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How Executive Compensation Impacts Divorce

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In our previous article, “How Executive Compensation Impacts Divorce,” we presented the types of executive compensation that should be considered for purposes of marital property division, as well as future income that should be included for support calculations. This article will examine the basics of dividing executive compensation. We begin by identifying several key aspects of executive compensation in divorce.

Identifying the Marital Portion

In most cases involving divorce, we must first determine to what extent the compensation is marital and subject to division. In all cases, if the compensation was awarded and vested during the marriage, they are 100% marital. If awarded but not vested, we must first determine the extent the award is based on past service vs. future performance. To the degree based on future performance, that portion would be considered separate property. To the extent that there are no plan-specific rules regarding the division of benefits, coverture fractions are used to determine the percent marital. 

Applying Coverture Fractions

Coverture fractions based on past performance are based on the Hug formula. The numerator (marital service credit) represents the total number of years or months during which the retirement benefits were earned or accrued while the spouses were married. This includes the period from the date of marriage to the date of separation or divorce filing, whichever is applicable. The denominator (total service credit) represents the total number of years or months that the spouse worked or accumulated service credit that counts towards the retirement benefit. Up to the present date or retirement date. Calculate the marital coverture fraction by dividing the numerator (years of marital service credit) by the denominator (total years of service credit).

Coverture fractions based on future performance are based on the Nelson formula. The numerator (period of marital service) represents the period during which the spouse earned or accrued retirement benefits while the marriage was intact. This typically starts from the date of marriage to the date of separation or divorce filing, depending on state laws. The denominator (total period of service) represents the total period during which the spouse worked or accumulated service credit that counts towards the retirement benefit up to the present date or anticipated retirement date. Calculate the marital coverture fraction by dividing the numerator (period of marital service) by the denominator (total period of service).

Divide or Offset?

Most executive compensation cannot transfer directly to the non-employee spouse. Even if it can be, it may not be advantageous to transfer it at the time of vesting or payment. In these cases, we need to be able to provide a value for the portion earned during the marriage so that the employee-spouse can keep the compensation while the non-employee spouse receives other assets to compensate. Valuation, however, is not always a straightforward exercise. 

Tax Considerations 

When transferring to a non-employee spouse, we need to adjust for the taxes paid at the time of vesting or exercise. Depending on the plan, the recipient’s marginal tax rate applies to some transfers when exercised. Only the employee spouse can exercise others, using the employee spouse’s marginal tax rate at vesting or exercise.

Attorneys may subpoena the employee spouse’s company or the employee spouse can provide documents that are necessary to determine if the executive compensation is based on past or future performance, granting conditions and vesting schedules. Request the following documents:

    • Compensation plans and all amendments
    • Grant agreements and all amendments
    • All correspondence (letters, memorandum, emails) relating to grants
    • Summary plan descriptions
    • Annual statements of employee benefits
    • Employee manuals the describe employee’s right to benefits
    • Employment contract or offer letter
    • Beneficiary designation forms
    • Employee’s employment file
    • Valuations conducted for IRC Section 409(A) purposes or other purposes
    • Employee’s W2’s

In our next article, we will look at some of the nuances of handling executive compensation across the more common types of executive compensation. 

Take Control of Your Future

When you consider divorce, one of the biggest realities for those in the divorce process is the financial settlement and financial analysis post-divorce. Get the assistance of Berni Stevens, a Mediator and Certified Divorce Financial Analyst® (CDFA®.)

Berni provides step-by-step guidance on matters related to divorce. With a wide range of experience and expertise related to divorce issues. Berni will simplify the process and provide much-needed clarity in areas such as long-term tax consequences, asset, and debt analysis, dividing pension plans, continued health care coverage, stock option elections, protecting support with life insurance, and much more.

Schedule Your Complimentary Divorce Strategy Session Today!

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How to Win in Divorce

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In a recent post, I addressed the notion of “winning” at divorce. There are many lawyers who claim they can do just that, and they will be happy to take your hard-earned money while they fight your war for you. The reality is, in the vast majority of cases, you’ll wind up no better off than if you’d negotiated to begin with, and all the while you’re funding your lawyer’s kids’ college education instead of your own. 

Winning might instead be viewed as getting through this divorce transition with integrity, keeping more of your own money, and maintaining your and your children’s emotional health throughout. Ideally, you’ll do this without ever stepping foot into a courthouse or even speaking to an attorney. 

So, how do you get better outcomes, at a lower cost and without judges, courts, or even lawyers? If you have minor children and marital assets, don’t attempt a do-it-yourself divorce unless you want to risk costly mistakes that cannot later be reversed. If you want an easy, affordable, and legal solution, seek a qualified divorce mediator. 

You will want to find a mediator who has the knowledge, skills, and experience to guide you and your spouse to a financially optimized settlement agreement and, if applicable, with a parenting plan that preserves the integrity of your family. A mediator with the divorce financial expertise of a Certified Divorce Financial Analyst (CDFA®) is ideal.

How, though, to address the legal piece of your divorce? You will find that legal agreements and divorce papers are straightforward in a mediated case. These can be easily facilitated by your mediator so that you never even have to work directly with an attorney to process your divorce. (It’s never a bad idea, though, to have an attorney review your agreements before they are finalized, and this can be done at a minimal cost.)

Rationally approaching your divorce, along with a dose of grace, can result in a lower-cost and faster process while addressing your financial needs and preserving your family’s emotional well-being. Now, wouldn’t you agree this would be a “win” at divorce?

Making Time for You: How to Make Time for Yourself

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Divorce is a truly hard and difficult process that impacts many facets of life including our social circles, finances, and even our sense of identity. To adapt to this transition, it’s essential to schedule time for self-care. I say schedule because that’s just how intentional doing self-care during your divorce is. In order to have the stamina to find a new living situation, research affordable childcare, or land a new job, you’ve got to carve out time that’s just for you. 

How to Make Time for Yourself

Exercise

Move your body! Movement provides an outlet for stress and anxiety and gives a safe place for these (valid) emotions to go. In addition, regular exercise promotes healthy sleep and improves your mood. Divorce is a long-distance sport, so keep your strength by pumping your heart rate up for at least 15 minutes, three times per week. Most importantly, let go of any predetermined notion of how your body should be looking right now, and exercise for the lasting health benefits and confidence it builds.

Meditation

While it may feel daunting at first, introducing a meditation practice into your routine is a core self-care tool. Meditation can take many forms, including walking meditations, repeating a mantra, or guided breathing exercises, so don’t feel like you have to look or dress a certain way to practice. Ultimately, meditation encourages our awareness of the present moment, helping us to safely feel our bodies and provide refuge in a sea of emotions without judgement.

Journaling

Therapeutic activities like journaling is another great grounding technique to keep you rooted in the present. Gurus and scientists alike agree that writing a list of what we are grateful for — especially first thing in the morning — can instill a sense of optimism and sustain us through the hurdles of the day. Keeping a journal during your divorce can also provide catharsis in the future, a testimony to what you accomplished; your hard won freedom.

Recreational Reading

Give your brain a break from the divorce lingo and the parade of emails. Having a solid fiction book to dive into is a readily accessible form of relaxation, even for the busiest of minds. A reading ritual is just as much about the material as it is the setting, so use this time as an intentional space set aside where you can find some quiet, free of distractions.

Relaxing Bath or Shower

When depression looms, self-grooming can go out the window. Scheduling time for a luxurious bubble bath might seem ridiculous, but not if you’re serious about staying sane. Combine this time with your recreational reading, or don’t! It’s your self-care ritual, relaxation is the only requirement. Incorporating essential oil blends like spearmint, eucalyptus, and lavender are a perfect addition to soothe your sinuses. Candles make things feel official and can transform just about any space into a sanctuary.

A Balanced Diet

Stress can deeply affect your appetite, especially when facing separation. It’s important to create systems in your home that will help you eat regular meals to maintain your blood sugar level and a stable mood. A diet full of leafy greens and energy-packed fats like avocado and ghee is the most nutritious, but can be challenging to sustain. This means maintaining a healthy diet might require setting aside an afternoon for meal prep or making batches of comfort foods like lasagna that can be easily heated up when you don’t feel like cooking. Whatever your optimal diet is, try to focus on the idea of nourishment while eating instead of distracting yourself with devices and screens.

A Divorce-Free Zone

Spending social time without dominating the discussion with your divorce is not only essential for your well-being, but your friends’ as well. Divorce doesn’t need to define you, and playing the broken record of how crappy your ex is, well, crappy to listen to. Protect your social circle and make a point to be present with your friends. Using this transition as an opportunity to check out some local activities you’d normally slough off can be a great way to stay socially active; I’m talking Zumba, farmer’s markets, that Persian restaurant you haven’t tried, all of it. You’re discovering the new you after all! 


Hopefully this list not only offers advice after a breakup but gives you some blueprints on how to design your own divorce self-care routine. These rituals will serve you best if you approach them with a sense of curiosity; these practices should not be punishments. If you’d like to check out other guides on how to survive your divorce, download my free ebook here.

Making Time for You: Self-Care During Your Divorce

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Divorce is a truly hard and difficult process that impacts many facets of life as social circles, finances, and even our sense of identity changes. In order to adapt to this transition, it’s essential to schedule time for self-care. I say schedule because that’s just how intentional providing self-care during your divorce is. In order to have the stamina to find a new living situation, research affordable childcare, or land a new job, you’ve got to carve out time that’s just for you. 

Importance of Prioritizing Self Care

This is a marathon, not a sprint

Scroll Instagram for a few minutes and the hashtag #selfcare will have you believing it’s something you buy online; week-long tropical retreats, lavish skincare routines, pricey juicing cleanses…keep scrolling. Self-care is ultimately the choice to take care of yourself, despite the constant demands of a society that wants you to address everything else first, before attending to your needs. Each time you practice a form of self-care, you send and reinforce the message that you matter, that you deserve to feel good in your mind and safe in your body. That you are enough all on your own.

Sound Decision-making

Most of the decisions you make during your divorce will have long-term consequences. So bring in the reinforcements — all the self-care practices that help keep you grounded during times of uncertainty. As imperfect human beings, our inner world mirrors our external one. By taking the time out of our busy lives to pause before beginning yet another task sets us up for being present with our emotions, allows us to identify and name them, and with that presence we can then tap into the compassion necessary to accept them as they are. Operating from a place of self-care, and therefore, self-compassion, helps prevent you from making reactive decisions out of anger or fear. Because it’s what we do with the emotion that matters, and really the only thing we can control.

Better Parenting

You may be tempted to cut corners with your kids during a divorce, but healthy and consistent ground rules during this time is the best advice for separating with children – you’re making choices that will affect your child’s well-being, choices that can also impact your custody plea if your divorce goes to court. Establishing a parenting schedule is key to offering a stable structure your child can depend on and can help limit the cause for anxiety. Strong boundaries surrounding sleep, meals, and hygiene for both you and your family is a baseline for any positive routine. Start there, and move towards negotiating more complex co-parenting agreements from the same page.

Psychological Well-being

A self-care regiment prevents catastrophic thinking, helping you stay grounded throughout the divorce. This entails the ability to flex those strong boundary muscles, especially if you’re still having to cohabitate with your soon-to-be-ex partner. As traumatic arguments may arise during this time, it’s necessary for your psyche to have a plan of action to cope. This doesn’t mean turning to a bottle of Proseco or editing your Bumble profile. Instead, focus on nurturing yourself by having multiple self care methods in your tool shed and ask for help when you need it.

Physical Health

Self-care involves taking care of your physical self as much as it does your mental. By eating a healthy diet, getting sufficient rest, and exercising at least three times per week, we can prevent our nervous system from hyperactivity, or getting stuck in a constant mode of flight or fight. A hyper vigilant nervous system is in a state of reactivity, rather than response, and remaining in this condition for too long can lead to stress-induced symptoms like inflammation, GI tract issues, skin rashes, or auto-immune system flair-ups. 


Performance at Your Job

Making time for your self care in your off hours immeasurably paves the path of least resistance during your work hours. If you’re feeling tired from a lack of quality sleep or suffering from a lot of negative internal rumination, it will ultimately show up in your interactions and relationship with your work. By taking the time necessary to practice self-care, you’re reinforcing your ability to compartmentalize the divorce from your employment. This can prevent you from emotionally spiraling and threatening your job security when you surely need it most.

Quality of Your Relationships with Friends and Family

Now’s the time to restrict who has access to you. If you have toxic family members or friends who feed on drama, a solid dose of distance during your divorce can prevent unreliable points of view from clouding your judgement. If you’re around people who push you to be a better person, you will be. If you’re around a cohort who deal with their emotions using drugs, alcohol, and risky sexual behavior, however, the consequences can be disastrous to your divorce proceedings and custody plea. 


Hopefully this list not only offers advice after a breakup but gives you some blueprints on how to design your own divorce self-care routine. These rituals will serve you best if you approach them with a sense of curiosity; these practices should not be punishments. If you’d like to check out other guides on how to survive your divorce, download my free ebook here.

Should I Use Divorce Mediation in Maryland?

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Once you’ve made the decision to go ahead and move forward with a divorce, the next step is deciding how you want to pursue a divorce settlement agreement. One of the questions that you might ask yourself is whether divorce mediation is the right choice for you here in Maryland.

If you’re getting a divorce in the state of Maryland, the first step is to explore the options that are available to you locally. Did you know that most modern divorces don’t go to court? It’s true. Unless there are issues present that are complicating your divorce and barring you from reaching any kind of reasonable mutual agreement, you probably won’t be needing to hire a family law lawyer to handle your divorce proceedings.

1. Why divorce mediation is a great alternative to hiring a lawyer

If you’re seeking divorce mediation in Montgomery County, you might know that it’s a great alternative to hiring a divorce attorney to handle the proceedings. Why? For starters, divorce isn’t cheap. While the rates charged by divorce mediators and family law lawyers vary by location and different professionals bring with them a different level of expertise, divorce mediation is generally more affordable. Divorce mediators in the US charge anywhere between $100 and $1000 an hour, and the average cost of mediation varies between $3,500 to $7,500 (this is dependent on the nature of mediation services and on how long it takes to reach an agreement). 

2. Mediators are out-of-court settlement negotiation experts

Another reason that many divorcing couples choose to work with divorce mediators over hiring attorneys is that it’s not always necessary for a divorce to go to court. Court is costly in terms of dollars and time spent for all parties involved—you, your soon-to-be-ex, your lawyer, court officials, etc. The fact of the matter is that unless your divorce is hopelessly contested, you will be settling it outside of the courtroom.

The court plays a very small role in uncontested divorces in terms of filing paperwork and submitting fees. Your divorce settlement agreement won’t be legally presided over by a judge but will be recognized and upheld by the court as legally binding. Professional mediators have the expertise and know-how to handle the ins-and-outs of out of court settlements with the same ease that a divorce lawyer can. Both specialize in handling divorce negotiations. Lawyers only provide an edge when the court is involved because they know the court system and can better navigate contested divorces.

3. How to go about choosing a divorce mediator

If you choose to seek out the services of a local mediator, it’s important to do your homework. Ask questions about their mediation process and about the professional expertise that they bring to the table. This will not only help you gauge expectations when it comes to the mediation process, it will provide you with a clear picture of the services you’re paying for.

Looking to explore your options for divorce mediation in the Towson, Maryland area? TruNorth Divorce Solutions can provide divorce mediation packages tailored to fit your needs. Visit our Maryland office or schedule a free strategy session to learn more.