Divorce with Complex Compensation Packages in New Jersey

Not all compensation packages from an employer look the same. Earnings packages can be complex, and the way an individual is compensated can impact the way their assets are distributed in the instance of a divorce. Depending on how a compensation package is structured, some earnings may impact alimony obligations while others may be considered marital property and undergo equitable distribution.

If your earnings package or that of your spouse involves performance-based bonuses, restricted stock units, or other complicated payments, it is wise to seek the counsel of a high net worth divorce attorney. A knowledgeable attorney at Moskowitz Law Group can guide you through a divorce with complex compensation packages in New Jersey and ensure that your best interests are protected in your separation.

Dividing Bonuses in a Divorce

If bonuses are performance-based, they are likely considered for alimony and are included in the earning spouse’s income when calculating spousal support. If bonuses are in the form of restricted stock units (RSUs), their treatment will depend on when they were granted and when they are vest.

For example, if an RSU is granted during the marriage and is vest after the marriage, this could be considered marital property and distributed via equitable distribution. However, if the RSU was granted and vest after the divorce, then it is no longer considered for equitable distribution and would instead be considered part of earning spouse’s income for alimony purposes.

How the Structure of a Bonus Impacts Distribution

The way a bonus is distributed in spousal support payments may vary depending on how the person receives their bonus. If someone receives a guaranteed bonus on a monthly basis, that may be part of a monthly award. Conversely, if a spouse receives a yearly discretionary bonus, that part of the compensation for purposes of alimony may have to be assessed at the time it is received. A skilled New Jersey attorney can explain bonus pay structures in more detail as they relate to spousal support in a divorce.

What is a Clawback Provision?

A clawback is a provision in which money that has been paid out in advance to the recipient but must be returned to their employer or to the firm under certain circumstances.  These are used mainly in financial firms and are usually contractual.

A clawback provision could be put in place for something like a sign-on bonus. In this case, money is paid in advance, but the person has to remain employed for a certain number of years or else they would have to return the money.

When it comes to allocation during a divorce, a clawback provision would have to be taken into account in terms of equitable distribution. If a bonus is paid out to a spouse and is subject to a clawback provision, this would need to be factored into the marital settlement agreement. The way that this amount would be paid back can vary depending on many factors, and an NJ attorney skilled in complex earnings packages can help negotiate these terms.

Stock Distribution in New Jersey

The distribution of stocks in a divorce is dependent on when the stocks were acquired. Stocks acquired during the marriage are considered an asset to the marriage and are therefore subject to equitable distribution. On the other hand, stocks acquired before the marriage are considered non-marital assets and would not be distributed in a divorce.

Consider a case where a spouse received an RSU during a marriage but vested after the marriage. Because this would be paid out as an asset, one could not go back and count these RSUs as income as well, because this would be considered double counting and is unfair in a divorce. It is best to work with a seasoned attorney for complex compensation packages like RSUs to avoid issues such as double counting.

Consult with a New Jersey Attorney About Complex Compensation Packages in Divorce

Intricate earnings packages can add complexity to the proceedings of a divorce. Some payments may be classified as marital property, while some are considered income and go into alimony payments. Either way, divorcing couples dealing with dividing these complex assets can benefit from the guidance of a seasoned attorney. A seasoned NJ lawyer can assess your situation and help you determine the effect of certain payments on spousal support or equitable distribution.

If you are going through a divorce with complex compensation payments in New Jersey, do not attempt to handle the distribution process alone. Reach out to Moskowitz Law Group today to schedule a consultation.

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