Both your salary and any bonuses or other compensation are considered in establishing support. It is common for executives to receive a base salary, but also a significant bonus or alternative compensation in excess of the base salary. These bonuses may not be guaranteed and may fluctuate from year to year. This may lead people to believe that this type of income is not considered in support calculations because it is not guaranteed and is not consistent. However, this is not true. In these types of cases, a bonus – in whatever amount – is routinely included in establishing support. This can be done in a number of ways: The parties can either agree that they will take an average of recent years’ total incomes to establish the level of income, or they may agree to a percentage share of the bonus that will be shared. For example, it’s common that people in this situation will agree that the party who is receiving alimony will receive an additional lump sum percentage of the other spouse’s bonus annually. Regardless of how it is ultimately established that this will be paid, all compensation received by the parties will be considered in establishing support.
Some of your benefits may not be divided at the time of divorce. One way in which companies may choose to compensate their employees includes issuing Restricted Stock Units, or RSUs. These stocks are issued by the company to an individual for their services, and come with a vesting schedule, which refers to the time that they become exercisable and can be sold. The existence of this type of benefit must be disclosed during a divorce. For individuals who receive RSUs, it’s likely that there remains some unvested or non-exercisable stocks at any given time. This may lead them to believe that these assets do not have to be shared. Not so. In this situation, the attorneys and the parties would need to determine what RSUs were issued between the date of marriage and the date of complaint for divorce, and those RSUs would remain subject to equitable distribution. The party who owns the RSUs would have an obligation, under the terms of a settlement, to sell their former spouse’s share of the stocks when they are directed to. They would then receive the funds and provide the former spouse with the net proceeds of the sale. Depending on when the shares vest and are able to be sold, the employed spouse may continue to have an ongoing obligation to do this for a number of years after the parties are divorced.
Ownership or an ownership interest in the business is subject to equitable distribution. If one party is an executive within a business and has an interest in the equity of that business, it may be necessary to value the business and establish that party’s level of interest. The parties will then need to decide how to divide that asset. In many situations, this will mean that the business will remain intact and the other spouse will be compensated either through a cash buyout, or perhaps by taking a larger percentage of another asset in order to make them whole.
If you have questions about executive compensation and divorce in New Jersey, contact the attorneys of DeTorres & DeGeorge to schedule a consultation.