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What You Need to Know about Non-cash Compensation in Texas Divorces

When a marriage comes to an end, a divorce is a likely destination. Whereas nobody looks forward to a divorce or to the changes that are a part of that process, the steps taken can oftentimes be positive in many regards. If money disputes or financial arguments drive your divorce, then you’ll likely feel the divorce’s impact most in your wallet and your prospects for future financial success.

I have noticed in married couples that married people cannot achieve long-lasting and true success in finances unless both people are on board with the plan. I’m not telling you that you need to follow any certain plan to become financially successful or to have financial peace. Still, the reality is that two people moving in different directions have difficult times achieving any degree of sustained success. You and your spouse can achieve success by coming together and intentionally planning and acting.

Dividing Assets in Your Texas Divorce

In your divorce, you and your spouse will face the task of dividing your community estate and settling finances related to jointly owned property as well as separately owned assets. The approach to this process will vary depending on factors such as the nature of your marriage, the number of children, the types of property and debts involved, and various other circumstances. Since I Mount can guess exactly what your circumstances are, I will not waste any time making assumptions or drawing conclusions based on hypotheticals.

I want to discuss any aspect of property division that is known as noncash compensation. In all of the blog posts I have written on this subject, I do not believe that I have written about noncash compensation and how it relates to Texas divorces. We try to make this blog a resource for people that come to have questions about the world of Texas family law and would like to the point, straightforward answers. While such simple and straightforward answers are not always available, I do my best to provide information as thoroughly as possible. Still, I am always approachable in terms of your ability to access and understand the information provided.

Divorcing with Complex Finances: Challenges and Solutions

Depending upon how complex your financial life is, you may be the owner of a significant amount of assets and also someone who owes that to several creditors. Adding to this difficulty would be figuring out how to divide up any non-cash compensation. Whether you’re representing yourself in your divorce case or have an attorney, you may feel like the odds are stacked against you in successfully managing all the financial aspects of your current situation.

That is where today’s blog post comes in. I want to provide you with as much information in context as I can about this issue so that you can use it as a jumping-off point when speaking with an experienced family law attorney. Bear in mind that the attorneys with the law office of Brian Fagan offer free of charge consultation six days a week in person, over the phone, and via video. We excel at collaborating with you to address issues such as noncash compensation that may affect you and your family in your current divorce situations.

Just what is noncash compensation?

When it comes to living a post-divorce life, the most frequently accepted kind of support from one ex-spouse to the other would be spousal maintenance or contractual alimony. The Texas family code permits various types of post-divorce spousal support. Depending on your circumstances, you may either agree to contractual alimony payments or face court-ordered spousal maintenance payments if your case proceeds to trial before a judge.

Understanding Contractual Alimony in Divorce Negotiations

Contractual alimony is a form of spousal support that occurs after a divorce through the process of negotiation. Typically in a mediation setting, your spouse may agree to receive payments from you of an expected amount over a certain length of time. You can agree to make these payments monthly, bimonthly, or on any other basis that you all agree upon. A family court judge may be able to enforce your contractual alimony payments in the future but would only be able to do so to the extent that they could have awarded spousal maintenance.

On the other hand, a family court judge orders spousal maintenance after a divorce trial. A family court judge limits these maintenance payments to 20% of your gross monthly income at the time of your divorce. Depending upon the length of your marriage, these payments could last for up to 10 years. The death of either party to the divorce, your ex-spouse remarrying, or cohabitating with a person with whom they have a dating relationship would be grounds to terminate any orders of special maintenance.

Distinguishing Noncash Compensation in Divorce Property Division

Noncash compensation differs from either of these types of cash compensation that may be ordered after a divorce. When you divide property in a divorce, we typically think of being part of the Community property estate. Even if we’re talking about bank accounts, stocks, and other investments, although you don’t have your hands on this money or value currently, you can identify the amounts through bank statements, investment statements other information like this.

Other types of property and assets that are frequently divided in a divorce include vehicles, real property, your marital residence, and other intangible property assets such as vehicles. When we think about issues like noncash compensation, we will be considering dividing up the property that does not have a specific value at the moment. These types of assets are trickier to divide, given that you must be able to keep them organized, evaluate which estate they belong in, and then determine a relative value amount for each asset.

What are some examples of non-cash compensation?

Noncash compensation typically refers to investments and retirement accounts. For example, with a pension, you may be able to ascertain an approximate value, but the pension would produce for you every month at the time of your retirement. Still, you may also struggle to obtain a clear understanding of the current value of the pension at the beginning of your divorce.

Understanding Stock Options in Divorce

Types of stock may also qualify as non-cash compensation in your divorce, as the value of the stock is currently unknown since you do not possess it. For instance, as an employment benefit, you might have restricted stock or stock options allowing you to buy stock at a predetermined price in the future upon meeting specific conditions. These stock options have a value, but it is difficult to determine what it is exactly.

As a result, What are the jobs that you, your attorney, and possibly an expert in this field must undertake in your divorces to determine an approximate value to figure out how to divide them in your divorce? Standing orders or temporary orders established during your divorce may even restrict you from selling or purchasing noncash pieces of property. You need to know what you can and cannot do during the divorce about noncash compensation.

As we have seen, even taking a dollar value for stock or other types of noncash compensation at this moment may not be the best way to value the asset. The extent of noncash compensation or assets you own could substantially shape your community estate and affect how your case is handled, whether in a trial or mediation setting. There is little way to accurately predict what the stock market will do over the next 10 to 15 years. There is quite a bit of evidence that the stock market will increase in value over that time, and thus, your stocks may be worth more, but there is no real way of knowing exactly by how much they will increase or decrease, for that matter.

The Role of a Family Law Attorney in Valuing Noncash Compensation

Being able to make assessments like this and then provide clients with assistance in valuing these assets is what an experienced family law attorney can bring to the equation. You need to be able to weigh the pros and cons of dividing up these types of assets in the divorce so that you can receive a fair deal when it comes to a division of your community estate. Without a doubt, noncash compensation can represent a substantial part of your community estate. Still, it can also represent a substantial mistake if you do not correctly handle matters related to this subject.

For that reason, I recommend meeting with a handful of family law attorneys and interviewing them regarding this subject in particular if you anticipate that it will be a big part of your case. You will want to make sure that your family law attorney is experienced in handling divorces but is experienced in helping people in your position divide property like noncash compensation. I like to tell people that there is nothing wrong with an attorney learning the field of family law but that you shouldn’t be the person they practice on. Your best bet is to find an attorney who has been there before in his skill of dividing these types of assets. You will not get a second chance after the divorce, so your best bet is to get it right the first time.

High wealth earners should be especially aware of noncash compensation issues in divorce

Not every divorce involves issues regarding noncash compensation. Typically, persons who are more high-earning received types of noncash compensation as benefits associated with their employment. We’ve already discussed how stock options and restricted stock represent forms of compensation separate from salary. However, the information may come to the forefront that these types of noncash compensation exist in the discovery process. That’s how they join the list of items to negotiate during mediation.

Collaborating with Your Attorney for Strategic Decisions

For example, stock options, a type of noncash compensation, typically allow exercising once or twice a year. Work with your attorney to review temporary orders and decide whether you can exercise or sell the stock options, clarifying your divorce situation. If you know that you have stock options available for purchase or sale, you should work with your attorney to figure out exactly when those dates arrive and what you can do with them as far as negotiation for your case.

A wise thing for you and your attorney to do is maybe to go ahead and request permission from the court to buy or sell shares of stock by these stock options. If you find out that your temporary orders do not allow for the purchase or sale of stock in these scenarios, then you may want to ask a judge for permission to do so under limited circumstances to divide up your community’s state. That way, you can determine how much stock is available, and its value and better understand how everything fits into a division of your community estate.

Planning for Stock Market Volatility in Divorce Proceedings

It would be best if you asked an attorney in any consultation with them what their plan may be as far as determining what an attorney thinks about the ability of the stock to go up or down in value based on conditions in the market. I am not implying that your attorney would be able to play stockbroker or guess or time the market in any way. Still, the attorney should have a plan in place depending on what happens with the stock market regarding increases or decreases in value over time. Acting intentionally in this regard is very important, and your attorney should have a plan to help guide you and provide advice where need be.

The other option would be to address this issue upfront with your plan to take advantage of any of these options to purchase her cell during your divorce. If you can get on the same page with your spouse, you would be able to avoid going to court to have a judge address the issue. This will save you both time and money. It will also lay the groundwork for establishing a line of open communication regarding issues like this.

Provide information to your attorney and then listen to their advice

The most valuable guidance I can offer on this topic, without knowledge of your specific circumstances regarding the types of non-cash compensation relevant to your divorce, would be to work with your attorney to determine the frequency of exercising your stock options and then decide how you wish to address that issue accordingly. Considering that some divorces can take years to complete, you will want to have a plan in place from the outset of your case to avoid situations where vesting dates occur seemingly out of the blue where you and your attorney have no plan on how to deal with them.

I cannot emphasize enough to make sure that you and your attorney were on the same page with this issue. Your attorney will be able to guide you better based on your circumstances, jurisdiction another is she’s related to your divorce, but you may violate temporary or standing orders if you allow for these vesting dates to pass without taking certain actions. Regardless of the situation that you find yourself in, you can almost certainly make informed decisions in advance if you put into place proper planning.

Working with an experienced attorney, one who displays a willingness and ability to develop a plan and stick to it, is the best place to start, in my opinion. Rather than rushing into a divorce with no plan and an attorney that you lack confidence in, I would recommend interviewing a handful of attorneys, finding out their ideas on the subject, and determining which one presents the best road map for you and your family.

Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan

If you have any questions about the material contained in this blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultation six days a week in person, over the phone, and via video. These consultations offer you a great opportunity to gain more insights into the realm of Texas family law and understand how your life circumstances could be affected by a child custody or divorce case.

Book an appointment with Law Office of Bryan Fagan using SetMore
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