Deferred Compensation and Divorce: Who Gets What?

Divorce is a difficult time, and one of the more trying conversations involves how assets are to be split. Between deciding who gets the house and how to split various pieces of personal property, divorce asset determinations often lead to difficult and contentious discussions.

Recently, the Supreme Court of Virginia issued an opinion further clarifying the rules to be applied during the equitable distribution during a divorce of deferred compensation such as stock options, restricted stock, or retirement plans.

Deferred compensation refers to payment that is provided at a later time during employment. In this case, the court issued a holding on the correct way to handle stock options issued during the marriage that were not available for use until after the separation.

Details of Ruling

The couple that was involved in the ruling was married in 2004. Shortly after, the wife accepted a position as vice president of a corporation with a generous salary that included stock options scheduled to vest, or become available for her use, at a later date. The couple separated almost three years later, and the stock awards vested shortly after the separation.

The analysis of the equitable distribution implications of stock options are very complicated because they involve the interplay of three events: (1) award, (2) vesting, and (3) date of exercise.

State law notes pensions and other forms of deferred compensation "is presumed to be marital property in the absence of satisfactory evidence that it is separate property." In this case, the options were awarded before the separation, some vested before the separation and some after, and the options at issue were exercised after the separation. This was not sufficient to make the options separate property. As a result, the stock options were included marital property that was subject to equitable distribution.

Navigating the complex set of determinations and recent case law used to guide decisions splitting assets in a divorce can be complicated. Every situation is unique, and the use of an experienced Virginia divorce lawyer can better ensure your legal rights and remedies are protected.