Is deferred compensation at risk during a Massachusetts divorce?

On Behalf of | Feb 1, 2022 | High Asset Divorce |

Spouses share everything from a bank account to a bedroom. While sharing is convenient and efficient during marriage, it creates most of the complications couples encounter when divorcing. Commingled finances are one of the hardest things to address in Massachusetts divorce. A couple will have to negotiate a way to split their property and their debts so that the outcome is fair.

Higher-earning individuals and high-asset couples will likely find this process more challenging than working-class couples. In a Massachusetts divorce, the goal is equitable distribution or a fair outcome, which means looking carefully at all of your shared property and obligations. It can be difficult to divide complex property, especially because you may not know what is actually subject to division in your divorce and what is exempt.

You probably realize that you and your spouse will divide your financial accounts and your big possessions out like your home. What about deferred compensation offered by one of your employers?

When you earn is what matters most

Deferred compensation represents future income, so some people might disregard it because they don’t have it in their hands at the time of the divorce. However, that would not be the appropriate approach. A pension is also a benefit typically payable in the future, but that doesn’t mean the spouse that accrued pension benefits can avoid sharing them with their spouse.

If one spouse accepted a position with deferred compensation, either a lump-sum payment after they stay at the company for a fixed amount of time or an ownership interest, like stock options, when they accrued that compensation matters more than when they receive it. Deferred compensation earning during the marriage is subject to division.

It can be hard to value deferred compensation

In some cases, the financial value of deferred compensation is straightforward. It will be a one-time bonus in a fixed amount, so you can easily factor that into the property division negotiations for your divorce. Other times, like with stock options, it will be impossible to know exactly what that deferred compensation will be worth when someone receives it.

Identifying what deferred compensation may be marital property and how much it is worth is an important part of planning for complex property division in a high-asset divorce.