Making the decision to divorce is life-changing, but realizing just how far-reaching this legal process is can be critical. This is particularly necessary in divorce and executive compensation matters. If you are in a well-paying job, perhaps even owning a portion of the company, with a well-designed retirement account, you may be wondering what happens to financial assets, such as stock options and bonuses in a NJ divorce.
Each case is a bit different when it comes to divorce and dividing assets. Hiring an experienced attorney who can help you navigate this far more complex divorce process is critical. Contact Zeigler Law Group, LLC, to discuss the specifics of your case.
Deferred Compensation Plans, RSUs, and Bonuses in Divorce
In New Jersey, the court divides marital property equitably, meaning it is not necessary to divide it in a 50/50 value split. One key concern in that process is valuing stock options or other deferred compensation plans. These plans require the investment early, often during the marriage, and build value long-term as long as the funds remain within the account.
In the case of a divorce, the court recognizes that withdrawing funds from such accounts now is either not possible at the highest value, especially if you are not fully vested, or comes at a very high cost. That is why it takes a more specific approach to making decisions about deferred compensation plans and other financials.
Deferred Compensation Plans
A deferred compensation plan, such as an executive retirement account, will need to be divided during a divorce. However, the court may require a qualified domestic relations order (QDRO) to divide the pension funds or other investment strategies. Or, a buyout agreement may be used.
Stock Options and RSUs
Stock options and RSUs, for example, must be considered carefully to determine if they are marital property. They can be a challenge because they may not be vested for years into the future, and their value may be tied to the unknown future performance of those investments.
Bonuses
Bonuses are another key area of consideration. If the bonus was earned during the marriage, it is usually part of the marital property. However, if the bonus is for future work after the divorce, it tends to be separate property.
For all of these reasons, executive compensation in divorce is complex. However, you can protect your future by working with a local attorney who knows the courts and has experience in high-asset divorce and executive pay.
Whether or not the property is marital, meaning it was earned during the marriage, plays an important role in this process. Several creative ways are available to divide assets, which are likely to achieve a truly fair plan.
Strategies to Protect High-Value Stock Options and Bonuses in NJ Divorce
Now that you are thinking about NJ divorce and stock options, as well as how bonuses are divided in divorce, you may be a bit worried about what will happen to all the hard work you put into your career. Developing a legal strategy based on your specific situation could be critical, and we can help you.
Remember that New Jersey operates as an equitable division state. That means assets do not always have to be divided in a 50/50 split. They have to be evenly distributed based on what is fair to both parties. There are various strategies that may help you based on your objectives:
- Providing other assets: Instead of putting your stock options in a divorce settlement, you may be able to offer your spouse another type of asset that is of fair value to the value of the stock options.
- If your stock options are vested, it is possible to liquidate them and distribute the monetary value as the court determines is fair.
- In a deferred distribution strategy, the spouse, who is not the employee, receives their share of the stocks later if they exercise their stock options later.
- Employers may be willing to transfer some of the stock options into the other party’s name, so you do not have to liquidate your accounts.
- An agreement between the two of you may be carefully considered based on what is valuable to each person.
Taxation Considerations on Stock Options and Bonuses in NJ Divorce
Tax considerations throughout this process must also be considered. Stock options could lead to a higher trigger for capital gains tax, and bonuses and deferred compensation are taxed as income. If assets are not divided in a way that is considered equitable, that could lead to double taxation or penalties later.
By working with an attorney who has ample experience in this process, with New Jersey equitable distribution, high-net-worth matters, and long-term financial planning, you gain insight into all strategies that may be beneficial to you. This includes focusing on the options for mitigating taxes and ensuring the best possible strategies for minimizing financial loss.
The key to remember is that there is flexibility in this process. It may be possible to work out an agreement that both parties deem fair, but that may not seem like that to others. As long as the court understands that both parties are achieving their goals, you may be able to move your case forward. With creative ways to divide assets, finding a solution that works for everyone may be possible.
Why Working with a Skilled Toms River Divorce Lawyer at Zeigler Law Group, LLC is Essential to Protect Your Assets
New Jersey equitable distribution laws allow for creative ways to divide assets in a way that works for all parties. Whether you are worried about RSUs and divorce in NJ or are unsure how bonuses are divided in a divorce in your situation, speaking to an attorney with knowledge and experience in the matter can provide peace of mind. Sonya K. Zeigler, Esq. and her team have a well-earned reputation for committed and fierce legal representation. Our firm is here to provide you with the best possible guidance. Call a Toms River divorce lawyer at Zeigler Law Group, LLC at 732-361-4827 or contact us online to schedule a free consultation. Located in Toms River, Red Bank, Princeton, and Mount Laurel, New Jersey, we serve clients throughout Ocean County, Monmouth County, Mercer County, and Burlington County.