In our increasingly complicated world, it is becoming more common that high earning professionals do not just receive salary, but also receive sizeable bonuses, stock options and deferred benefits as part of their remuneration packages.

We have long standing expertise in dealing with the challenges that these present, on both sides of the argument.

Base salary

Salary is important in the context of a breakdown of marriage or breakdown of a relationship where there are children, because the base salary will be relevant in respect of either spousal maintenance or child maintenance payable by one to the other. Most base salary elements are fixed and, therefore, it is relatively simple to assess what the per calendar month income will be for that person from this element. In the case of periodical payments for children (child maintenance), there is a set formula of base salary which will be paid towards the care of the child by the absent parent. In respect of periodical payments for a spouse (spousal maintenance), there is no set formula, but the Court will look at the income of the parties, the earning capacity of the party who is seeking periodical payments and the genuine income needs (generously interpreted) of the person who is seeking periodical payments for themselves.

Apart from the risk of redundancy, base salary is fairly stable and predictable.

Bonuses

Cash bonuses are paid in addition to one’s base salary. However, there are wide variations and fluctuations as to how cash bonuses are paid. For example, some bonuses are paid on an open “discretionary” basis, some bonuses are paid upon a set of personal and/or company targets being realised and some bonuses are paid on a sliding or uplifting scale, depending on various factors. Most commonly, they are paid annually, but where they are closely linked to sales targets, they can resemble commissions and be paid much more frequently as a short-term incentive.

If a cash bonus is being paid, then the question of whether the bonus can be considered a normal part of one’s income and, therefore, added to the family income when considering spousal or child periodical payments. It is important to consider from the viewpoint of the person receiving the bonus that the bonus is not guaranteed and, therefore, it would not make sense from that person’s perspective to have any periodical payments due out of their bonus to be expressed as a figure. It can make more sense for that person to have the amount expressed as a percentage of the bonus. However, then the issue arises as to why, if there is a very large bonus, should perhaps a long-separated spouse receive a windfall much in excess of their stated need?

Bonuses paid as shares or stock options

Traditionally, in order to incentivise staff, companies offer share option schemes. This would normally allow an employee to purchase stock at a certain fixed value, no matter what the actual value at the time of exercise. For example, if 1,000 stock options were granted at a “strike price” of £2.00 per share in 2012, not exercisable for two years and at the time of exercise, the stock market price was £3.00 per share, then the employee would be making a 50% gain. Stock options may not be considered as part of income and they may well add to the capital pot, but it does depend upon the circumstances in which they are granted and, of course, it will be relevant as to whether this is a common occurrence in the income stream of that individual.

Deferred vesting is a very common feature, where the options can only be exercised if the employee is still with the same employer after three years for example.

Some companies, particularly banks in the past, granted shares to employees as part of their annual remuneration package. Usually, the shares vested into the name of the employee and delivered at the same time. Again, these can usually be considered as an extension of income, rather than adding to the capital pot, but each case will turn on its own facts.

Claw-back

Due to the recession and financial difficulties post 2008, with many financial professionals coming under more scrutiny and condemnation from various circles, a culture of claw-back of bonuses or shares has been instituted in the City. The wider ramifications of this are not yet in play.

EC rules now limit bonuses to twice salary, which has led to an explosion of creative ways to define extra payments in other terms than “bonus”.

More traditionally, employers especially banks, will seek to claw back certain aspects of their employees’ remuneration packages, for example if they leave the company within a certain period of time a share allotment may be subject to “claw-back”. It is important to note that, in normal circumstances, if a portion of the employee’s remuneration package will be subject to claw-back, then this will very often be offset by any new employer that wants to recruit them, as part of the negotiation package. When acting for the spouse of such an individual, it is important to keep that in mind.

Finally, the taxation rules need to be borne in mind when assessing what is to be a fair deal between the spouses.

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Financial Settlement Scenarios

The scenarios below do not relate to any individual clients of ours but the facts and the outcomes relate to some similar experiences in our practice.

Scenario Analysis Example #1

The Scenario

Mrs G left the home last year due to her husband's alcoholism. The home is in his name and he refuses to co-operate. He works as a Sales Director and has a large pension accumulated from fifteen years with his employer.

Our Solution

Mrs G petitioned for divorce on the basis of her husband's unreasonable behaviour. At the same time we filed a financial application. When Mr G failed to make financial disclosure we obtained an Order requiring him to do so in 14 days or risk imprisonment for contempt of Court.

It was made clear that if he did not co-operate then the Court would make Orders giving Mrs G her share anyway and if necessary Mrs G would be given power to sell the house and to evict him. Mr G then settled the case.

If you have questions, contact us now, we can help you.

Scenario Analysis Example #2

The Scenario

In 1980 Mr G aged 25 was living with his partner.  When she became pregnant he made a Will making her the executor and leaving everything to her.  They separated 2 years later.  The child is now adult.  He re-partnered and had 1 child but the relationship again ended after 2 years.  He continued paying his ex partner’s rent rather than go through the Child Support Agency.  

He met his third partner in 1994 and they had 3 children.  He died in 2010.  He had never made another Will or revoked the one made in 1980, but he had quite substantial assets by the time of his death.  What rights did his ex- partners and 4 children have?

Our Solution

Briefly, Mr G left a huge mess.  His ex-partners challenged the Will in the Courts.  The dependent children had claims.  Did the adult son, who was independent and 28 years old, have a claim?  What rights did the mothers have where they were left supporting children under 18?

Ultimately a judge had to decide on the balance of fairness between the minor children bearing in mind the available resources.  His first partner and adult child did not receive anything.  The cost of sorting this out used almost half the estate.The moral is, make a Will!

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Myself and my mother had a free video consultation with Mr. Brookman regarding my mother's divorce and were both impressed with his knowledge on divorce matters, professionalism and understanding. Henry then followed up with us with a clear plan of what he suggests we do...

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I want to highly commend Brookman Solicitors firm. I had the privilege of getting very thorough and sensible advice from their solicitor Jennifer Douglas. I don't have enough praise for her.

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I had an initial consultation and Henry was well prepared. He gave great advice and followed through quite quickly. He was very helpful.

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I had a free consultation with Henry Brookman. He was incredibly knowledgeable about my complex situation, gave straightforward advice and empowered me to understand exactly how I need to proceed.

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About The Team

We are a specialist divorce and international divorce family law team, advising clients in the United Kingdom (specifically England and Wales) and throughout the world. We have a very people–orientated approach to working with clients. Henry Brookman has practised law for over 45 years, and our team has a wide range of skills and expertise. We are recommended by the Legal 500 and have been awarded the Law Society’s quality mark, Lexcel.

Partner

Henry Brookman

With over 45 years' experience, Henry Brookman is the senior member of the team. He is described by The Legal 500 as ‘shrewd, savvy, sagacious and highly experienced’.

Partner

Talitha Brookman

Talitha is a Partner in the firm and a very experienced practitioner. She has been exclusively practising family law for over 15 years and is a recognised expert in her field.

Partner

Aziz Malik

Aziz is a Partner at the firm and is highly regarded for his expertise on financial matters in divorce and has been recommended by the Legal 500.

Solicitor

Kevin Danagher

Kevin specialises exclusively in family law, advising on all aspects of relationship breakdown, divorce, same sex marriage, marital agreements, and international family cases.

Solicitor

Jennifer Douglas

Jennifer is a talented solicitor, experienced in all elements of family law, including high net worth financial proceedings, Children Act proceedings and financial claims.

Solicitor

Gavin Yeung

Gavin has excellent experience in family law including divorce and financial proceedings and international child abduction proceedings involving Hague Convention countries.

Chartered Legal Executive

Lorraine Imms

With over 20 years' family law experience, Lorraine can advise on divorce, matrimonial finances, cohabitee disputes, nuptial agreements and private children matters.

Office Manager

Lorna Martin

Lorna is our Office Manager who oversees the operations of the firm including providing accounts support as well as secretarial support to the team.

Accounts Manager

Evdokia Dikova

Eva is an AAT qualified accounts manager and holds full AAT membership (MAAT). She gained her degree in financial accounting from the University of Economics in Bulgaria.

Secretary

Victoria Delatouche

Victoria is a highly experienced Legal Secretary and a long-standing member of the team. She provides secretarial support for the office.

Secretary

Michelle Louison

Michelle provides secretarial support to Henry Brookman. A very experienced family law secretary, Michelle has worked in law for over 12 years.

Front of House Manager

Patricia Antonio

Patricia is an experienced secretary and office administrator, handling the calls that come into the office, greeting clients, and managing office presentation.

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