This is one of the most common questions we are asked, particularly by people working in finance, law, sales and other sectors where a significant part of their income is paid as a bonus rather than a fixed salary.
The short answer is: not automatically.
In England and Wales, the court looks at the couple’s overall financial circumstances when deciding what would be a fair settlement on divorce. A bonus is usually treated as a financial resource, but the key question is when it was earned and what it represents and, therefore, whether it is matrimonial.
Bonuses earned around the time of separation
If a bonus relates to work carried out during the marriage, or was expected and accrued before you separated, it is likely to be considered part of the matrimonial finances. This is particularly true where bonuses were a regular feature of family income and were used to pay the mortgage, school fees, holidays or other household expenses.
For example, a bonus paid three months after separation may still be treated as a matrimonial asset if it was largely earned through work performed before the relationship ended. The court will look at the timing of the work, the bonus period and the parties’ financial circumstances at the point of separation.
Future bonuses and income
A different approach is usually taken to future bonuses earned after separation. These are often seen as part of a person’s future earning capacity, especially where they depend on future performance, targets or market conditions.
That does not mean they are irrelevant. If there is a strong history of substantial annual bonuses, the court may take them into account when considering spousal maintenance. In some cases, a maintenance order may include a provision requiring a percentage of future bonuses to be paid for a limited period, particularly where one party’s income is significantly lower.
Does it matter?
A lot of cases are decided with reference to everyone’s needs, the most foundational need being the ability to rehouse. The court can invade assets that it decides are non-matrimonial in order to meet needs so, if the asset is not sufficiently large, whether or not a bonus is matrimonial may be immaterial.
If you are divorcing and expecting to receive a bonus, get in touch with one of our specialist solicitors today to discuss how we can help.
