Dealing with Salaries, Contracts and Professional Income in Divorce Settlements

The question of how to deal with future income and earnings in divorce settlements for professionals is not always a straightforward one. As salaries, wages and bonuses do not fall under the banner of shared matrimonial assets, they are not automatically shared equally in the financial settlement. However, they still play a vital part in working out what each party is entitled to take from the partnership – and what they might still owe the other person.

Salaries and other professional income in divorce proceedings offer a highly effective method of how each person can cover their financial responsibilities and maintain their standard of life for themselves and any children or dependents from the union. Pensions must also be taken into account when negotiating divorce settlements for professionals; however, these are slightly more complex to sort out, as they can be taken into account for the purposes of dividing assets and money during a divorce.

What happens about salaries in divorce settlements for professionals?

As a general rule, the court expects the status quo to carry on after a divorce in the way that it did during the marriage or civil partnership. For example, if one person remained at home to look after children and relied on their spouse’s income to live on, this arrangement should continue, post-separation. This is known as interim maintenance and can form part of the final financial settlement.

Regarding the salary itself, divorcing couples do not have an automatic right to half of each other’s income. Each person retains their own. However, the court considers salary , including any potential for future raises, on a needs basis. In other words, if a former spouse is unable to meet their own financial needs after the divorce. This could be because a career break to raise children or care for a relative has affected their future earning capabilities. In that case, they can apply for spousal maintenance payments from their former partner. Courts do expect both parties to maximise their own earning potential post-divorce, so such agreements can often be temporary while both parties get back on their feet.

Can someone have claim over their former spouse’s existing or future bonus as part of professional income in divorce?

Overall courts will take a similar approach to bonuses as they do for salaries and other types of professional income in divorce. Any division will be assessed on a needs basis only. The type of bonus will also affect how it is considered. For example, discretionary bonuses, that is, those that are not guaranteed as part of a professional contract, can only be assessed once they have been awarded. This is because amounts and timings are not always known in advance.

The process will largely depend on how previous bonuses of the same nature were used during the marriage and to what extent the financially weaker partner depended on them to maintain their standard of living. Again, there are options for how the bonus share is paid. This can be either as a pre-agreed lump sum that stays the same whenever a bonus is given, or as a percentage of the exact amount awarded that changes each time.

How are pensions dealt with in divorce settlements for professionals?

Pensions are seen as a unique and more complex professional asset in divorce settlements. For a start, they do not become available until you reach retirement age, or the age which you set at the start of the pension to begin receiving payouts. So, a pension is more of a future income than a present one. Pensions are normally accumulated by one or both parties throughout life, often running before, during and after a marriage. It is difficult to attribute set values to pensions, as they can vary so much in what type they are, what the forecasted payouts will be and how much you (and your employer) contribute to them.

Pensions accrued during the marriage are considered a shared matrimonial asset, while any accumulated after separation are not. The shared portion can, therefore, be part of a divorce financial settlement. Payments can be made under the terms of the final settlement as a lump sum, either at the time or on retirement. Alternatively, payments can be made on a percentage basis. Again, many factors are considered when dealing with pensions. These include age, financial responsibilities and dependents, length of marriage, standards of living and contributions to the marriage or partnership.

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