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Type of compensation may impact divorce timing

| Aug 23, 2019 | Divorce |

Finances are among the most hotly contested issues in many Virginia divorces. For people who are paid on an hourly or straight salary basis, the timing of the divorce may have little impact on finance or property division. However, for individuals with more complicated compensation structures, the timing of the divorce and other negotiation matters may be of greater importance.

People who are paid large bonuses with clawback provisions, for example, may be able to argue against dividing the bonus funds. If the bonus money can be clawed back by the employer, then those funds might be thought of as not yet earned at the time of the divorce. In a situation where such bonus money is divided between the spouses, the divorce agreement should clearly outline what the parties’ responsibilities are in the event that the clawback provision becomes relevant.

On the other hand, individuals who receive a bonus during the course of the divorce process for work performed before the petition was filed will likely have to count the bonus as a marital asset. In such cases, it is important to avoid double counting, where the bonus is divided between both spouses but then counted in full as income for the party who earned it.

People who are paid on commission might want to file for divorce before they are paid for a large deal. The other side might argue that the commission was earned before it was paid, but filing sooner gives room for argument.

An attorney who has experience handling divorces in Virginia may examine a case and highlight areas where financial planning might make a client more secure. A lawyer may identify marital and separate assets or negotiate with the other side to improve the terms of property division.