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How do divorce courts treat executive compensation and benefits?

Divorce in California presents unique challenges for high-earning executives with valuable compensation and benefits packages. Dealing with complex assets like stock options and bonuses can add confusion to an already emotionally charged divorce.

Understanding how community property laws apply to executive pay and benefits can help ensure that your settlement is balanced and equitable, regardless of whether you or your spouse is the one with these assets.

Marital vs. separate property: A refresher

In California, any income earned during the marriage, regardless of who earned it, is joint marital property — even complex executive benefits. That means it is subject to division under state law.

The assets spouses owned before marriage or inherited individually remain separate property, unless they’ve been commingled, and not generally subject to property division.

Valuing executive compensation

Executive compensation often involves assets with fluctuating values or vesting periods, making accurate valuation crucial.

Stock options and restricted stock have uncertain future values due to vesting periods and market fluctuations. They require expert appraisals to determine a fair market value at the divorce date.

Courts value assets like deferred compensation and bonuses based on their projected payout dates and vesting schedules, accounting for future uncertainties.

Dividing executive packages

As you may know, California law aims for an equal division of community property, but other factors can influence the outcome. For example, the contents of a premarital agreement or a spouse’s alimony needs can lead to deviations from the 50/50 split.

Creative problem solving

Remember, every divorce is unique and can benefit from an innovative approach to resolving contentious matters. With experienced guidance and a willingness to explore progressive solutions, you can emerge from your divorce proceedings with a truly fair property settlement.



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