Is All Compensation Treated Equally in Divorce?
We talk a lot about asset division in divorce, but cannot always get into the specifics, such as how different types of income are treated differently in divorce negotiations; even in a state like Florida that goes by equitable distribution. For example, what if most of your compensation comes from a bonus or stock options? Negotiations are fairly straightforward if you simply make a salary, however, if you receive compensation from any of the following, you will want to discuss this subject closely with your divorce attorney:
Pre-paid Bonuses with “Clawback” Provisions
These are bonuses that are paid at the beginning of the employment term; however, they are subject to what is known as “clawback”: if you fail to meet certain performance criteria or leave the company before a certain amount of time, money already paid to you as the employee must be paid back to the employer under some circumstances. Because this is essentially a conditional bonus, an argument could be made that it should not be considered a marital asset subject to division, therefore, if your spouse is granted a portion of this bonus, you need to make sure that conditions surrounding it are very clearly addressed in your divorce settlement; For example, are there circumstances under which your spouse is going to need to return the funds?
Bonuses Paid for the Year’s Work
Note that any bonus from work that was completed before your divorce is filed will likely be considered subject to division as a marital asset; however, make sure that the bonus is not counted both in your income and separately as a bonus in terms of divvying up asset totals in this process.
These can be argued both ways: while your spouse could argue that the commission was paid for work that was done during the marriage and is therefore subject to equitable distribution, this is not necessarily the case, especially if you file for divorce before receiving the commission. In this case, you could then argue that it was not earned until it was paid; in fact it was earned after the divorce petition was filed; and is therefore separate property. In this respect, the date of the commission payment is very important.
Stock options are typically considered marital assets, however, equitable distribution does not necessarily mean a 50-50 split, and splitting these can become complex, depending on when the interests are vested. Settlements will sometimes include a “present value pay out” or pay out language that depends upon when the distributions are made.
Particular Circumstances Warrant Particular Negotiations & Treatment
Note that each unique income asset is treated differently. For example, if you receive housing as part of your job, this benefit could be considered part of your income subject to division. And If during the divorce you leave one job that has one type of compensation for another job with another type of compensation, this could cause issues in the divorce. Therefore, you and your attorney will need to engage in specific, careful negotiations, depending upon the particular asset. Also note that if you determine your own salary, the court will look at consistency and will not necessarily take a figure that you made for example right before you file for divorce if it was significantly less than your “regular” salary.
Contact Us with Questions
For any questions related to asset division here in Florida during divorce, contact our experienced Orlando divorce attorneys at Greater Orlando Family Law today.