January 2015 Archives

Employee Compensation Subject to Asset Division

Many companies compensate employees with stock awards, stock option, annual bonuses, and other such items.  To the extent these assets, or even a portion of them, are attributable to employment by that company during marriage, then that portion is community property subject to asset division at time of divorce. Normally there is a vesting period for the incentive-type compensation of stock awards and stock options.  At time of divorce these items may be unvested, but they are still divisible as a part of the division of the community estate.  The spouse to whom these awards were made is under no obligation to continue employment at that company until after the awards have vested.  For that reason, it is not unusual for the non-employee spouse to consider taking a discounted amount of cash at time of divorce in exchange for the employee spouse's receiving 100% of the interest in the incentive awards.  If the options or stock awards are divided, there is a procedure for determining the community property portion of the awards, factoring out the time the employee spouse worked for the company before marriage and after divorce.  Those portions are not divisible. Annual bonuses often are not paid until the first quarter of the year after they were earned.  The divorce decree can include provisions calling for the employee spouse to pay the established portion of the bonus to the other spouse when it is received, even if after the divorce is finalized.  This type of asset can also be divided pro rata to reflect whatever percentage of it is attributable to the portion of the year during which the parties were married.  For example, if a couple divorces at the end of October, then 10/12th of the bonus for that year will be community property subject to division when the bonus is paid. If you are the employee spouse you will want to be sure federal income taxes are considered in the division of stock awards and options and bonuses, and all other types of compensation paid or payable to you which are to be divided with your spouse.  You will want provisions for the allocation of the tax obligation to be included in the divorce decree, since it will all be appearing on your earnings record and presumably reportable and taxable to you only, not to your former spouse. Certain professions, such as insurance sales, yield income year after year for a policy sold during marriage.  Certain professions, such as personal injury law, may not produce income until a year or more after the work is done.  Even crops not harvested and sold until after divorce may result in income attributable to the community time, toil and effort of one of the divorced spouses, and thus divisible, or partially divisible as community property at the time of divorce.  The proceeds of a winning lottery ticket bought during marriage will be presumed to be community property subject to division at divorce.  The possibilities are many, and if you are the non-employee spouse, you will want to be sure all of these possibilities are taken into account to the extent they apply to your case.

Divorce Documents Become Part of the Public Record

Texas will give you a no-fault divorce based on an allegation that the relationship between you and your spouse has become insupportable because of discord or conflict of personalities that destroys the legitimate ends of the marital relationship and prevents any reasonable expectation of reconciliation.  Nobody really knows what any of that means, and of course everybody knows there are far more serious problems underlying the mysterious discord or conflict of personalities.  It's pretty normal to think it would be right to put in black and white in your petition for divorce the real reason you want a divorce. Here are the statutory fault grounds you could choose from: cruel treatment; adultery; conviction of a felony; abandonment for at least one year; living apart for at least three years; confinement in a mental hospital for at least three years and unlikely to recover from the mental disorder.  Or, you could allege all of them and throw in the no-fault ground for good measure.  No doubt, most married people have - at one time or another - thought all of those allegations about their spouse would fit the bill.  No question about the mental disorder, and, if he or she has not yet been convicted of a felony -- well, you might think, it is bound to happen sooner or later. Often people whose spouses have been unfaithful want to allege adultery as the grounds for divorce.  Let the judge know the truth about what has happened.  It's an understandable reaction to a very painful life event.  But really, it is never a good idea to do that.  There is no privacy in the world these days.  Your allegations will become part of the public record.  Everybody, including your kids and all their friends and their parents, everybody in your family, even your spouse's grandmother, the one you have always liked, will go on line to read your petition for divorce.  Your spouse's current and future employers may well read it.  You want your spouse out there making money to help you support your kids.  Maybe your employer will read it too.  The dean of admissions at the college your child applies to may happen to find it.  You have no reasonable expectation of privacy with regard to any documents filed as public records in your divorce case. In recognition of this sad fact of modern life, the Texas legislature has gradually been paring down the amount of private information required for inclusion in divorce case documents filed of record.  No longer must you state your social security number, date of birth, driver's license number, address, and phone number.  It's a start.  But it is up to you to be conscious of the fact that anybody can look at your filed documents.  As much as you want your spouse to have to face the reality that it is cruel treatment and adultery that have brought your marriage down, it is not in your best interest to say so in a public record.

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