What can the courts do with deferred compensation in a divorce?

During a contested divorce in South Carolina, you and your spouse provide information about your finances and assets to the courts in order to help them reach a fair and reasonable decision about how to split up your assets. For some couples, this process is straightforward, as they may own simple assets that are relatively easy for the courts to divide.

Other couples, especially high-asset couples with professional careers, may wind up facing more complications as they work through a divorce. Complex assets and unusual financial situations, including deferred compensation, could potentially make the process of property division a little bit more difficult in your divorce.

Some forms of deferred compensation aren’t easy to track

In order for an employer and employee to legally arrange to defer payment for current work, there usually needs to be a contract and documentation for what is known as qualified deferred compensation.

However, some employers will work with their employees to defer compensation for the benefit of the employee, even if it might violate employment or tax laws. For example, if your ex works for their cousin, their cousin might agree to pay them substantially less from now until the courts finalize the divorce in order to reduce their income in the eyes of the courts, which could affect both property division and spousal or child support.

You will have to show the courts that your ex and their employer have intentionally avoided paying for work in a prompt manner in order to prevent you from claiming those funds or from the court considering them when determining what is fair and reasonable in your divorce.

There are multiple ways to handle deferred compensation

If the courts have a specific financial figure that represents the amount of deferred compensation for a qualified deferment arrangement, they might allocate some of that to the other spouse or factor that amount of income into their determination about support and property division.

In some cases where the deferred compensation is meant for it later in life or during retirement, the courts might decide to order spousal support for the duration of that deferred compensation in order to ensure that a spouse receives a fair division of the marital assets and income.

Regardless of how the courts handle deferred compensation, it’s important that you make them aware of it in order to secure a fair outcome in the property division process.