Unique Divorce Issues For Executives And Shareholders

Executive and shareholder divorces involve more than salary. Equity awards, deferred compensation, and ownership interests have to be inventoried, classified, and valued, and the divorce can affect the company, its other shareholders, and the executive’s privacy.

Here are the issues that set these cases apart.

Executive Compensation Is More Than Salary

In Colorado property division, every form of compensation has to be identified before it can be divided. Executives often receive bonuses, stock options, restricted stock, deferred compensation, and retirement benefits on top of salary.

Start by gathering every plan document, grant agreement, and vesting schedule. The terms of each award often decide how it can be divided.

Are Unvested Awards Marital Property?

Colorado’s Supreme Court has held that whether a stock option is property depends on what it was granted for. Options granted for past services can be property when granted, while options granted for future services become property only as those services are performed.¹

Applying that rule to a specific award often requires a time-based allocation and careful review of the grant terms.²

Disclosure and Valuation

Each spouse must disclose business tax returns and financial statements for any business in which they have an interest, along with other mandatory financial records.³ Company equity, especially in a private company, usually needs a qualified valuation.

Property is valued as of the decree or the property hearing, whichever comes first.⁴ For volatile stock, the timing can change the result significantly.

Executive compensation cases turn on the details of each plan and grant. Johnson Law Group offers a no-pressure consultation to inventory your awards and plan the division, so schedule a consultation before disclosures are due.

Effects on the Business and Shareholders

Shareholder and buy-sell agreements may restrict transfers, give the company a purchase right, or set a valuation method. Those terms can keep ownership with the executive, with the other spouse’s share paid in other assets.

Divorces involving a family business raise related issues, and the tax implications in a high net worth divorce affect what each settlement option is worth.

Privacy for Executives

Executives often want to keep financial terms out of the public record. A separation agreement can provide that its terms will not be set forth in the decree.⁵ The decree then identifies the agreement and states that the court found it not unconscionable.

Talk With a Colorado Divorce Attorney

Executive and shareholder divorces reward early, organized work on compensation and ownership. Johnson Law Group is here to help.

The attorneys at Johnson Law Group help executives and their spouses inventory, value, and divide complex compensation and will give you a clear read on your options. Schedule a free consultation through our Colorado offices, and we will serve as your North Star from here.

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