Not every spouse gets paid in the same manner, and that can make child support, maintenance and property division calculations a bit complicated. Most people tend to think of income as what one sees on a W-2, and that may be true for some workers who get paid a straight salary. But employees can receive other types of compensation – do those forms count as income or property?
For example, what happens if a spouse works on a commission basis? That spouse may receive a small base salary, but the bulk of the income depends on how well that spouse performs in a given year. How does one calculate actual income for purposes of child support or maintenance? Does the bonus count? What if the last year was the best or worst year the spouse ever had? In these situations, courts typically look to several years of past performance and take an average income. However, the spouse earning this income may try to introduce evidence that shows going forward bonuses will be lower, commissions will be down because of structural changes in the company or the industry. A good workaround strategy in this situation would be to write up an agreement that the parties will accept a certain figure as a base income (including commissions) and agree to recalculate child support or maintenance of that sum deviates up or down by a certain percentage in a given year.
Timing of bonus payments can also be tricky. Some companies award a bonus for a given year but pay it out over several years. What if the bonus is earned right before the parties get divorced. Should future bonus payments be considered marital property so that the other spouse has some claim to it? That could be a plausible argument, as any income earned during the marriage is considered marital property. To be sure a spouse receives full compensation, that spouse would need to put payment of the bonus into a settlement agreement.
Spouses also receive other benefits that are not considered income, such as retirement or pension benefits. In those situations, courts generally fix the marital portion of those benefits and award the other spouse half of that amount. Similarly, if a spouse has stock options earned during the marriage, the court will split marital portions (though this can require more detailed language if the options have not vested or come in tiers). Finally, some spouses receive significant perks with their jobs – company cars or even housing. How should that factor into income? Generally, courts will not count these as income unless the other spouse can show how they should count as income, since not having to pay for a car or a house frees up disposable income but does not change gross income.
As you can see, all employment based income requires full consideration by you and your attorney to be sure that no spouse gets denied marital property or shorted in an income calculation.
If you have questions about spousal income and divorce, contact us – we can help.