Understanding how executive compensation complicates divorce

On Behalf of | Aug 8, 2023 | Divorce |

Many wealthy individuals in Arkansas are receiving executive compensation. This means that their total income from their high-paying job isn’t reflected in their bank account. They receive benefits, like club memberships, short and long-term incentives, and complicated stock portfolios. When divorcing someone with executive compensation, you have the additional burden of discovering these assets and then attempting an equitable division plan.

Division of complex assets

Dividing stock options is a complex issue. When the stocks are part of executive compensation, they come with rules from the employer. Typically, employers do not allow for the transfer of stock options to another person’s name. This means if you are divorcing someone with stock options, they cannot put the stock in your name or split that stock with you.

One option is to place the stock into a constructive trust. This allows the ex-spouse who isn’t an employee to receive benefits from that stock. Of course, getting to this point requires the non-employee spouse to discover this existing stock, which isn’t always easy. Then they must ensure that language is very carefully written into the divorce settlement agreement to guarantee they will properly receive the benefits from the stock. This agreement needs to mention tax obligations in the wording. Otherwise, one of the parties involved can end up paying all the taxes while the other only receives benefits.

Discovering full compensation

It isn’t always easy to discover the entirety of executive compensation, especially if your ex-spouse isn’t volunteering information. You may look for their incentive compensation plan document, annual award benefit statements or award letters from the employer. Sometimes, the employee manual at the company can offer clues that help track down the types of compensation that one may have.

Contact Form

Contact The Firm

The Law Offices of Herbert M. Pearce

The Law Offices of Herbert M. Pearce
731 I Street Suite 203
Anchorage, AK 99501

Local: 907-276-0113
Toll-Free: 800-579-4214
Fax: 907-258-1232
Anchorage Office