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How the changes to bankers’ pay packages could affect divorce settlements.

Date: July 16th, 2010 - Written by: Brookman Solicitors

Henry Brookman and Aziz Malik discuss the issues some bankers will face when dividing their assets during a divorce. Published in Financial News.

The recent banking crisis has had a direct impact on the way in which bankers are paid. In many cases, they are being offered higher base salaries, lower bonuses and packages of toxic assets. Some of these changes in pay structure have increased salary complexity, meaning bankers could face more complicated valuation problems during a divorce.

The effect of complex remuneration packages on divorce payouts

It is important that the divorce solicitor closely considers the composition of the banker’s pay package. A bankers’ pay may appear obvious on the surface, but on closer inspection, may not for reasons such as:-

  • Claw-back arrangements in a banker’s contract could put them at a severe disadvantage if those arrangements are actioned after a settlement is agreed.
  • Share benefit schemes can also add complications and it may be that the banker’s spouse should share the risk on those investments.
  • Employee benefit trusts that defer income tax payments by administering the funds offshore, must also be properly disclosed by the banker. IThe changing tax rules in relation to these schemes impose a further risk.
  • A banker expecting a substantial increase in their earnings in the future may seek to pay a lump sum to their ex-spouse now rather than pay ongoing spousal maintenance.

These complexities can increase the risk that a financial settlement is structured unfairly. To prevent this, a specialist solicitor experienced in these matters should be retained.

If divorce or divorce settlements are an issue for you, please contact Brookman Solicitors for more advice.

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