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Complex compensation can make property division messy

Divorce even between two salaried, nine-to-five employees can be hard to agree on and delicate to calculate. When one or both have complicated compensation packages and intimate entanglements with a business’s assets, breaking up can truly be hard to do.

Sometimes it is wise and possible to time divorces and compensation so that they land at convenient moments. Certainly, as an article in Forbes describes, a divorcing spouse whose compensation structure is complex and whose counsel is wise can try to think strategically about property division.

Commissions and stock options

Imagine filing for divorce and then closing a deal that earns a commission. How can anyone know if the commission is paid for work done during the marriage or after, and therefore is or is not marital property? Depending on the timing, or choice of timing, arguments could go either way.

Pennsylvania generally sees stock options as marital property, but they are often more complex as they involve future value, vesting schedules and more. Agreeing to a rational calculation of present value can sometimes be best for everyone.

Planning and counting bonuses carefully

Unlike regular salary payments, bonuses hit bank accounts at discrete moments. This can cause complications that are easy to miss. For example, a bonus can slip, perhaps inadvertently, into calculations for both dividing up marital assets as well for individual income used to calculate support. One or the other is enough.

Employers sometimes give employees bonuses upfront, while keeping a “claw-back” option that allows the employer to get back all or some of the bonus if the employee does not meet goals or if they leave the company prematurely.

If the claw-back option is still on the table at the divorce filing, the divorce agreement should spell out how different claw-back scenarios would play out. Tax and other considerations could cut deeply into finances unless the agreement plans appropriately.

Personal perks versus business expenses

How do you divide the company car? The place to start is to understand that not everything “nice to have” is compensation subject to asset division.

Cars and expense accounts used for business-only purposes are not compensation. But housing, country club memberships or other perks meant to improve your family’s lifestyle might be, at least in part. Whichever way the judgment goes, it may not make calculating or negotiating its value entirely simple.

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