Photo of Professionals at Weinberg, Kaplan & Smith, P.A.
Photo of Professionals at Weinberg, Kaplan & Smith, P.A.
  1. Home
  2.  » 
  3. Divorce
  4.  » Dealing with executive compensation in a divorce

Dealing with executive compensation in a divorce

On Behalf of | Oct 31, 2023 | Divorce

New Jersey is home to many corporate executives, and inevitably some of them go through a divorce. Executives tend to be people with high incomes and varied assets, and this often makes for a more complicated divorce.

One particularly tricky area is dealing with executive compensation in a high asset divorce. Unlike simpler classes of assets, there are several ways in which resolving executive compensation requires extra consideration.

The issue of vesting periods

The two most common forms of corporate compensation are stock options and restricted stock awards. In each case, an executive is given either stock in their company or the option to buy stock at a discounted price.

But the catch is that there’s generally a vesting period during which an executive is unable to sell that stock and cash in. During a divorce, one party may have stock options or restricted stock whose vesting period hasn’t expired. Generally, neither stock options nor restricted stocks can be transferred to another person.

In this case, one option is to place the stock in a consecutive trust on behalf of both parties. This gives legal standing and control to the executive’s ex-partner, and the stock may be resolved after the vesting period expires.

Finding executive compensation

Unfortunately, one messy aspect of a divorce is often tracking down and accounting for the other party’s assets. Especially in divorces involving high-worth individuals, this can be an involved process.

Corporate compensation is often a tempting option for one party to try to hide during a divorce. Usually, all paperwork and documentation is the personal property of that executive, and corporate compensation generally doesn’t appear on tax returns.

It may require the services of a financial analyst to help track down evidence of stock options or unvested restricted stock. Corporate documents of various kind usually offer the best evidence of undisclosed corporate compensation.

The issue of corporate compensation can make divorce even trickier than usual. Corporate compensation can be difficult to fully discover, and there are structural issues that can make resolving it fairly for both parties difficult.