We are regurlary asked about bonuses on divorce and how this is treated during any settlement. When bonuses are discretionary (i.e. when they are not necessarily paid out every single year or month), this can cause complications when it comes to financial settlements, quite simply because earnings could vary significantly from one year to the next. Unsurprisingly, this can often make negotiations surrounding maintenance difficult.
For example, it is not unusual for the party receiving the bonuses to argue that any discretionary bonuses are, by their very nature, not guaranteed. Indeed, they may not receive the bonus one year or may receive a much smaller proportion of it.
On the other side, a spouse may argue that these bonuses are actually a major part of the income for the family and therefore should be included as income when it comes to maintenance.
Moreover, the receiving party may say that any bonuses that they earn after the divorce will be due to the work they have done, so the other spouse should not be entitled to a share of them, anyway.
Back in April 2018, a case hit the headlines when a woman lost her legal battle for a share of the money her husband made after their marriage had broken down.
The case, heard by the Court of Appeal, was an appeal of a final financial remedy order made by the Central Family Court.
In this case the majority of the husband’s income was made up of discretionary bonuses.
At this appeal, the wife argued that her husband’s earning capacity was indeed capable of being a matrimonial asset and, as such, the sharing principle should be applied and it should be divided, as happens with other marital assets.
Additionally, she argued that she should not have to use her capital to meet her income needs when her husband would be able to meet these needs from his earnings.
The wife ultimately wanted 35% of her husband’s net bonuses until 2019.
Her appeal was dismissed by the Court of Appeal.
In this case, the Court of Appeal ruled that an earning capacity was not capable of being a matrimonial asset to which the sharing principle applied.
One of the main reasons why this was found to be the case, is that if the sharing principle was applied to earnings after a couple had separated, this would “fundamentally undermine” the ability of the court to provide a clean break.
Additionally, the court also rejected the wife’s argument that she should not have to use her capital to meet her income needs, for the same reason.
As we touched on at the start of this article, bonuses can add to the already complex nature of a financial settlement upon divorce. Every family’s circumstances are unique, which is why it is vital to seek legal advice from a specialist family solicitor regarding your situation.
Our expert divorce solicitors can help you with a range of legal issues:
For more information call our divorce solicitors on 0845 862 5001 or email firstname.lastname@example.org.
Our expert divorce solicitors offer a nationwide service. We have client meeting office facilities available, in order to have face-to-face client meetings / conferences as and when required in our:
Leeds Office: St Andrew House, The Headrow, Leeds, LS1 5JW
Sheffield Office: Pinfold Street, The Balance, Sheffield, S1 2GU
Manchester Office: King Street, Manchester, M2 4PD
Wakefield Office: Market Walk, Wakefield, WF1 1QR
Canary Wharf Office: 25 Canada Square, Canary Wharf, London, E14 5LB
London Office: 01 Nothumberland Avenue, Trafalgar Square, London, WC2N 5BW
Please contact us for more details.