Couples with more assets and more complicated financial holdings often find that the legal side of the divorce process can be more of a challenge than it tends to be for couples with minimal resources. Ultimately, spouses may disagree about everything from what their marital estate is worth to which assets are subject to division.
When at least one of the spouses is a successful professional, their employment arrangements can add an extra layer of complication to property division negotiations. Specifically, divorcing couples may need to address deferred compensation when discussing how to divide their shared property.
Is deferred compensation marital property?
The first question that people often have about claims related to deferred compensation in a divorce is whether that future income is part of the marital estate. Unless the couple has a marital agreement specifically addressing deferred income and other employment benefits, at least a portion of the deferred income will likely be marital property.
Any amount accrued during the marriage would potentially be part of the marital estate and could influence other choices about property division. For example, perhaps an employer offers a retention bonus if a worker stays for five years. If someone initiates a divorce in the third year of that contract, they may be able to claim a percentage of that future bonus because someone earned it during the marriage. The same is often true of performance-based bonuses, deferred compensation promised in a future year and stock options. A portion of that deferred compensation may be subject to division. Couples will need to establish what percentage of the compensation is subject to division and also what it is worth.
Particularly in cases involving performance-related bonuses or stock options, any value assigned to that future compensation will likely be speculative. It will be of the utmost importance for spouses to reach an agreement regarding how much of the deferred compensation is on the table and what it is worth. If they cannot agree, then each spouse will present their side of the situation to the courts and wait for a judge to make the final determination in accordance with New York’s equitable distribution rules.
Deferred compensation is only one of multiple factors that can make divorce a bit messier for those in high-asset marriages. Understanding which assets are subject to division and how New York handles marital property may help people put together more effective plans when preparing for an upcoming divorce.