Compensation structures that feature handsome bonuses can represent a significant portion of an executive’s or professional’s compensation. When a spouse who is entitled to such bonuses divorces, their ex (or soon-to-be ex) may or may not be entitled to a share of this type of compensation.
Whether a bonus is considered marital property or separate property depends on several factors, including when it was earned, what it was intended to compensate and the unique ins-and-outs of a divorcing couple’s circumstances. There is no automatic rule that every bonus must be divided equally.
The basics of dividing bonuses in a divorce
Bonuses paid before a divorce is finalized are often considered marital property, if only to a degree. If a bonus was earned via work performed during the marriage, it may be considered a marital asset even if payment occurs shortly before or after a divorce decree is entered.
Marital vs. non-marital asset analysis generally becomes more complicated when a bonus is paid after the divorce is finalized. Some post-divorce bonuses are intended to reward past performance that occurred during the marriage, while others compensate an employee for future work or encourage them to remain with the company. A retention bonus, signing bonus or incentive tied to future performance may be treated differently from an annual performance bonus based primarily on work completed before the formal end of one’s marriage.
To add to the potential “chaos,” high-asset divorces frequently involve more than a single annual bonus. Stock-based incentives, deferred compensation, profit-sharing awards and long-term incentive plans may all require careful analysis. Proper valuation and classification of these forms of compensation can have a substantial impact on a couple’s overall property division outcome.
If you anticipate receiving a significant bonus before or after your divorce, it is important to seek legal guidance early. An experienced legal ream can evaluate your compensation structure, explain how Ohio law may apply to your circumstances and work to protect your financial interests while pursuing a fair and equitable resolution to your circumstances.