Very often, we deal with cases where one or both parties’ incomes are variable, because they are tied to commissions, etc,. or heavily tied to a bonus which can vary. In fact, for many people who work on Wall Street, their salary (oftentimes in the $120,000 to $150,000 per year range), makes up a small percentage of their annual income with the rest coming as bonus at the end of the year or in the first quarter of the next year. Moreover, it is not uncommon for the bonuses to vary widely from year to year based upon company performance, etc.
This often makes cases difficult to settle, especially during the uncertain if not unstable economic times of the last several years. Typically, the law provides that when someones income is variable, that a 3 or 5 year average should be considered for support purposes. In these times, is that fair. Take the person working at a hedge fund who was earning seven figures for several years, but for the last few years, if they still had a job, only earned their $120,000 per year salary. Ask that person if taking an average of 3 or 5 years for support purposes is fair. Moreover, from a cash flow perspective, even when an average is used, the payor can be really strained to pay support if their actual income is lower than the average used. As time goes by after the divorce, in theory, this should be balanced by the years when they earn in excess of the average. In the years closest to a divorce, after all assets were distributed and perhaps the liquid assets were used to pay for the divorce, to pay equitable distribution, to buy a new home, etc., there may be no fund to serve as the buffer in one of these under average years.
That person tends to want to base the support solely on their salary, with some strict percentage share of the amount over the salary as additional alimony and/or child support. The other person often balks at that claiming that the regular monthly (or weekly support is too low).
Have I settled cases using this approach? Yes. Have I settled cases using an average? Yes. I have often used a hybrid meaning that the base support was based upon a number higher than the salary with a percentage of the amount above that number being used to determine additional support.
As we have said before, there are many ways to settle a case. Courts on the other hand, do not have the same flexibility. In fact, one wonders whether they have the authority to do this. This issue was recently before the Court in the recently decided unreported (non-precedential) case of Saina v. Singh.
In that case, a 13 year marriage, the divorce judgment required defendant to pay plaintiff $49,240 in alimony, and thirty percent of his bonuses, per year, for fourteen years. This was based upon the husband’s income of $165,000 annually in base salary, along with yearly bonuses worth approximately $35,000 consisting of cash and restricted stock and a current annual salary of approximately $21,000 for the wife. The amount of the base alimony was purportedly fixed based upon the wife’s needs, after reviewing her budget.
The Appellate Division reversed and remanded the matter as it pertained to the bonus noting:
As to the annual bonus, however, although the court’s intent is clear, the propriety of the award is not. The judge did not make findings of fact or engage in legal analysis as to the seventy percent-thirty percent distribution. The court did not offer a rationale other than stating it would be considered "additional alimony to the wife." Given that the judge fixed the monthly amount of support based on plaintiff’s monthly expenses, on this record plaintiff does not appear to need additional support.
Accordingly, we affirm the monthly payment of alimony, but reverse the allocation of a portion of defendant’s future bonus payments as additional alimony. The bonus, however, may be subject to additional child support obligations. On remand, the trial court shall review whether child support would be modified upon receipt of future bonuses. (Emphasis added).
Getting back to the original question, can a court order the sharing of a bonus, this case suggests that it might be possible. However, if the court is going to do it, proper fact findings must be made to support the award. Moreover, it appears that if the amount of the share of the bonus would provide support in excess of the marital lifestyle/need, then perhaps the excess could be disallowed. Since parties have more flexibility then the court will ever have, it remains better practice to find a creative solution that is fair to everyone.