Divorce for Executives in North Carolina
We represent executives, and we represent the spouses of executives. When most of a family’s wealth is pay that has been promised but not yet received, the divorce turns on what was earned during the marriage and how to divide something that cannot be transferred.
Salary is the smallest part
For many executives, base salary is a fraction of total compensation. The rest arrives as bonuses, restricted stock, options and deferred pay, each with its own vesting schedule, tax treatment and strings attached.
What makes an executive divorce different
An executive’s compensation is spread across time. A bonus paid in February was earned the year before. Stock granted three years ago vests next spring. Deferred compensation may not pay out until retirement, and only if the executive stays.
Divorce law asks what was acquired during the marriage and before the date of separation. With executive pay, that question has to be answered award by award.
The area executives struggle with most is deferred compensation. Most assume that because they have not received it yet, it is separate property. That is not the question a court asks. The portion of deferred compensation, bonuses, stock options and restricted stock units earned between the date of marriage and the date of separation is subject to division, whenever it is paid.
What is usually at stake
- Restricted stock and performance shares
- Stock options, vested and unvested
- Annual and long-term bonuses
- Nonqualified deferred compensation
- Severance and change-in-control terms
- Support based on income that varies
- Privacy for a public-facing career
Each kind of pay raises a different question
We start with the grant agreements and plan documents, not the pay stub. The terms decide what is marital and how it can be divided.
| Type of pay | How it works | The divorce question |
|---|---|---|
| Restricted stock units | Shares delivered as they vest over several years | How much of an award granted during the marriage but vesting after separation is marital |
| Performance shares | Shares that vest only if company targets are met | The number of shares is unknown on the date of separation |
| Stock options | The right to buy shares at a fixed price | Value depends on a future share price, and exercise triggers tax |
| Annual bonus | Cash paid after year end for the prior year | A bonus paid after separation may have been earned largely before it |
| Deferred compensation | Pay set aside under an employer plan, often forfeitable | Usually cannot be divided by a retirement order and is at risk if the employer fails |
| Severance and change-in-control pay | Payments triggered by termination or a sale | Whether it replaces future income or rewards past service |
How you divide what cannot be transferred
Most equity awards cannot be signed over to a spouse. The division has to be designed around that.
Keep the award and offset it
This is how most of our cases resolve. Nonqualified deferred compensation and private company stock are often illiquid or barred from transfer. The executive keeps the full award, and the other spouse receives a larger share of the home equity, a 401(k) or other liquid assets of equal value.
It also protects the other spouse, who could end up with nothing if the executive leaves the company and the award is forfeited.
Divide it when it pays
The executive holds the award, and the other spouse receives a set share if and when it vests, net of the tax withheld. This shares the risk but ties the two of you together for years.
The details that cause trouble
Tax withholding at vesting, trading windows and insider trading policies, clawback provisions, and what happens if the executive leaves. An agreement that ignores these produces a second dispute.
Income for alimony and child support
When pay changes every year, the argument is over what income is. One side points to the best year, the other to base salary. The court looks at actual earnings and the pattern over time.
There is also a double-counting problem. An award that has been divided as property should not be counted again as income for support when it vests. Keeping the two straight takes careful drafting.
At higher incomes child support moves off the standard guidelines and is set on the children’s actual needs. A child’s needs are not limited to things bought for the child. They can include housing, vacations, a nanny, private school and more. See alimony and child support.
If you are married to the executive
You may know the salary and little else. That is common, and it is fixable. The compensation is documented in detail; it is a matter of knowing what to ask for.
We obtain the grant agreements, vesting schedules and plan statements, compare them with the tax returns, and build a full schedule of what exists and when it pays.
Three things surprise spouses most often. The first is how the bonus is actually earned, and over what period. The second is how much influence an executive can have over their own compensation package, including the ability to restructure or delay pay in a way that works against the other spouse. The third is tax: deferred compensation is taxed when it is paid, so a dollar in that account is not worth a dollar in the settlement.
Documents that tell the story
- Year-end pay stub and W-2
- Equity grant agreements and vesting schedule
- Stock plan account statements
- Deferred compensation plan statements
- Employment and severance agreements
- The company proxy statement, for senior officers
Keeping compensation and conflict out of public view
Court filings are public and, since North Carolina moved to electronic filing, searchable online by name. For an executive, a divorce file can put compensation details, financial affidavits and personal allegations in front of colleagues, a board, competitors and the press.
Many of our executive cases are resolved in private mediation or arbitration for this reason. See private resolution.
A sale, an IPO or a large vesting event is also the time to look at a trust. See when we recommend a trust.
Charlotte and Raleigh
We have offices in Charlotte, Gastonia and Raleigh, and executive pay looks different in each market.
Charlotte
Charlotte is a banking city, and it sees a steady run of IPOs. We see cash bonuses deferred over several years, restricted stock that is forfeited if the executive joins a competitor, and equity that turns liquid when a company goes public. Many executives here also hold interests in real estate deals, which have to be valued alongside the compensation.
Raleigh and the Triangle
The Triangle is a technology market, and we see a lot of tech stock here: restricted stock units and options at public companies, and equity in private companies where there is no market for the shares and the value depends on an exit that may never come. As in Charlotte, many executives also hold interests in real estate deals.
Executive divorce FAQ
Are unvested stock awards marital property?
They can be. It depends on when the award was granted and what it was granted for. An award earned during the marriage may be partly marital even if it vests after separation.
Can restricted stock or options be transferred to my spouse?
Usually not. Most plans prohibit transfer, so the award is either divided as it vests or valued and offset with other assets.
Is a bonus paid after separation marital?
If it was earned for work done before the date of separation, some or all of it may be marital, even though it was paid later.
Can deferred compensation be divided like a 401(k)?
Often it cannot. Many executive plans are not covered by the orders used to divide retirement accounts, so the executive usually keeps the plan and the other spouse receives other assets of equal value.
Can an executive’s divorce be kept private?
Much of it can. Private mediation and arbitration keep compensation and allegations out of the public court file. The divorce judgment itself is still entered by a court.
Learn more
Meet with a team near you
Talk with a team that reads the grant agreements
Whether you are the executive or married to one, an attorney will review what is at stake and how we would approach it.
For general information only; not legal advice.
Managing Partner and Co-Founder, McIlveen Family Law Firm. Angela is a Board Certified Specialist in Family Law, certified by the North Carolina State Bar Board of Legal Specialization, and an experienced family law trial attorney who represents clients across North Carolina. She personally reviewed this page for legal accuracy.
