For some employees, particularly at high levels in a company such as presidents, vice presidents, CEO’s, managers and other similar roles,m the compensation for perks or other benefits can be as great or even greater than the dollars that a person receives. Many perks or benefits received by employees can be used to add value to a spouse’s compensation for purposes of calculating maintenance or child support and/or in some circumstances, the benefits can be classified as assets subject to division as any other assets owned by the parties during the marriage. Normally, perks or employee benefits can only be classified as income or assets but not both. If a perk is considered in both categories, it can feel like “double dipping” which typically is inequitable. For most circumstances, it is more financially advantageous for the non-benefitted spouse to count a perk as an asset, subject to division (typically divided on equal, 50/50 basis) than it is to count it towards income.
What is the discovery necessary to ascertain perks or employee benefits?
In a general way, in order to fairly and equitably divide marital property, the judge (or mediator) assisting with the determination of a fair division of assets and debts must ensure that all assets and debts have been disclosed. In order for the court to know about relevant perks or employee benefits that may be considered assets, the spouses need to start by complying with required discovery disclosures, including responses to interrogatories (questions), request for production of documents and the required financial forms (the income and expense statement and the property disclosure form). In addition to standard or basic forms required, each party has the opportunity to make additional discovery requests.
If you believe that your spouse is the recipient of unique employment-related perks or benefits, it is important that you work with an experienced family law attorney who can help prepare specific discovery requests focused on obtaining the information necessary to obtain a fair division of assets and debts. In some situations, the other party fails to disclose employment-related information due to hiding, in other circumstances, they have misunderstood or were not aware that there were meaningful assets that need to be disclosed.
What kind of assets or employment-related perks may be relevant to discover in a family law case? They may include but are not limited to the following potential categories of information (which may be actual money-based benefits or financial in-kind benefits):
- Various insurance benefits (including health, disability, legal, life, among other types of insurance);
- Vested or unvested stock options or stock grants;
- Restricted or deferred shares of stock;
- Profit sharing (which sometimes is only granted once per year or even once every few years and therefore, in some situations not readily thought about or disclosed until received even though the benefit may have accrued over the period of the last year or multiple years);
- Paid relocation expenses or a relocation package including payment for expenses or reimbursement of expenses;
- Paid personal travel or vacation allowances or points for airline miles, hotel miles or even payment of or use of all-inclusive vacation clubs or other pre-paid vacations;
- Use of company vehicles or planes plus coverage of expenses related to use;
- Use of a personal vehicle and payment of expenses to maintain and drive the vehicle;
- Concert, movie, sporting, theater and other tickets to be used for personal entertainment purposes;
- Use of or access to company residences or company vacation properties;
- Paid mobile phone or company-paid service for mobile phone use;
- Company paid or subsidized loans;
- Memberships at country clubs, gyms or athletic facilities;
- Payment of professional licensing fees or memberships for professional organizations;
- Dining allowances or company-paid expenses for dining out;
- Retirement benefits including IRA’s, pension plans and/or 401(k), including individual and company contributions;
- Deferred compensation or incentive plans;
- Company payment of professional services such as financial advisor consultations, tax accounting advice, among other similar things;
- Housing allowances or other costs of living;
- Discounts, including a discount card or access to other benefits at a discounted opportunity;
- Commuting expenses;
In regard to the general list of perks, the most complicated or difficult situations can be when the other party is an owner, director, or executive in a closely held corporation, particularly if it a family business. In these situations, often the benefits that family members in a business share and provide to one another becomes blurred. In many closely held companies, perks can be distributed/covered, without necessarily having the perks disclosed as personal benefits.
How Does the Court Determine whether Benefits are Marital Property and subject to division versus just an added benefit of working?
While this is not a clear-cut “rule of law”, there are a few questions or considerations that are often helpful in making this determination. Some of those topics can include:
- Does the other spouse have an ownership interest?
- Is the ownership interest an actual, quantifiable value or is it just a future, unknown expectancy?
- Is the value or the benefit defined through an employment contract?
- If the benefit is an asset that has the possibility of vesting, has any portion of the asset vested? If so, this helps to quantify that there is actual awarded value that can be measured.
- Is there a reasonable valuation method available to determine value?
- Is the potential future interest something that can be ascertained at a time in the future?
How Do We Value Perks or Employment Benefits?
Perks are often difficult to value and determine, particularly if they are rare, unusual, intangible or complex assets. In some situations, a litigant has to retain a financial expert to value or place a value on employment-related perks. A financial expert will often use a variety of different methods to provide an opinion as to value.
While many different valuation methods exist, the parties either have to agree to a valuation method or ultimately the judge will decide the method that is appropriate based on the testimony and facts provided.
If you are anticipating a divorce or other family law matter that will involve complex valuation of employment-based or other unusual assets, call Pingel Family Law today at (816) 208-8130 to schedule a consultation so you can put our knowledge and experience to work for you!