Chicago couples going through a divorce often have difficult conversations about how to split assets and property. These conversations become immensely more complicated when one spouse has what’s referred to as executive compensation.
What is executive compensation?
Executive compensation refers to the salary or compensation packages that an employee is given when they’re promoted to a high-level executive position. Often, this compensation is directly tied to the company’s success in the form of vested stock options or increased retirement perks.
Executive compensation is typically used to keep employees around longer. These stock options are vested for a certain period, meaning the employee can’t pull from them early.
How do you divide executive compensation packages?
In addition to the limits on pulling from the stock, most companies have strict rules about dividing the stock or transferring ownership. While executive compensation should still be listed in assets and income during divorce proceedings, dividing it can be tricky.
Determining alimony, child support and asset division will look different depending on the marriage and reasons for divorce. Giving the non-employee spouse part of the stock might involve creating a trust that distributes the payout to the non-employee spouse immediately when the vesting period is over.
Whichever way the couple decides to handle the payout of the stock, it should also address how taxes on the stock will be handled. Often, pulling from a stock or retirement plan involves hefty penalties or high tax amounts, but the non-employee spouse shouldn’t be held responsible for that.
Do you have to split the stock or create a trust?
How you and your ex-spouse decide to split the employee compensation is completely up to you. The important thing is addressing it during the divorce proceedings instead of letting assets stay hidden or not being divided fairly.