California’s community property laws give both spouses an interest in their marital estate. If they divorce, the income they earned during the marriage and the property they acquired is subject to division.
Professionals working as executives or engineers in the tech sector and those who hold other well-compensated roles may have employment contracts that offer them deferred compensation. Is deferred compensation that a spouse has not yet received vulnerable to division during a divorce?
Deferred compensation could be divisible
Every employment contract that includes an arrangement for deferred compensation typically contains unique terms. Deferred compensation could involve a bonus paid based on the company’s profits, the worker’s sales or other specific metrics. The company might offer restricted stock units or stock options to professionals based on how long they stay with the company or their performance.
Generally speaking, deferred compensation earned during the marriage is likely divisible in the event of a divorce. Spouses may need help determining how much of the deferred compensation is subject to distribution.
They may also need help valuing the deferred compensation, especially if it involves stock. The deferred compensation may not be directly divisible, as the worker may not yet be eligible to receive it. The spouses may need to make alternate arrangements to address its value as part of a property division settlement.
Those worried about ensuring a fair property division decree because their marital estate contains complex and hard-to-value resources may need legal guidance. Partnering with an attorney who has experience navigating high-asset divorces can help successful professionals and their spouses during challenging property division negotiations.
