Many executives and professionals like lawyers, doctors, bankers, stockbrokers, directors and financial analysts receive significant bonuses, usually on an annual basis, which may even exceed their salaries. When large bonuses become a regular part of individual or family income, it is appropriate to include them in the recipient’s income for purposes of setting future alimony and child support and determining property distribution in Connecticut divorces.
Connecticut requires inclusion of bonuses as part of spousal income in divorce cases. The court’s automatic orders request information about bonuses received on the required financial affidavit of each spouse.
Connecticut courts have also ordered the use of bonus money for other purposes like paying down marital debt or reimbursing a marital account the bonus recipient had previously wasted or improperly spent. See Leonova v. Leonov, 201 Conn.App. 285 (2020).
Bonuses are part of available income in divorce
Connecticut courts have an “expansive definition of income used when crafting financial orders in dissolution proceedings,” so judges should normally include annual bonuses in income, even if they are not entirely guaranteed. See Bartel v. Bartel, 98 Conn.App. 706 (2006). A history of regular bonus payouts is sufficient for a court to presume they will continue. If bonuses cease in the future, the remedy is to then request a downward modification of any related support orders based on this change in circumstance.
Difficulty establishing future bonus amounts
Sometimes establishing the size of a future bonus can be challenging. The litigants could negotiate a stipulation to a dollar amount to use for periodic bonuses going forward. That number would be added to other sources of income to determine total resources available for alimony, child support and other financial obligations. Or, for the litigant who would be the recipient of such payments, their own bonuses may help determine fair support levels.
When bonus valuation is difficult, another approach is to enlist an expert to testify about their bonus forecast.
Some bonus arrangements may cast doubt on bonus regularity and continuity. For example, is an annual bonus based on sales or profits and do those numbers vary widely year to year? Does a manager or officer have discretion to approve yearly bonus payouts? Is that decision tied to any other factors or is it completely discretionary?
Is the employer a closely held or family business in which family members or close colleagues have the ongoing power to design or approve bonuses? Is there concern whether the close relationships with the litigant could influence the bonus decision? Might the litigant even be part of the bonus decision making team?
Strong matrimonial lawyers
Did a bonus recipient fail to disclose the bonus on their required financial affidavit? An experienced Connecticut divorce lawyer will carefully investigate the circumstances of any bonuses at issue, using specific discovery requests to uncover all relevant details. See Bartel, 98 Conn.App. 706 (2006).
Skilled legal counsel can present evidence proving (or disproving) the appropriateness of including a bonus in a litigant’s income for support purposes as well as establishing the amount.
Should a complex bonus arrangement make analysis difficult, the attorney can advocate for an arrangement that benefits their client. For example, the litigant receiving support might get a percentage of any future bonuses within a set time of the other litigant’s receipt of the funds, avoiding the need to set an exact dollar amount. Guarascio v. Guarascio, 105 Conn.App. 418 (2008).