Holiday bonuses and other forms of extra income — know what constitutes “income” for determining child and spousal support – #divorcelife
With the holidays approaching and the year coming to a close, some divorced parents are looking forward to a year-end bonus. Whether the check will purchase necessities or provide for a Caribean adventure, parents should understand how bonuses, and other types of extra income, impact child and spousal support.
In California, the threshold for defining income for purposes of calculating child support is low. Courts gather income “from any source derived” to calculate payable support. Yearly bonuses, overtime, commissions, and income from side jobs all are captured in the support calculation.
Since this type of income is rarely paid on a predictable basis, Courts generally order that a percentage of the additional income be paid upon receipt. This means, when the bonus is received by the employed parent, a corresponding percentage of that bonus is paid out as additional support.
Parents receiving support do not get to keep their total bonus, either. If the parent who is receiving support earns additional income, the bonus table will calculate a reimbursement owed to the payor. There is even a two-way bonus table to calculate support when both parents earn additional income.
For long-term spousal support, Court’s look backward at the standard of living during the marriage. If bonuses or other additional income was received during the marriage, then it is included in a support determination. However, bonuses earned for the first time after separation are likely to be excluded from support.
As an example, if an employee earned no bonuses during the marriage, but two years after the divorce, was promoted to a management position with considerable bonus income, the additional income is unlikely to be distributed as support.
Many employees, particularly those in management, receive compensation in ways that are not as easy to define as a bonus. Stock grants and options, per diem travel pay, and reimbursement for living expenses can all be included in a support determination. Even perks that offset living expenses — like a company car — can be included to the extent that they lower the recipient’s expenses.
Varied compensation can certainly make support determinations more complicated. Seeing a highly qualified attorney or attorney-mediator is recommended any time spouses have complex or non-traditional compensation packages.
For more detail, see our 2-part live conversation on the topic: