California’s community property system generally requires divorcing spouses to divide all of the assets acquired during a marriage. But what about something like an employment bonus that’s awarded after the couple separates but is based on work performed during the marriage? California’s Fourth District Court of Appeals recently took on this question in In re Marriage of Finby.
Husband and Wife were married in 1995 and separated nearly 15 years later. Wife worked as financial advisor during the course of the marriage, primarily for UBS Financial Services. She signed a contract with Wachovia in January 2009, however, and was employed by the company when it was later purchased by Wells Fargo. Among other bonuses and incentives, the contract provided that Wife would be entitled to $2.8 million, based largely on the value of “book of business” – or client list – that she brought with her, if she remained employed with the company for 112 months and maintained a certain performance level.
The company allowed Wife to take the entire amount of the bonus up front, with the agreement that it be treated as a loan. Wells Fargo agreed to forgive more than $27,000 of the loan each month during the 112-month bonus period. It was also agreed that the entire amount outstanding from the loan would be due if Wife left the company.
A trial court later granted the couple’s divorce following a hearing on number of matters including whether the bonus money should be treated as community property. The judge concluded that only the portion of the loan that Wife earned during the first 11 months ($380,000) with Wells Fargo, the time she worked with the company before Husband and she separated, was community property to be divided between the former spouses.
The Fourth District reversed the decision on appeal, however, finding that the entire amount of the bonus was community property because it was based on the “book of business” that Wife acquired during the course of the marriage. “[W]ife’s book of business was a valuable asset,” the Court said. “The evidence reflects Wells Fargo agreed to pay Wife $2.8 million for bringing her customers to the firm.” The Court also noted that the conditions that she had to satisfy in order to keep the bonus were entirely under Wife’s control.
“This does not mean the court must simply award one-half of the $2.8 million to husband,” the Court further explained, however. Instead, it remanded the case back to the trial court to determine the extent of the community property interest in the bonus money.
Bonus money and other community property issues are just one piece of the puzzle in California divorce cases. It’s important that a person considering a divorce consult an experienced family lawyer before starting the legal process to have a clear understanding of your rights, obligations and options.
With more than 30 years of experience representing clients in divorce and other related proceedings, San Jose divorce lawyer John S. Yohanan has the experience and ability to help guide you through the process while ensuring that your legal rights are protected. Contact us online or call our office at (408) 297-0700 to learn more about how we can help you.
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