The Impact of Divorce on Executive Compensation Packages and Stock Options

Marriage to a high earner in Florida may sound like life will be smooth sailing in the years ahead. That is not the case if the marriage ends in divorce. The higher a divorcing couple’s net worth in Florida, the more complicated their divorce.

The divisions may not cover just assets such as a home, property, investments, and cars but also the executive compensation one or both spouses will receive from their employer. 

Stock options, company cars, and future bonuses may be awarded to valuable high-net-worth employees who a company wants to retain. The challenge for your Florida family law attorney is to recognize corporate compensation received during the marriage and classify it as a marital asset subject to equitable distribution.

Complex assets include:

• Supplemental Executive Retirement Plans,
• Profit sharing plans 
• Life insurance benefits
• Pension benefits
• Top-Hat Plans
• Deferred compensation plans,
• Excess Benefit Plans
• IRAs and 401(k)s 

Equitable Distribution

Unlike a community property state such as California, where half of the community property is divided 50/50 in a divorce, Florida follows equitable distribution, allowing the couple to negotiate assets that are valuable to them. For example, the wife may value furniture and jewelry more than the husband and retain those items instead of cash.

Ultimately there may not be a 50/50 split of assets but an equitable or fair share of property. 

Both states are no-fault, and adultery is rarely considered unless there is a child custody question. The judge has the option to consider each individual’s financial circumstances. When there is a sizeable difference in each spouse’s income, the judge can consider additional compensation as long as it was accrued during the marriage and with marital assets.

The court will consider the length of the marriage. Additionally, credit card debt will also be divided.

Transparency of Executive Compensation

Another challenge is recognizing when these bonuses are delayed in light of a divorce to avoid sharing the compensation with their spouse.

An employee may have been able to purchase stock in his company at a lower price than the actual market price when they exercised their stock option. When dividing these assets, it’s essential to consider the tax consequences and whether the stock has dropped in value or increased. 

The divorcing spouse may take a portion of stock options, 401(k) plans, pensions, and IRAs instead of cash. A judicial order may be required to establish you as an alternative recipient of these benefits.

Whether a stock, bond, executive compensation, or security, estimating their value may require the company to be brought into court to determine the actual value. 

If compensation is deferred or withheld until the future, the ultimate value must be considered in a Florida divorce. 

Contributions made during the marriage with marital assets and a company match may restrict access, so it’s important to understand the rules of these plans before counting on collecting their assets.

A divorce settlement may specify that executive compensation and stocks be held in a trust for the benefit of the non-employee spouse.

Prenuptial Agreement Post Nuptial Agreement

In some cases, one of the spouses may have signed a prenuptial agreement or prenup. It guarantees that one of the spouses wants to keep everything he earned and is not subject to equitable distribution. To make a prenup or postnup legitimate, your attorney will tell you what you are giving up when you sign one before or after the marriage. 

It may be more than you intend, especially if children must be provided for. 

Your Florida Family Law Attorney

It’s essential to understand the assets you accrued in the marriage, the various types of executive compensation, and how they are divided in light of a Florida divorce. 

Attorney Crystal Collins Spencer will be your ally in understanding what may be available when assets are co-mingled and when they are intentionally kept separate.

She insists on transparency in the divorce process and is an expert at uncovering assets subject to equitable distribution. Executive compensation, stock options, and health care benefits are valuable assets in a high-asset divorce that must be included in a divorce settlement.

Contact her at her Pensacola office at 850-795-4910. She provides valuable divorce knowledge for high-net-worth divorcing couples throughout the Florida Panhandle.