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Compensation structure matters during divorce negotiations

Many Massachusetts couples who have made the decision to end their legal union face some time ahead, sometimes months or even years, negotiating asset division. When it comes time to decide on a fair and equitable division of salary in a divorce situation, those people whose earnings are structured as straight salary often find this process fairly straightforward. However, people whose salary is structured differently — for example, including commissions, bonuses and/or perks — may find this stage of the negotiation a bit more challenging. Divorcing people who know how each type of income is treated and understand the significance of strategically timing the divorce filing will likely fair better financially in the end.

Some people receive part of their income in the form of a prepaid bonus with a clawback provision. Typically, people with this type of compensation structure will receive a large bonus at the beginning of a period of employment. However, with this arrangement, the employer will expect some or all of the funds to be returned if, for example, the employee leaves the company within a particular time period or fails to meet performance standards. A person who receives this type of compensation whose spouse receives part of the bonus in asset division should consider the fact that they may have to pay back that money and ensure that surrounding conditions are clearly stated in the divorce contract.

Many employees receive part or all of their income as commissions. In this case, a person planning to begin divorce proceedings who knows he or she is about to complete a deal in which a significant commission will be paid out would be smart to proceed with filing as soon as possible in order to retain as much of the payout as possible. As well, some people receive perks as part of their compensation package, and while some perks are used for business purposes only, others, such as a family vehicle or housing, will be considered in divorce negotiations as income.

Many divorcing couples find negotiations around asset division one of the more challenging aspects of the divorce process. However, those people who prepare for this step are most likely to minimize the stress involved and maximize their financial future. Many people have found a skilled Massachusetts family law attorney a valuable asset in navigating the divorce process.


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