California is a community estate, which means the court will divide all your marital property equally between you and your partner during a divorce. This 50/50 division also applies to the executive compensation you received from your employer for services offered or as an incentive to keep you in the company. Read on to find out how you can deal with your executive compensation in a divorce.
Divorce in California
The first step in splitting assets in a divorce in California is determining which part of that property is separate and which is marital. Marital property is any income or assets that you acquired while you were married, regardless of when you would receive it.
Regardless of who contributed income to your marriage, your partner has a 50% claim to all marital property during your divorce. For the separate property, which are assets that you had prior to your marriage, the court will determine how your partner contributed in supporting or promoting its value or, in this case, your career as an executive. For instance, your partner may have given you advice on investing your compensation, and it paid off. With this information, the court may give part of your separate property to your spouse.
What constitutes executive compensation?
- Stock options
- Deferred compensation
- Restricted stock awards
- Restricted stock units
- Unrestricted stock grants
Dividing executive compensation
The court will determine the value of the executive compensation packages at the date of divorce. Usually, the court won’t speculate their value in the future because no one can actually tell if the stock will go up or down.
It’s important to take time to learn more about your executive compensation packages before the divorce. Many factors affect these assets; for example, some may not be divisible until the vesting period is over whereas other contracts can make executive compensations hard to split during a divorce.