Divorce Case Law-Allocation of employment benefits

Skelly v. Skelly, Mich. Ct. App., No. 287127 (per curiam)

Facts:

The trial court distributed a portion of Appellant’s retention bonus, paid before and after the divorce judgment, and a portion of all of Appellant’s future bonuses to Appellee. Appellant’s income included a first installment of a retention bonus from his employer. If Appellant remained employed by the employer until a specified date, which fell after the divorce judgment, he would receive the second and third installments of his retention bonus.  If, however, Appellant did not remain employed at the employer until the specified date, Appellant would have to repay all retention bonus monies. The trial court ordered the first two installment payments be divided equally between the parties and the third, which would be considered separate property, as it was paid after the divorce decree, would be divided so that Appellee would receive forty percent. Further, the trial court granted a forty-percent share of Appellant’s future bonuses to Appellee.

Question:

Did the trial court err in determining the first two payments of the Appellant’s retention bonus were marital property; the third payment was separate property subject to invasion; and in granting Appellee forty percent of any future bonuses Appellant may earn?

Holding:

Yes. Neither the retention bonus payments nor future bonuses were earned during the marriage and, therefore, should not have been included in the marital estate; and the bonus payment made after the judgment of divorce was not separate property subject to invasion. Reversed.

Reasoning:

The retention bonus was intended to entice the Appellant to remain at the company until a specified date, and if he left the company before that date, any advance payments of the bonus he received would have had to be repaid. Appellant did not actually earn the retention bonus until the date set in the retention agreement, which occurred after the judgment of divorce was entered. Therefore, even though part of the bonus had been advanced to him during the marriage, the retention bonus was not earned during the marriage; thus no portion of the retention bonus was marital property.  Likewise, the third installment should not have been considered separate property subject to invasion because Appellant had not yet earned it at the time of the judgment of divorce. Because future bonuses paid to Appellant are speculative and would not have been earned during the marriage, they were unrelated to the marriage, should not have been considered part of the marital estate and should not have been awarded in part to the Appellee. 

Commentary:

This case, while not an Illinois decision, illustrates a problem frequently confronting trial courts—how to allocate “golden handcuff” type bonus plans. I agree that the future bonuses are probably not marital property under a traditional definition (earned after the marriage) but doesn’t the marital estate get some credit for the fact that a portion of the value derives from past performance?  Frankly an easy non-offensive solution would be to give the other spouse a piece of the future bonus as additional “maintenance” rather than property.

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