Income is often discussed as if it is a straightforward matter that has only one of two approaches — a regular salary or a paycheck based on worked hours. However, many people in California also earn additional income in the form of things like bonuses, commissions and added perks. This makes dealing with the topic of income during divorce somewhat more complicated.
Although income earned during the course of a marriage is generally considered marital property, it may be appropriate to argue that prepaid bonuses with clawback provisions do not fall under that category. This is applicable for a person who received this type of bonus at the start of his or her employment, and it is still within the time frame for which the funds could be withdrawn. If the money were to be withdrawn after the divorce, it would come exclusively from the employee’s asset pool rather than his or her ex’s.
Since there are usually no strings attached to bonuses for past work performances, these will need to be included during asset division. However, individuals should be certain that these bonuses are not counted twice. For example, an ex might insist that he or she should receive half of the bonus while also trying to include the bonus when counting overall income. This not only skews the division of assets, but it also means that a person could end up paying more than his or her fair share in support.
Commissions, stock options and other added compensation should be treated carefully during divorce. Lumping everything together in the single category of income is not always an accurate representation of either income or marital assets. To avoid unintended outcomes during divorce, it is best to not leave these types of matters up to chance. An experienced California attorney can generally explain a person’s options for handling income and property division in divorce.