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Is deferred compensation on the table in a Connecticut divorce?

On Behalf of | Nov 9, 2022 | Property Division |

It can take weeks of careful review and frustrating negotiations to reach a property division settlement that works for you and your spouse. For many couples contemplating divorce in Connecticut, separating their financial resources will be one of the most challenging steps in the process.

The more assets and income you have, the greater the incentive to fight over your marital property. Spouses who have a marital agreement in place may already have rules regarding how they divide their property and if there are any spousal support obligations. Most couples will either need to negotiate their own terms early in the divorce process or prepare for litigation.

Higher-earning professionals often have more challenges during this process. Will your deferred compensation, like your end-of-year bonus, be at risk during your divorce proceedings?

Compensation from during the marriage is marital property

Unless you already made an agreement stating otherwise with your spouse, any income you accrue while married is part of your marital estate. That will include employment benefits like an employer’s matching contributions to your retirement account and deferred compensation.

Perhaps you have a performance stock option in your employment contracts that will lead to you receiving a certain amount of stock after your third year with the company. Perhaps you receive an annual end-of-year bonus based on the company’s performance and your total sales. Although you won’t receive it during the marriage or even during the divorce proceedings, the deferred compensation technically earned during the marriage is subject to division in your divorce proceedings.

Valuing deferred compensation is a challenge

You can hire an appraiser to determine what your home is worth, and many of your other assets have an obvious, fixed value. The price of a company’s stock could change drastically in the next few months, to say nothing of the two years before deferred compensation gets paid out by an employer.

Negotiating the value of deferred compensation for the purpose of property division can be as important as determining how much of the compensation is at risk of division. Those with more assets and complicated property often have a harder time resolving property division matters in a divorce. Identifying likely challenges that you will face when dividing your property can help you plan the best strategy for negotiations or court.

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