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Divorce law blog

What will happen to my future bonuses in the event of a divorce?

07/02/2014   By: Sue Brookes

Many financial settlements are complicated by the fact that one spouse is paid a discretionary bonus and when it comes to working out the right amount of maintenance this can often be a source of contention. For the purposes of illustration let’s say it’s the husband who gets the bonus and the wife that is making the financial claims, although it would be exactly the same the other way round.

Wives may argue that bonuses have always been part and parcel of the family’s income over the years and should be treated as being likely to continue and therefore part of the income available for maintenance purposes. In contrast, husbands will point to the fact that discretionary bonuses are not guaranteed and that there are often genuine reasons why they may not be paid at all or why they will be significantly less than in previous years. They will say in any event that they will be a result of work after the parties have separated and the wife shouldn’t get the benefit.

Balancing a wife’s needs against the family’s standard of living in this context can therefore be quite challenging.

The recent case of Parr [2013] EWHC 4105 (Fam) has set out one approach to this conundrum. In that case, the husband was earning a basic annual salary of £250,000 and he had also received discretionary bonuses of approximately £225,000 each year. The bonus therefore doubled the amount of income available. The wife did not work. On the specific facts of that case, the court ruled that the wife should receive basic maintenance of £3,750 per month by reference to the husband’s net monthly salary (£11,441) and also receive 25% of the husband’s future bonuses up to a maximum sum of £20,000 per year, as this was the amount she required to meet her “ generously assessed needs”.

This meant that the wife was adequately provided for with reference to both her stated needs and the income available to the husband. It also meant that the husband was protected both in the event that his bonuses were less than £80,000 (as he would only have to pay 25% of whatever sum he actually received) and, if his bonus was more than £80,000, he would keep the whole of any surplus.

This split approach is only one way of dealing with bonuses and it may not be appropriate in every case. Every family is different and the individual settlement should therefore be approached on a case by case basis. However, this approach should at least be considered and it may be a starting point where discretionary bonuses are involved.

Sue Brookes
Senior Solicitor (Family Lawyer) 

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