When a couple is getting divorced and dealing with how to separate their finances, who receive the bonus, or even a share of it, can often create problems.  Naturally, the party due to receive the bonus may seek to ‘ringfence’ the award, while the opposing party will argue that it should be part of the overall matrimonial pot and be distributed accordingly.

Issues such as this, which frequently occur and cause arguments, invariably produce a litany of case law, which needs to be considered by both legal advisors and the court in determining a fair financial outcome. To ascertain whether a spouse will be eligible for any degree of a parties’ bonus post separation, one must first explore the law in relation to bonuses received during the marriage.

During marriage

Generally, bonuses awarded while the parties are together are considered matrimonial assets. These are assets acquired during the marriage, or during the period of cohabitation before marriage. Upon reaching a financial settlement, the starting point for a division of the matrimonial assets is a 50/50 split. This can be altered based on each parties’ respective needs. For example, a party who is the primary carer of the children in the marriage, and who possibly has a lower earning capacity, would likely have a greater entitlement to capital from the matrimonial assets if their ‘need’ warranted such a claim. This would include any bonuses accumulated during the marriage.

Post marriage

The situation in relation to bonuses which are obtained post separation is less cut and dry, and usually depends on the circumstances of each case. For example, if there is a maintenance order in favour of the party earning less, it is possible for this individual to be awarded a portion of the payer’s future bonuses. This was explored in the case of H v W [2013] EWHC 4105 where it was originally determined that a wife was to receive maintenance of £3,750 per month plus 25% of the husband’s net annual bonus for the rest of their lives. Given his bonusses were typically circa £250,000, this was not an insignificant amount. Upon appeal, this was drastically reduced and capped at £20,000 per year, although the judge still held that it was necessary for the husband to share his bonus, in order to meet the wife’s future income needs in a fair and proportionate way.

Nevertheless, this case is now over 10 years old. I In recent years courts have taken a less generous approach to sharing bonuses post separation. For example, in the case of Waggot v Waggot [2018] EWCA Civ 727, , the wife’s attempt to have 35% of the husband’s net bonuses for a limited period was rejected. During this case, Lord Justice Moylan stated that, ‘Any extension of the sharing principle to post-separation earnings would fundamentally undermine the court’s ability to effect a clean break.’ The court being required to try and achieve this in every case, if it can. 

In such cases, all bonuses received after a clean break would remain with the spouse receiving the bonus and subsequently, they are not to be shared. This is only relevant to circumstances where there is no spousal maintenance. If such an order is necessary, then bonuses can be used to meet future financial needs, as illustrated above in H v W [2013] EWCH 4105.

Perhaps the most difficult issue to determine when deciding to share bonuses is the timing of when they have been received. During a clean break case, if a party receives a bonus post separation, they may be entitled to believe that it ought not to be shared. However, as the case of O’Dwyer v O’Dwyer [2019] EWCH 1838 demonstrates, if a bonus is earned during the marriage but not paid out until after the marriage has ended, then there is every reason to treat it as matrimonial property in its truest sense. Again, in the case of Rossi v Rossi [2006] EWCH 1482,  MrJustice Mostyn suggested that he ‘would not allow a post-separation bonus to be classed as non-matrimonial unless it related to a period which commenced at least 12 months after the separation’. This would seemingly give risk to the party receiving the bonus that it may still be added to the matrimonial pot, even if earned up to a year following separation.

It is therefore important that a party take legal advice, if they believe that they are either entitled to receive a bonus during their separation, or that their partner is. Here at Edwards Family Law, we are best place to guide you through your potential options and advise you in relation to an outcome which best protects your interests, either in relation to bonuses specifically, or in the broader context of your financial circumstances on divorce.