they do, they can get it at the price it was when the award was made. However, the employee might owe tax on the difference in the stock value between then and the vesting time. One issue that may come up is whose responsibility it is to pay this tax.

Division

Another complication is that unlike many other assets, stock options cannot be transferred even in a divorce. The spouse who owns the options will have to place them in a trust for the other spouse. The divorce agreement must be written so that it is very specific about who is responsible for taxes.

Identifying executive compensation

A person who is searching for evidence of a spouse’s executive compensation might want to look for annual benefit statements and other documentation. The original employee offer letter may also have useful information.

Many people will be open about their assets during the discovery phase of the divorce. However, you may want to carefully review all of the financial paperwork that you can find to make sure this is the case. Getting your portion of the marital property can be important in establishing your financial security.