How Will My Bonus Be Divided Upon Divorce in Texas?
Whether your bonus is considered your own separate property or a part of the marital estate depends on the nature and reason for that bonus. In Texas, a bonus which is paid to you in exchange for work that was completed during the marriage, then that bonus is treated as community property. Even if the bonus is issued after the date of divorce, it can be claimed as community property if it is paid out in exchange for work that was performed while the marriage was intact. A year-end bonus, for example, may not be paid out until January. If the divorce is finalized in December, that bonus could still be subject to consideration as community property because it is being paid out for work that was performed prior to the dissolution of the marriage.
On the other hand, a bonus that is contingent solely on future work, which will be performed entirely after divorce, is considered to be your own separate property. An example of this would be a signing bonus which is paid out subject to the employee’s agreement to work for a fixed amount of time, on the condition that the bonus must be paid back if they do not remain employed for the agreed-upon term. In that case, the bonus in question is conditioned on work that has yet to be completed.
Will my spouse’s bonus be considered when the court determines child support?
Yes. Under the Texas Family Code, child support obligations are based on the “net resources” which are available to a party for the purpose of paying child support. Section 154.062 provides a framework for calculating a party’s net resources. The language of the code clearly states that “100 percent of all wage and salary income and other compensation for personal services (including commissions, overtime pay, tips, and bonuses)” should be factored into the determination of a party’s child support obligation.
Will my spouse’s bonus be considered in the court’s calculation of spousal maintenance?
Yes. Section 8.055 of the Texas Family Code establishes an upper limit for the amount of money that a court can order a party to pay as spousal maintenance. That limit is defined as “the lesser of $5,000 or 20 percent of the spouse's average monthly gross income.” The code considers “monthly gross income” to include “100 percent of all wage and salary income… (including… bonuses).” Should the court decide to use your spouse’s average monthly gross income as the basis for calculating spousal maintenance, your spouse’s bonus will be included in that calculation.
How Will My Stock Options Be Divided Upon Divorce in Texas?
The division of stock options can be a tricky process, and is often largely dependent on the facts of a particular situation. In order to get a clear sense of what the division of a stock option might look like, you should have your attorney carefully review the specific terms of the option agreement in question. It is also important to note whether the stock option was offered as part of a compensation package to the specific employee in question, or if it is available as a benefit to all (or most) employees at the company.
Broadly speaking, however, a stock option which was received during the course of a marriage will be counted as community property. Even if they are not fully vested at the time of divorce, some portion of the asset can be claimed and awarded to the non-employee spouse (similar to the discussion above regarding RSUs – see Section 3.007 of the Texas Family Code). If the options were awarded prior to marriage, but were contingent on the employee remaining employed during part or all of the marriage, then those stock options would also be considered community property in a divorce proceeding. The degree to which the options “touch” the marriage (the timing of issuance and the reliance on work performed during the marriage) will is the guiding factor in determining whether, and to what extent, stock options are treated as community property.
How Are Restricted Stock Units (RSUs) Divided If They Do Not Vest Until After Divorce in Texas?
In Texas, division of Restricted Stock Units (RSUs) can be treated as separate property, community property, or some combination of the two. When RSUs do not fully vest until after divorce, how they’re treated depends on when they were issued. Since the RSUs in question cannot be sold until some future date, an exact dollar value cannot be assigned at the time of division. The most sensible way to divide the asset, then, is to award a percentage (or number of shares) to each party so that when/if the RSUs are eligible to be sold, each party receives the amount that they are entitled to.
In an attempt to produce consistent and predictable outcomes in situations where post-divorce vesting is an issue, the legislature crafted a formula for the division of such assets (Texas Family Code, Sec. 3.007(d)). The formula determines the percentage of an RSU which should be treated as a party’s separate property, so that the remainder may then be considered a part of the marital estate. Depending on the facts of the situation, the Family Code presents two different approaches to determining the amount of an unvested RSU that can be counted as separate property.
In situations where an RSU was awarded prior to marriage, but the employee was required to continue working during the marriage, this formula determines the amount of the asset which will be considered separate property::
- (time from issuance of the RSU to date of marriage) + (time from date of divorce to date of vesting) divided by (time from issuance to fully vested date)
In situations where the RSU was awarded during the marriage, and the employee was required to continue working after the marriage ended, this formula determines the amount of the asset which will be considered separate property:
- (period of time from divorce to date of vesting) divided by (period of time from issuance to fully vested date)
Importantly, this calculation is performed with respect to each component of a benefit which is subject to a different vesting period. A set of restricted stock options whose restrictions are lifted after varying lengths of time, will each be viewed separately and divided in proportion to the results of their respective calculations per the relevant statutory formula.
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