Involvement in a high asset divorce can be a long, complicated process. Furthermore, if you or your spouse holds the title of executive, you more than likely have executive compensation. Why try to unravel the financial mysteries of this situation on your own when you could hire a Colorado divorce lawyer with all the experience necessary to put you in the best position for a favorable outcome?
At Litvak Litvak Mehrtens and Carlton, P.C., we have extensive experience handling divorces all over Colorado, including those involving a large amount of assets. Additionally, we offer aid and legal counsel on various other issues as a top Colorado family law firm. Whether you’re dealing with divorce, child custody battles, or other complex issues, we’ve got your back. To schedule a consultation with a qualified Denver divorce attorney, please call our office at 303-951-4506 today.
What is Typical in an Executive Compensation Package?
Generally, executive compensation packages are performance-based. But, what does this mean exactly? The compensation differs quite a bit from salaried or hourly workers. This is because, in order to receive better compensation, executives must produce better results. When the company itself underperforms, the executive receives a smaller fraction of their possible pay. On the contrary, when the company performs well, those executives responsible receive a larger payout.
Below, we list the typical components included in executive compensation pay packages:
- Base salary
- Bonuses, or annual performance based incentives
- Performance based long term incentives
- Executive perquisites
- Contingent payments
Who Qualifies for Executive Compensation?
Only certain employees within a company are eligible for executive compensation. Key managerial personnel, such as those we list below, receive executive compensation:
- The Chief Executive Officer (CEO), or the managing director
- Company secretary
- Whole-time director
- Chief Financial Officer (CFO)
- Other officers as prescribed
How Do You Calculate Executive Compensation?
Actually, different types of executive compensation exist which offer different tax benefits and performance incentives. Below, we list the most common varieties of compensation:
- Cash compensation: The sum of the standard compensation that executives receive in the year.
- Option grants: A list of options granted to the executives. These options include strike prices, expiration dates, and stock options.
- Deferred Compensation: Compensation which is deferred until a later date, usually for tax-related purposes.
- Long-term incentive plans (LTIPs): This encompasses all performance-related compensation for tax reasons.
- Retirement packages: Packages that executives receive once they retire. It is a customary practice which often includes health benefits and other perks after years of service.
- Executive perks: Various other perks that executives receive, such as the use of certain vehicles, travel expense reimbursements, and other benefits.
What is the Purpose of Executive Compensation?
The benefits given to senior executives and management are extremely important to the success of a company. This compensation includes the base salary, perks, insurance, incentives, company shares, and more. Senior management within a company plays a vital role in not only its operation, but also its success. Executives help make decisions about building the company’s brand and business. Therefore, companies and organizations stress the importance of keeping management officials and executives motivated in their roles.
Firstly, executive compensation is an extremely important part of both business as a whole and human resources. Senior level executives and employees develop the strategies, make important decisions, and do so much more. Therefore, appropriate compensation keeps them properly motivated. Generally, executive compensation is negotiated between the executive and the employer.
What Is a Deferred Compensation Plan?
Deferred compensation plans basically withhold a certain amount of an employee’s pay until a specified later date. Usually, the employees choose their retirement date. This plan forms the compensation into a lump-sum payment that they receive on the date of their choosing. Examples of these plans include retirement plans, pensions, and stock options.
Qualified Deferred Compensation Plans
These comply with the Employee Retirement Income Security Act (ERISA). They include 401(k) and 403(b) plans. Additionally, they must include contribution limits, be nondiscriminatory, open to any employee of the company, and be beneficial to all employees. Typically, these plans are also more secure.
Non-Qualified Deferred Compensation Plans
These are more like written agreements between the employer and one employee in particular. The company withholds part of the employee’s pay, invests it, then gives it to the employee at a later date. These plans do not have contribution limits, and might target only certain employees, such as the top executives or management officials. However, in the event of the company’s bankruptcy, the employer might choose to keep that deferred money to fund the business. Therefore, this option is less secure than qualified plans.
My Spouse Has Executive Compensation and Filed for Divorce. Now What?
We recommend bringing in a Certified Divorce Financial Analyst, or CDFA, as soon as possible. If you can, bring them in before the discovery phase even begins. This CDFA provides lists of which documents you need to correctly value all assets. These documents also help to determine marital property and separate property, thus preventing last-minute clambering if you go to trial. Luckily, most CDFAs are knowledgeable in this area and qualified to help you, but make sure that you find an individual who has experience in this area beforehand.
Additionally, work with the CDFA to see if they will be available for necessary depositions. They are great experts to have on your side. In some cases, the presence of a CFDA even encourages a settlement. In the event of a settlement agreement, your CDFA will help even further by overseeing the final settlement agreement. Keep in mind that executive compensation is not generally eligible for non-employee spouses at divorce. However, with the help of a Denver divorce attorney and a CDFA, you’ll be in the best position for a favorable outcome.
Contact Litvak Litvak Mehrtens and Carlton, P.C. Today
Divorce cases involving executive compensation are often highly complex. Taking all of this on by yourself might seem an almost impossible task. What’s more is that you potentially expose yourself to financial risk. Because these assets in particular make up a large portion of the “pie”, so to speak, it is important to value them correctly. If your divorce case involves executive compensation, you need a qualified and experienced Colorado divorce attorney on your side. At Litvak Litvak Mehrtens and Carlton, P.C., we offer high-quality service and personalized plans for each and every client. To schedule a consultation with an experienced attorney today, please give us a call at 303-951-4506.