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Executive compensation can complicate divorces

On Behalf of | Jul 5, 2023 | Divorce

Divorce is a reality for married couples in Illinois who can’t work things out. Some divorces are simple matters resolved in a few days. But that’s not always the case, especially if you divorce an executive. An important part of what makes that so complicated involves the many ways they can earn compensation.

Supplemental executive retirement plans

Companies with urges to keep executives on board often issue retirement plans. A supplemental executive retirement plan acts as an insurance policy. The executive contributes to this plan by paying premiums. Paying these expenses allows the executive to access the account’s cash value. Illinois treats vested and matured retirement accounts as marital property, which could work in your favor.

Restricted stock

Restricted stock often comes up in situations involving divorce and executive compensation. This type of incentive is a way to reward executives for exceptional performances. Restricted stock can also incentivize executives to perform better in the future. Dividing actual shares of restricted stock isn’t difficult. However, companies also reward executives with the right to acquire restricted stock in the future. Dividing vested stock is a more difficult situation to handle in a divorce.

Deferred compensation

An executive’s large salary also can come with expensive tax payments. Some companies allow executives to defer portions of their salaries and receive this income in the future. It’s not unheard of for an executive to postpone compensation until after retirement, which could be a long way away.

Divorcing an executive could provide you with a big payday, but it isn’t likely going to be a quick process. Some former executives’ spouses even hire outside help, such as forensic financial specialists for assistance with divorce-related compensation.