Couples divorcing in Michigan either settle their economic matters cooperatively or rely on a judge to apply equitable distribution rules to their assets and debts. It is common for spouses to disagree about what assets are subject to division, how to value those resources and the most appropriate way to actually split them.
When either spouse is a successful professional with a contract that includes deferred compensation, that future pay can potentially complicate property division negotiations. Understanding how to address deferred compensation can limit opportunities for unnecessary conflict.
Is deferred compensation divisible in a divorce?
From a legal standpoint, deferred compensation is often subject to division during divorce proceedings. Any income earned during the marriage is potentially marital property. However, from a practical standpoint, deferred compensation may not be available to divide when the divorce occurs.
Deferred compensation could include stock options that may not be available for several more years. The compensation package could also include bonuses for long-term retention of a position or meeting critical job performance goals. Spouses may need support determining what portion of the deferred compensation is subject to division. They may also need assistance determining a reasonable value for the deferred compensation.
Especially in cases where workers may have the future right to acquire stock or the bonus they may later receive depends on their job performance, accurately estimating the value of deferred compensation can become a hurdle. Spouses may have to employ creative solutions to effectively offset the value of deferred compensation as part of a property division settlement.
People preparing for high-asset divorces often need assistance as they evaluate marital resources and set goals for the process ahead. Deferred compensation is one of many stumbling blocks that can complicate the property division process otherwise.