Jun 24
It is common practice for individuals to be paid bonuses in addition to their basic salary. Often these bonuses can form a significant proportion of an individual’s income. In the event of divorce, do you have to share your bonus with your spouse?
Firstly it is important to understand the type of bonus, whether this is guaranteed, performance based, discretionary, stock options or even share options in a company. A clear understanding of the value or future value of the bonus is necessary along with details of any tax payable.
In a divorce situation, fundamentally the aim of the court is to achieve a clean break between the separating parties without either party experiencing undue hardship. There is no set formula when it comes to dividing assets on divorce and the outcome depends on several factors including:
Over the years the court’s approach to future bonuses has changed and there is now clear guidance that post separation earnings should not be deemed assets to be shared. So whilst bonuses paid during the marriage are likely to be deemed a matrimonial asset and capable of being shared, bonuses paid post separation are not. It is likely that a bonus awarded during the marriage but paid post separation will be deemed a matrimonial asset and capable of being shared.
The situation may, however, differ if the financially weaker party’s needs cannot be met by sharing the matrimonial assets and therefore it may be necessary for non-matrimonial assets (such as post separation bonuses) to be used to pay maintenance or provide the financially weaker party with a lump sum so their needs can be met.
Treatment of bonuses especially post separation bonuses is complex and legal and possibly tax advice is strongly recommended.
Claire Hunter is a Family, Children and Divorce specialist lawyer at Raworths in Harrogate. Claire can be contacted at 01423 566666 or claire.hunter@raworths.co.uk
The Family Law team at Raworths is ranked in the top tier by Chambers UK 2024, an independent guide to the legal profession.
Published on 27 June 2024
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