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Unpredictable Bonuses and Alimony

By S. Dean Michaux, JD

Finn v. Finn, COA 19-520 (Unpublished opinion)

Alimony can be a complex element in divorce. How much is fair and reasonable, how it is categorized for tax purposes, or even whether it is owed at all are matters often left to the discretion of judges. Here in the Piedmont area of North Carolina, we had a case that required some back-and-forth among the judges to get it right.

Facts: This is a previously remanded case from the North Carolina Court of Appeals instructing the trial court to make additional findings for alimony and attorney fees.

In 2016 the trial court entered an order denying Ms. Finn’s claim for alimony and attorney fees. The Court of Appeals vacated the order as there were insufficient facts to determine the validity of the court’s determination on the issue of alimony. The case was remanded with instructions that the trial court make additional findings of facts “on the factors set out in N.C. Gen. Stat § 50-16.3(A)(b) for which evidence was introduced” and “consider whether to include plaintiff’s annual bonus in its calculation of plaintiff’s income.”

The trial court entered a new order in 2018 addressing each of the statutory factors of N.C. Gen. Stat. § 50.16.3(A)(b). The trial court found Mr. Finn was eligible for an annual bonus and had received a bonus for the past two years amounting to $48,000 gross. The trial court stated that it would not consider any bonus in the calculation of income as “there was a lack of evidence that [Mr. Finn] had received beyond these two years or that he will receive an annual bonus in the future.” The trial court concluded that Mr. Finn was a supporting spouse, Ms. Finn was a dependent spouse, and alimony was inappropriate because Mr. Finn “does not have the present ability to pay Alimony.” The trial court denied the claim for alimony and the related claim for attorneys’ fees.

On appeal, the Court of Appeals found that the trial court had considered whether to include Mr. Finn’s possible annual bonus as part of its alimony determination. The trial court explained that there was insufficient information to determine if Mr. Finn would continue to receive annual bonuses going forward.

Issue: Should the trial court include an annual bonus in calculating income for purposes of alimony?

Answer to the issue: It depends.

Summary of Rationale: The trial court must award alimony if the requesting party shows the following: “(1) that the party is a dependent spouse; (2) the other party is a supporting spouse; and (3) an award of alimony would be equitable under all the relevant factors.” Barrett v. Barrett, 140 N.C. App. 369, 371, 536 S.E.2d 642,644 (2000). “Decisions regarding the amount of alimony are left to the sound discretion of the trial judge and will not be disturbed on appeal unless there has been a manifest abuse of that discretion.” Bookholt v. Bookholt, 136 N.C. App. 247, 249, 523 S.E.2d 729, 731 (1999).

The Court of Appeals has previously held that when “a supporting spouse receives bonuses on a consistent basis, this amount may be included in the calculation of the spouse’s income.” Finn v. Finn,

2018 WL 1386210 at *5. In this case, the trial court on remand chose not to include the bonus as income because the record was insufficient to determine if Mr. Finn would continue to receive annual bonuses going forward. The Court of Appeals noted that there was competent evidence that the trial court could not predict with any certainty the likelihood or amount of Mr. Finn’s future annual bonuses.

Obvious lesson:

1. Including an annual bonus received by a supporting spouse as income will be at the discretion of the trial court judge.

2. To establish that a supporting spouse’s bonuses should be included as income for alimony the party seeking alimony should establish a pattern of consistent payments. The seeking party should also provide sufficient evidence showing the amounts that have and will continue to be paid as income.

3. Any evidence that potentially shows a break in payment or a possibility for bonuses not to be paid may cause the trial court not to consider the bonus as income to the supporting spouse.