When people divorce, it should be a (mostly) clean break from their former spouse. Most know that their future earnings are considered for child support and spousal support too if that is ordered and modifiable. But what about speculative employment benefits you earn in the future or post judgment? Those should be yours and yours alone, right? If you said yes, the Michigan Court of Appeals agrees with you.
In the 2009 published case Skelly v Skelly, 286 Mich App 578, Wayne County trial court awarded Thomas Skelly’s former wife, Patricia, part of his future benefits with his employer Ford Motor Company. Tom had a lucrative position at Ford which came with a retention bonus, paid out in installments, totaling $108,000. The point of the bonus was to have Tom stay put at Ford through May 31, 2009 to receive the full amount (I’d be sold). If he didn’t, he had to reimburse Ford for every payment received.
The lower
court did its usual equitable division of marital retirement, assets and debts,
and awarded Patricia spousal support of $5,000 per month. While recognizing
that the future retention bonus payments would likely be separate property, the
court ultimately chose to invade it, noting Patricia’s limited ability to earn,
and “in the Court’s mind, [the retention award] is based on performance during
the marriage,” and awarded Tom 60%, and Patricia 40%. The court went on to
award Patricia 40% of any future bonus received by Tom, in addition to the
retention bonus. Earned bonuses are considered for support, including modifications
as they are income, but the parties were divorced July 23, 2008, almost a full
year before Tom could even get the last payment of his retention bonus. Not
surprisingly, Tom appealed.
The court of
appeals noted that assets earned during the marriage are part of the marital
estate whether they are received during the marriage or after the judgment has
been entered. However, the difference in the Skelly case is that the retention
bonus was not truly earned during the marriage, so none of it was marital
property. Don’t forget, Tom had to work until May 31, 2009 to get the full
$180,000, and he had to pay it all back, including portions already received,
if he didn’t stay with Ford until that time. Because of this, he hadn’t earned
the money as “he had not satisfied the condition subsequent…required by the
agreement between him and his employer.”
Ultimately, the
court of appeals found the lower court erred in considering any portion of the
retention bonus as marital property subject to division. It also held that the
third payment was not separate property subject to invasion because he had not
yet earned that money when the parties were divorced. As a final nail in the
coffin, the court ruled that because speculative, future bonuses are not
currently in existence, you can’t award them as part of the marital property
division. Once again, they aren’t earned during the marriage and are “based solely
on the potential occurrence of future events unrelated to the marriage.” Not
even a crystal ball could’ve helped Patricia win this case.
