How Are Bonuses and Commissions Divided in a Michigan Divorce?

spouse_bonus_divorceWhen it comes to how Michigan family law courts divide property and assets in a divorce, one can paraphrase the slogan of a town that has been the location of countless marriages – and the reason for myriad divorces: “what happens in a marriage, stays in the marriage.”

That means that almost every type of income, asset, or appreciation of value earned or acquired during the course of a marriage becomes part of the marital estate and is subject to equitable division in a Michigan divorce. Determining which assets are “marital property” to be divvied up between the spouses and which are “separate property” to be retained by each party is the foundational inquiry in the property division process.

Sometimes, determining whether an asset is marital or separate property is a no-brainer. When a couple buys a house or car, invests in stock, or puts money in an IRA after they say “I do” but before the entry of their final divorce judgment – a judge will divide that property equitably (but usually equally) between them.

Earned vs. Received

The same principle applies to income earned from employment. But the nature and timing of certain types of compensation can raise tricky questions about whether it constitutes marital or separate property. This is particularly true for things like bonuses, commissions, stock options, or perks that a spouse may earn during the marriage but may not receive until after the marriage is over.

How a court will treat such compensation, in theory, isn’t complicated. As one court put it plainly: “An asset earned during a marriage, but received thereafter, is a marital asset. An asset actually generated, not merely received, after a marriage has broken down is not a product of that marriage.

Until recently, this analysis was not always so simple in practice. While the “start date” of a marriage for asset division purposes is pretty much set in stone as the wedding day, Michigan judges had some discretion in determining a marriage’s asset division “end date” – the date before which property is marital and after which it is separate.

Courts sometimes faced situations where a couple showed “external public manifestation” of intent to divorce (e.g., living separately, one spouse moving out-of-state) for several years before filing for and getting a divorce. Was income earned or received during those years marital or separate? “External public manifestation” of the intent to divorce could, at least in some circumstances, be sufficient to create a separate estate with respect to assets subsequently earned.

Now, it is well-established that any income earned before the date of the final divorce decree is marital property. If, for example, a spouse is set to receive a year-end bonus in December for reaching certain goals during the course of the year, and the spouse’s divorce became final in September, any portion of that bonus that was earned before September is marital property subject to division. This is so even though the spouse did not receive the bonus check until well after the ink dried on the divorce decree.

Property Division Questions? Call Kreis Enderle Today

The treatment and division of income, such as bonuses and commissions in a Michigan divorce are just two of the many issues faced by individuals navigating the end of their marriage. The divorce and family law attorneys at Kreis Enderle can help bring clarity to the process and ensure that our clients turn the page and move on to the next chapter in their lives with confidence and peace of mind.

Please contact us today with your divorce and family law questions or concerns.

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