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Divorce and executive compensation in New Jersey

On Behalf of | Dec 3, 2021 | Divorce |

Divorcing an executive in New Jersey can be challenging at best. There are many different sources of income involved that can be difficult for you to identify, understand or even value. But, here’s what you need to know about divorcing someone with executive compensation.

Executive compensation in New Jersey

If your spouse works for a company and is at a higher position, the company will give him/her non-wage compensations as leverage to keep their talents in-house. Other times, such compensations are given as gratitude for a job well done. Such compensations come in the form of stock options, restricted stocks, deferred compensation plans, employee stock purchase plans, etc.

The reason why executive compensation becomes difficult to handle during a divorce is that it is tied to the structure of the business and its rules. Take stock options, for example; these are the right to buy stocks at a discounted price after a certain period of time (vesting period). So, if you are divorcing before this vesting period is up, you won’t be able to touch that compensation, but still, part of it belongs to you. Yet, prices will fluctuate from time to time.

Dividing executive compensation

In New Jersey, the judge doesn’t split marital property 50/50; rather, they will distribute what you have in a manner that they deem fair. Of course, the court will first determine which part of the executive compensation is separate and marital. Separate property is assets that you or your partner owned before you were married, whereas marital property is everything you accumulated when married.

You will need an experienced divorce attorney and a certified divorce financial analyst (CDFA). These people will help you gather the necessary documents that you will use to value assets in executive compensation.

You should know that most executive compensations are restricted to employees only. So, you should explore other options like taking something else of equal value to the executive compensation, or you can request the judge to hold the assets in a trust, cashed out when the vesting period is over and the proceeds divided equitably.

When dividing executive compensation, beware of loopholes that could hurt what you are getting. For example, look out for disadvantageous tax implications, concealments, and immovable assets. Since dividing executive compensation is complicated and takes a lot of time, it might as well be worth it.

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