Understanding How Executive Compensation Works Can Be Helpful

If you’re married to an executive of a New York company and have decided to get a divorce, dividing assets fairly can be complicated to complete. Understanding how executive compensation works is essential if you’re in this position and want to ensure you get what you deserve.

Understanding executive compensation

When high-level executives get paid, they are often given more than a traditional paycheck. Stock options or restricted stock awards may be used as compensation to reward them for performing well. These incentives may have tax benefits that help avoid higher tax brackets. Stock options, deferred compensation and long-term incentive plans can be used. When you’re getting divorced, dividing these types of assets can be challenging as they may have the following characteristics:

• Fluctuation in value
• Drop in value if they are converted into cash too soon
• Unable to be liquidated or transfer ownership

Stock options

Stock options are an example of executive compensation that can be challenging to divide in a divorce. They allow the recipient to purchase stock in the future. The advantage of this transaction is that it’s based on the stock price on the day the option was granted. If the stock trades higher in the future, the recipient can be rewarded with a significant profit.

Restricted stock awards

Restricted stock awards are also given to executives for performing well. Similar to stock options, dividing them in a divorce can be difficult as they have time limits and can only be sold when they vest. Another challenge with restricted stock awards and stock options is that the total value can be lost if the executive leaves the company before the vesting period.

Understanding how executive compensation works can be vital if you’re getting divorced and want to have a fair division of assets. Many factors must be examined to ensure an equitable distribution is achieved.