Tis the (Bonus) Season

Well, the Holiday season is upon us, and I'm pleased to report everyone is recovering nicely from their tryptophan overdose at my house! After years of haggling, my wife and I have finally settled on a fairly comfortable routine for scheduling which days/times to spend with which branches of our family each year. That's one of the great, unheralded achievements family life - no one tells you about it when you're starting your family, but when you get it right it can make your day like indoor plumbing!

Okay, end of cold open. Today's topic was inspired by that most Griswoldian of holiday traditions-the Christmas bonus. Did you know that income earned from labor performed or services rendered before your date of separation is marital property, even if it's received months or years after you separate?

If you are facing separation, and either you or your spouse has a job that incorporates periodic bonuses, commissions, or other variable compensation plans with lengthy periods between payouts, it can greatly affect strategic planning for your property division case.

An extreme example would be the successful small business owner who sells his marital business and moves to another. The purchaser often agrees to pay large chunks of the purchase price over a period of years after the sale because the money has to be generated from ongoing operations. This leads to all sorts of interesting questions: do you treat the expected future payments the same as you treat cash or property presently held when dividing the  marital estate? If not, do you discount it so that a clean division can be achieved now, or do you divide those dollars separately if and when received it so that both parties share the risk that you will encounter collection problems in the future?

Bonuses and commissions usually don't present collectibility problems, but they do present other valuation issues. Let's take the humble Christmas bonus. If you separate from your spouse in March and later receive a Christmas bonus of $10,000 in mid December, how much of it is marital and subject to division as part of the marital estate? Is it like an annual bonus for work performed throughout the year? Is the amount of the bonus performance or seniority-based? Depending on your employers policy, the answers may change. The most likely result is that a judge would try to determine the period of employment from which the bonus is derived and prorated based on how much accrued prior to separation.

Either way, if you find yourself in the situation be sure to discuss it with me, or whatever fabulous attorney you retain, so you don't end up feeling Scrooged later. Happy holidays everyone!