Sophisticated Compensation Plans

Michelle J. Perkins, Esq.

Michelle J. PerkinsAs companies change, so do their types of compensation plans. Understanding the way a spouse is compensated in a divorce is important for spousal maintenance, child support, and also for determining if there are additional assets to be divided in the case.

While it is true that many employees are compensated with regular W-2 salary or hourly income, more and more employers are granting additional employment incentives such as health benefits, stock and stock options, deferred compensation, bonuses, commissions, and other executive forms of compensation.

It is important to understand the difference between the different compensation components as they could affect spousal maintenance and child support. For example, an employee may be granted stock options, bonuses, or commissions only once per year for their performance for the whole year.

This means that although the marital community ended, months later the working spouse may receive compensation for his or her employment performance during the marriage. Additionally many employees earn and accrue benefits such as paid vacation time, which they can later cash out. This can also be an asset subject to division in a divorce.

Another complicated issue is determining the compensation of a self-employed person or entrepreneur. When a party owns his or her own business, often times the income generated from that business can vary greatly year to year.

As a result, the non-working spouse wants to use the most recent high year of income and the business owner will want to use the most recent low income year.

In order to properly calculate a self-employed person’s income special consideration needs to be given and it will require the review of bank statements and other documentation to ascertain the income before a spousal maintenance and/or child support calculation can be done.

If you are considering a divorce and would like to work with one of our experienced Attorneys, please call OWENS & PERKINS at(480) 630-2464to schedule your free 30 minute consultation.

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