Preparing for property division negotiations or litigation can be a daunting matter. Particularly when spouses have enjoyed a comfortable standard of living throughout their marriage, they may have reason to worry about unfair property division outcomes. The state’s community property statute makes most assets acquired during a marriage potentially divisible when couples divorce.
Those who have enjoyed successful careers may find that their diverse assets can complicate property division matters. Sometimes, even employment arrangements and benefits can serve as complicating factors during divorce. Some employers provide workers with promises of deferred compensation. Such arrangements may be a way to keep a bonus from pushing a worker into a higher tax bracket or to incentivize better performance. Deferred compensation can also be a way to reward workers for remaining with the business for multiple years.
Is deferred compensation subject to division under community property statutes?
Deferred compensation requires careful review
When one spouse has an employment arrangement that includes deferred compensation, a thorough review of circumstances may be necessary to ensure a fair property division outcome. Reviewing the employment contract is often necessary.
Spouses have to understand how much deferred compensation one spouse may have accrued during the marriage. Regardless of when the worker actually receives that compensation, a portion of it may be subject to division in the divorce because they earned it during the marriage. Establishing how much of the deferred compensation is part of the marital estate can be a challenge. So can appropriately valuing the compensation.
In some cases, both job performance and the duration of the employment arrangement may influence how much deferred compensation one spouse ultimately receives. Other times, the deferred compensation may come in the form of stock options. The value of the stock could change significantly between when the couple divorces and when the spouse actually receives their stock.
Those preparing for property division matters who recognize that they have a complex marital estate may need help determining what is marital property and what is separate, as well as how to value assets that may not have a straightforward value already attached.
People who understand the rules that apply to property division can protect themselves as they prepare for a complex divorce. Ensuring an appropriate property division outcome is crucial to rebuilding after a divorce.