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13.03.24

Am I entitled to a share of my ex’s bonus?/Is my ex entitled to a share of my bonus?

Financial matters can often be complex and contentious within divorce or dissolution proceedings. Among the assets subject to division, bonuses earned by a spouse during the marriage can present unique challenges. In England and Wales, the treatment of bonus payments in divorce settlements is governed by specific legal principles aimed at achieving fairness and equity. Here, we look at how bonuses are handled in the context of divorce and financial proceedings.

Understanding bonus payments

Bonus payments are additional sums of money awarded to employees by their employers, typically as a reward for performance, meeting targets, or other achievements. In many professions, bonuses form a significant component of overall compensation, sometimes exceeding base salaries. However, their fluctuating nature can complicate matters when it comes to divorce and the division of assets.

Treatment of bonuses in financial proceedings

In divorce proceedings, all assets acquired during the marriage are subject to division, including bonuses received by one or both spouses. The court considers bonuses as part of the marital assets to be divided equitably between the parties.

Typically, the recipient of the bonus will argue and attempt to protect the award by "ringfencing" it, whereas the other party may contend that it should be included in the overall marital assets and divided accordingly.

Key factors considered by the court

When determining how bonuses should be shared in divorce settlements, the court takes several factors into account:

Timing of bonus accrual

The timing of when a bonus is earned, as opposed to when it is received, can influence its treatment. Bonuses accrued during the marriage, even if paid after separation, are typically considered marital assets subject to division.

Contribution to acquisition

The court may consider each spouse's contribution to the earning of the bonus. This includes factors such as the role played in the spouse's career advancement, sacrifices made for the family's benefit, and the overall financial contributions to the marriage.

Financial needs and resources

The court assesses the financial needs and resources of both parties, taking into consideration factors such as earning capacity, childcare responsibilities, health, and standard of living.

Fairness and equality

The overarching principle guiding the court's decision is to achieve a fair and equitable distribution of assets, taking into account the circumstances of the case.

General caselaw

Several landmark cases have helped shape the approach of courts in England and Wales towards the division of assets, particularly concerning bonus payments. One such case is White v White [2000] UKHL 54, where the House of Lords emphasised the principle of equality in the division of marital assets. In this case, it was held that there should be no discrimination between the contributions of the breadwinner and the homemaker.

Another significant case is Miller v Miller and McFarlane v McFarlane [2006] UKHL 24, where the House of Lords stressed the importance of fairness and equality when dividing assets, particularly in cases involving substantial wealth.

Specific caselaw

In recent years, there has been a growing recognition of the importance of bonuses in divorce proceedings. Courts have become increasingly adept at assessing the relevance of bonuses to the financial settlement and ensuring that they are fairly accounted for.

In Rossi v Rossi [2006] EWHC 1482, Mr Justice Mostyn indicated that he would not consider a bonus earned after separation as non-matrimonial unless it pertained to a period starting at least 12 months after the separation.

In H v W [2013] EWHC 4105, the husband, who was a banker, received substantial bonuses as part of his income. The court considered whether these bonuses should be included in the financial settlement.

The court held that while bonuses earned during the marriage formed part of the matrimonial assets and were subject to division, bonuses earned after the separation date were not automatically included. Instead, the court considered various factors, including the nature of the bonuses, the parties' financial needs, and their contributions to the marriage.

The court finally determined that post-separation bonuses should not be included in the financial settlement unless there were exceptional circumstances warranting their inclusion. This decision highlights the court's discretion in determining the treatment of bonus payments and the importance of considering the specific circumstances of each case.

The issue was considered by the Court of Appeal in Waggott v Waggott [2018] EWCA Civ 727, where it ruled that bonuses earned after the separation date could be considered a matrimonial asset and therefore subject to division. This decision represented a departure from previous caselaw and established a significant precedent. The court emphasised the principle of fairness and equality in financial settlements and emphasised that post-separation earnings, including bonuses, could be relevant to achieving a fair outcome, particularly in cases involving high-earning individuals.

The ruling in Waggott v Waggott signifies a shift in approach towards bonus payments in divorce proceedings, highlighting the court's willingness to consider all relevant income and assets when determining financial settlements, even if they are acquired after the separation date.  Nevertheless, each case is unique and all circumstances of the same need to be considered in depth.

Conclusion

The treatment of bonus payments in divorce proceedings in England and Wales is governed by a discretionary approach that takes into account various factors, including the needs of the parties and any children involved. While there is no strict formula for the division of assets, recent caselaw emphasises the importance of fairness and equality in ensuring that bonus payments are fairly accounted for.

Given the complexities involved in the division of bonus payments in divorce proceedings, and the potential sums at stake, it is crucial that both parties to seek legal guidance from experienced family law practitioners.

 

If you require advice and/or representation in respect of a divorce or separation contact our specialist family law solicitors by sending us an emailcompleting our online enquiry form or calling on 020 3811 2782


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Legal Disclaimer

Articles are intended as an introduction to the topic and do not constitute legal advice.