When a spouse works for a corporation in an executive capacity, there are many different components to compensation. Whether you are the corporate employee or the spouse, our Connecticut family law attorneys at Ruel Ruel Burns & Britt have the knowledge that is crucial to understanding the components of executive compensation, and the experience to discover and explain the information and plan documents necessary to evaluate such compensation in a dissolution of marriage matter.
The most common categories of executive compensation are salary, cash bonus, Stock Options, Restricted Stock Units, Restricted Stock awards, Performance Share Units, and other types of deferred compensation. When and how these various components are paid differs from company to company and business to business. The awards are generally awards of stock or stock rights in a publicly held corporation. Our family law attorneys at Ruel Ruel Burns & Britt have significant experience in assessing, valuing, and dividing the components of executive compensation.
Types of Executive Compensation.
Salary and bonus are the most common components of compensation. These components are paid in cash and subject to immediate taxation and distribution to the employee. In divorce cases, these components provide the basis for support awards, such as child support and alimony.
Other types of executive compensation include the following:
- Stock Options: Stock options are granted to an employee and represent the future right to purchase company stock at a set price, subject to a vesting period.
- Restricted Stock: Restricted stock can be granted to an employee, and once the vesting schedule has been met, the employee assumes ownership of the awarded shares of stock. Generally, at the time an employee assumes ownership of the stock, the value of the shares is reported as income to the employee, unless the stock has been reported to the IRS as income at the time of the award (before the vesting period) under certain tax rules.
- Restricted Stock Units: RSUs represent awards to the employee that are measured by stock value, and share a similar vesting schedule, however, typically, once the award is fully vested, the employee is paid the value of the stock and does not assume ownership of the stock. The award is taxable upon completion of the vesting period, assuming the employee remains with the company.
There are other types of executive compensation or deferred compensation which may defer actual compensation, and taxation, for as long a decade into the future. Our family law attorneys carefully analyze and advise our divorcing clients on the various components of executive compensation when addressing property division and alimony and child support orders or the modification of support orders in both negotiation or litigation.
Other components of executive compensation are subject to “vesting periods”, which refer to a period of time that an employee must wait in order to access the awarded compensation. The vesting period is intended to give the employee an incentive to stay with the company and to work for the betterment of the company and, theoretically, to contribute to an increase in the price of the stock and value of the company. An employee who terminates employment may or may not be entitled to awards, depending upon the vesting schedule and reason for the employment termination. Our family lawyers take time and care to ensure that our clients understand the timing of specific payouts and the related implications for taxes, property division, and future support orders.
Our family law attorneys at Ruel Ruel Burns & Britt have litigated executive compensation issues at the trial and appellate levels. Whether we represent the corporate employee or the spouse, creating value for our clients through our understanding of how to divide these contingent awards is our focus. Please contact us at 860-206-9096 to discuss executive compensation and benefits involved in your Connecticut divorce case.