Addressing executive compensation in a Colorado divorce

On Behalf of | Jan 14, 2022 | High Asset Divorce |

When you need to split up your property with your ex in a divorce, your objective should be a solution that is fair to you both. After all, that is the approach that the courts will take if you litigate the property division process.

Colorado’s equitable distribution statute requires that the courts look at each spouse’s personal financial circumstances and their contributions to the marriage to determine what is fair and equitable for each of them at the end of the marriage. High-asset couples often have a harder time with this process, especially if one spouse earned far more than the other.

Compensation for work is often a source of emotional conflict in a divorce. People feel an attachment to certain kinds of pay, especially if it has a correlation to their work performance, like a bonus. You may realize that income earned during the marriage is marital property that you have to share with each other. What about deferred compensation an employer has yet to pay?

Executive or deferred compensation is often marital property

It is generally when and why you acquire an asset that determines whether it is a “marital” or “separate” for the purposes of equitable distribution in a divorce. Deferred compensation is usually income that is earned during the marriage but may be invested or saved by the company on the employee’s behalf.

Such compensation, if it was acquired (earned) during the marriage, is likely to be “marital.” Other types of income, such as performance bonuses, or stock, stock options, etc. might be partially earned during the marriage. If the work related to the earning of the compensation has occurred during the marriage, then the asset is likely to be marital. If the work related to the asset is to occur after the marriage (but the right to earn it came during the marriage), Colorado usually determines such assets to be non-marital or separate. However, some courts have found that the “right to earn” such assets in and of itself has some value. Some courts disagree. A lot of times it simply might depend on the specific facts, the compensation agreement the employee has with the employer, and/or the equities surrounding the assets or the situation. Bottom line, when it comes to the division of these sorts forms of “executive or deferred compensation,” what will happen does not have a simple black and white answer. The best thing a party to divorce can do is to consult with an experienced divorce lawyer.

What about compensation with an unclear financial value?

Sometimes, such executive compensation might involve the right to a future bonus, stock, stock options, restricted stock units, accrued leave, etc. Companies offer many types of incentives to employees, and sometimes such compensation is based on incentivizing the employee to join the company, or it might be based on past or future work. All these factors need to be analyzed before one can determine what portion of such assets (or rights to assets) are marital property, subject to equitable division.

There are also valuation issues surrounding some of these types of assets, and again, the best thing to do is to consult with the experts. Divorce lawyers that specialize in, and have experience with, high asset divorces in Colorado will possess the skills necessary to sort through and properly advise a client about theses complex issues. Ciancio Ciancio Brown has several attorneys that handle this type of work.