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How are employment benefits handled in a divorce?

On Behalf of | Dec 23, 2021 | Divorce |

Many people in the greater Houston area draw a number of employment benefits from their companies.

It has become typical for most Texas businesses to offer retirement plans, health benefits and other perks to those who work for them. People in higher-level positions may receive less common benefits, like the use of a company car, a housing allowance or stock options.

Like other property and income, employment benefits can have a role in a divorce.

Some benefits may be community property that are subject to division under Texas law. In other cases, employment benefits may count as income for purposes of child support and alimony.

Employment benefits may have to be divided as part of a property settlement

A Texas family court will treat an employment benefit as property subject to division.

To give an example, executives and other professionals who receive stock options may have to agree to share these with their former spouses, even if they have no cash value at the time of the divorce.

By way of background, a stock option is the right for a person to buy stocks in a company, usually that of one’s own employer, for an agreed price.

Usually, a person has to wait a number of years before cashing in on these options. The idea is that when the time comes, they will be able to purchase stock, which ideally would have increased in value, at a steep discount.

Since they have potential cash value in the future, putting an exact dollar value on stock options for a present-day divorce can be complicated.

Dividing even more commonly offered benefits, like a traditional 401(k) plan, also requires some special attention to detail.

A court may consider benefits as income for child support, alimony purposes

Employment benefits can also change a person’s child support obligation or alimony payment. With respect to child support, incentive bonuses and other extra wage payments can count as income, which in turn translates to a higher support payment for the parent earning the bonus.

Depending on the circumstances, other employment benefits, a housing allowance for example, may also count as income for child support purposes.