As the overall value and complexity of a marital estate increase, the challenges that arise during divorce also tend to increase. Spouses preparing for high-asset divorces may need to address a variety of unique concerns.
From robust retirement savings and investment holdings to real property and valuable personal property, there are likely a variety of assets that are subject to distribution during the divorce process.
Successful professionals, including executives, often have compensation packages that go beyond their basic salaries. They may have an agreement that allows them to accrue deferred compensation. The wages they have earned but not yet received could become a stumbling block during property division negotiations.
Is deferred compensation divisible?
Unless there is a written agreement between the spouses protecting deferred compensation or wages as separate property, whatever a spouse earns during the marriage is likely part of their marital estate. A portion of the deferred compensation could be marital property that is subject to division.
However, it might still be years before the professional is eligible for the distribution of the deferred compensation. As such, they may need to determine what the deferred compensation is worth and what portion of it is subject to division.
They can then integrate the value of the deferred compensation into the overall property division process. Spouses may find themselves disagreeing about what deferred compensation is worth, particularly in scenarios where executives might be available for incentive bonuses based on their performance or stock options that could increase in value over time. They may struggle to agree on how to offset the value of deferred compensation with other assets or financial obligations.
Understanding what assets are subject to division in high-asset divorces can help people set realistic expectations. Professionals with complex compensation packages may need to address their deferred compensation during the property division negotiation process.