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Dealing with executive compensation in California divorce

On Behalf of | Nov 12, 2023 | Divorce

Asset division is a crucial aspect during divorce proceedings in California. The state follows the principle of community property, which means that all assets acquired during marriage are joint property, subject to equal division between the spouses. This includes executive compensation, which can be a significant asset for high-earning couples.

Executive compensation and divorce

Executive compensation refers to the various forms of remuneration packages provided to top-level executives in a company to reward their performance and retain talent. These packages can include bonuses, stock options, insurance policies, and other perks.

During a high-asset divorce in California, all forms of executive compensation earned during the marriage belong to both spouses regardless of who earned it. So, it is important to determine what the compensation was awarded for. If it was for your past performance (before marriage) or future performance (after marriage), the courts might consider the executive compensation as separate property and not subject to division.

Determining the value of executive compensation

The valuation of executive compensation can be complex due to its nature. For instance, deferred compensation may not have a clear present value, and stock options may fluctuate in value. In such cases, both parties might need to hire financial experts to accurately determine the value of executive compensation for fair division. The court will also determine its own valuation based on the evidence you present.

Options for division

The first option for division is equal split, where the couples just divide everything right in the middle, and they receive their share in a lump sum. The second alternative is deferred distribution, which involves the non-executive spouse receiving their fair share in future installments when the executive spouse receives their compensation. The third route is offsetting, where the non-executive spouse receives other assets of equal value in lieu of their share of the executive compensation.

Navigating the complexities of executive compensation in divorce proceedings necessitates a thorough understanding of the intricacies involved and the application of precise strategies. Remember, each situation is unique, as what worked for one couple might not work for you. Devise a plan that aligns with your individual needs and circumstances for a successful outcome.