Divorce can be a difficult and complicated process, especially when it comes to California’s complicated financial landscape. One of the most complex issues in any divorce is executive compensation. Here are a few common mistakes that people make when handling executive compensation in divorce.
Not getting a valuation early enough in the process
Valuation helps to set the stage for the divorce negotiation process because it provides a clear understanding of what the executive compensation is worth. Without this information, it can be difficult to determine an equitable split of assets. When spouses fail to get a valuation early, the divorce negotiation process may get delayed or lead to an unfair settlement.
Not understanding the different types of executive compensation
There are two main types of executive compensation: salary and bonus. Each type of compensation is taxed differently, so it’s important to understand the tax implications before divorce negotiations begin.
In addition, there are other types of executive compensation that may be included in divorce negotiations, such as stock options, restricted stock units and deferred compensation.
Not accounting for the future
The divorce negotiation process should take into account the executive’s future earning potential. This is especially important if the divorce will result in a significant change in lifestyle for the executive.
For example, if the executive will no longer be able to work in their chosen field after the divorce, this should be taken into account when negotiating their compensation package.
Not getting professional help
Divorce can be a complex and emotional process. When handling executive compensation, it’s important to have a clear understanding of the divorce laws in your state as well as the tax implications of the divorce settlement.
It’s also important to have a clear understanding of your own financial situation, and a professional in these areas can be extremely helpful.
If you are facing divorce and executive compensation is an issue, it’s important to avoid these common mistakes. By understanding the process, you can ensure that your divorce settlement is fair and equitable.