Legal Professionals of Hirsch & Ehlenberger

How deferred compensation can complicate a Virginia divorce

On Behalf of | Oct 17, 2023 | Divorce

Divorce involving successful professionals often become more practically complex than divorces between those with few assets. When people are compelled to divide retirement savings, real property and other high-value resources, they may have a hard time reaching a fair and appropriate solution, simply because the situation at hand is so complicated.

For example, those with complex compensation packages from their employers may have deferred compensation that they expect to receive in the next few years, which could very well complicate the property division process. Couples in Virginia either need to negotiate a settlement that both spouses feel is appropriate or turn to a judge to apply the state’s equitable distribution law to both their belongings and their debts.

It can be hard to value

Deferred compensation can be challenging for people to divide with their spouse in part because it may not have a set value. Some deferred compensation, like retention bonuses, will have a fixed amount outlined in an employment contract. Other forms of deferred compensation, like stock options, could be very difficult to accurately value months or years before someone receives that compensation. Spouses may argue over what stock options or performance-based bonuses may be worth. Those disagreements can make it more challenging to then consider the deferred compensation when dividing other assets.

It may not all be subject to division

The other reason that deferred compensation can be such a challenge during divorce is that it is often a lump-sum form of pay slowly accrued over multiple years. Spouses may need to negotiate to establish what portion of the deferred compensation is part of the marital estate and therefore subject to division. The person who earned that deferred compensation may have a hard time accepting the need to share it with their spouse. Many people will have an emotional reaction when they realize that they have to divide a performance bonus that they have not yet received during a divorce, which may only exacerbate the process of resolving those challenges during divorce negotiations.

Identifying the issues that can make Virginia divorces more complex may help high-asset couples better prepare for negotiations or family court.


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