When considering a fair outcome regarding finances on divorce, no assets are completely safe and secure from potential division with a former spouse. How therefore does a Court treat an employment bonus received by one party? All the circumstances of the case are relevant including:-
- Whether there are sufficient capital assets to meet both parties’ needs;
- The period during which the husband or wife earned the bonus;
- When the bonus was or will be payable;
- Whether the recipient of the bonus needs to do anything further to secure their entitlement , or whether it is guaranteed to be paid.
In the case of C v C (2018) the husband held a senior position in an investment bank and received significant bonuses.
Following the parties separation the husband had attempted to ring-fence the part of his bonuses which were not required to meet ongoing expenditure. He argued that £6.5m from the total assets of approximately £26m was income awarded post-separation which should be regarded as non-matrimonial and his wife should not be entitled to this money.
The husband said he had to continue to work and meet targets at work otherwise the bonus could be clawed back- however his wife argued that throughout her husband’s 16 year career not once had his bonus been recovered by his employer. The Judge checked the husband’s employer’s bonus scheme rules and confirmed his argument that there was a genuine element of performance which underpinned the future value of his bonuses.
The Judge took the husband’s calculations and determined on that basis that his wife should receive just over £10m. This was deemed to be a fair award in the circumstances. The total assets in the case were approximately £26m. The Judge did not accept the wife’s argument that her ongoing contributions to the general welfare of the family matched those of the husband’s and/or gave rise to any entitlement to any equal share in the husband’s post separation bonus. However, those contributions were relevant in terms of assessing needs or fairness of outcome so were not entirely ignored.
In other cases whilst the Court have not accepted the claim by one spouse to a half share of bonuses a lesser proportion of such discretionary payments received during the marriage have been awarded to the other spouse.
In summary , knowledge of the circumstances and timing of receipt of such bonuses is important- the more distance that can be put between the bonus and the marriage the better the prospects that it will not be included for distribution. If wishing to claim an entitlement to bonus it will be necessary to demonstrate a need and a financial disparity between the parties going forward.
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