Is There An Obligation to Tell My Husband About the Year-End Bonus I Am
About to Receive?
This is a tough topic, because if you've found yourself here it is
because you are struggling with your legal and ethical responsibilities
to tell the other side about the bonus that you just learned you've
earned for the prior year's efforts. You want good news, not bad -
which is why you are squinting at the screen right now hoping to not read
something that churns your stomach?
Whether you must now disclose your year-end bonus depends a lot on where
you are in your dissolution proceedings. But first, some cynical advice
if you are contemplating divorce but have not yet pulled the trigger,
about whether to tell him or her now: While concealing information when
asked directly about it by your spouse before you've separated arguably
breaches the fiduciary duties that arise upon marriage per
Family Code section 721, forgetting (oops) to mention that fact arguably does not. Of course,
if you are not separated
and don't have a premarital agreement, every dime of the bonus earned before the date of separation is half
theirs. If you bank it, then later on it will get divided. If you conceal
it, later on it may all belong to her by operation of
Family Code section 1101. If you earn it and spend it, it will bring up your average monthly income
figures for purposes of a child or spousal support calculation, or maybe
an attorney fee application, once you are forced to submit an Income and
Expense Declaration to the extent the income came in within 12 months
of having filled out that disclosure.
Family Code section 4058(a)(1) defines "income" for purposes of child support, and almost always
for purposes of spousal support, and expressly includes bonus income.
What to Consider About Disclosing Bonus Income - and You Get to Live With
Bonus income for support purposes is either (1) simply averaged into your
prior 12 month's earnings or (2) addressed with Ostler Smith Orders.
We've written about
Ostler-Smith percentage of bonus income orders, and that is not what today's blog is about.
If a divorce is already pending, or maybe there are child support issues
arising from a non-marital relationship, then what you do now may depend
on where you are in the proceedings. Here are some common situations:
- A family law proceeding is pending and support orders have already been
made. There is no current motion or hearing pending.
- A family law proceeding involving support is pending and there is a hearing
coming up, or one is about to be filed by one or both of you.
- Nothing is pending and you don't expect it to be.
- Your matter has a trial date.
You have or have not yet prepared and served your Preliminary Declaration
of Disclosure. PDDs must be accompanied by an updated
FL-150 "Income and Expense Declaration".
You have or have not yet prepared and served your Final Declaration of
Disclosure. FDDs must be accompanied by an updated
FL-150 "Income and Expense Declaration".
No family law discovery has been undertaken. The most common and simple
discovery tool in divorce cases are
the Judicial Council Form Family Law Interrogatories, which is pre-printed and just requires some boxes be checked and that
it be dropped in the mail - easily done and it could come at any time.
Those from interrogatories require a Schedule of Assets and Debts, plus
a current Income and Expense Declaration.
- You are awaiting family law discovery that is surely forthcoming.
- Family law discovery has already been answered. You don't expect more.
- You have not yet received the bonus although you know it is coming - and
you or your lawyer is trying to determine whether you should hurry up
and prepare your PDDs, FDDs, or responses to Form Interrogatories before
the bonus is actually handed to you, or deposited into your account.
I want to be clear, dear reader, that I am not advising you on your current
dilemma and what to do because I don't know it. I am just issue spotting.
While you have an obligation to be transparent in real time and so to
disclose all material facts and circumstances that affect you, your support
or property obligations and division issues, or possibly the interests
of your spouse, lawyers often game the system and the public perception
is that the really good matrimonial lawyers game the system and win for
their clients. That's why they charge the big bucks, neh?
But telling you to be safe and honest is the only thing that a responsible
lawyer can do, with your bonus issue. Because if you screw it up, get
greedy, and/or lie to the Court your goose may get cooked and the financial
consequences in terms of monetary sanctions and attorney fees,
whether or not this bonus of yours is properly characterized as joint income
or your separate property, the potential loss of 100% of the CP amount you concealed may result
in consequences that far outweigh your irritation about having to share
your toys with that person whom you now hate, oh so much!
So, to Tell or Not to Tell About that Bonus?
Here are some suggestions:
- Always tell the other side in a pending divorce or support case that you
are about to receive the bonus.
If you cannot bring yourself to do that, then ask yourself whether you
are going to have to disclose it anyway in answers to discovery, or in
connection with a support motion that requires the parties to file updated
Income and Expense Declarations. The Rules of Court require family law
litigants to update their Income and Expense after 90 days from the prior
one, probably exactly so these kind of income events must be disclosed
if things change for the better (or worse) over time.
Cal. Rules of Court, Rule 5.427. Especially in Los Angeles support RFO's can take months to be heard
and so the original Income and Expense Declarations may become stale.
Whatever you do, you cannot commit perjury and actively misrepresent financial
circumstances that have already occurred. But pretending your opacity
was unintentional is a dangerous and dirty business.
- Get anything that needs to be filed filed before receipt of the funds.
Not depositing that bonus check so that there is no record of your receipt
as of the moment you make a sworn representation about your income can
be risky; if an employer is subpoenaed, they will likely have recorded
the transaction on the date the check was issued.
- Timing can have a huge impact on whether your hope that your fortunate
bonus circumstance can be obfuscated will come to light. If you know your
receipt of that bonus is certain, get your answers to discovery, your
declarations of disclosure, your FL-150's, and your declarations executed
and filed before your receipt of the check.
Keep in mind as to Declarations of Disclosure that you have a duty,
sua sponte (i.e., without being asked), to augment your prior Declarations of Disclosure
with updated information per
Family Code section 2102(b)(1) to the extent there have been "any material changes" relating
to assets and debts, but also income. Declarations of Disclosure, again,
include the Income and Expense Declaration.
So, often the question for the high-conflict divorce litigant, or their
wily lawyers, is effectively "is the other party so ignorant, or
her attorney so lazy or stupid or [fill in the box]" that they aren't
going to catch it? Because, sadly, that is the waltz that so many family
law attorneys step to. Which is not surprising. Volkswagen with its emissions'
cheating scandal personifies the values of our society on the corporate
level, and mirrors human nature in general. We know what is happening
to VW, neh? Of course, the Wall Streeters who blew us all up with the
mortgage crisis seem to have gotten away with it. I dunno, what is your
I believe the lawyer consensus - and I could be wrong about them - is that
you should only disclose the bonus when you have to sign something under
penalty of perjury. This leaves open the question whether you might be
sanctioned later if you didn't lie, but you just failed to be proactive
and transparent and disclose the facts without having had to be asked.
And, this article has implications for attorneys representing your spouse,
and how they might catch you, right? If your Wife's attorney reads
it - bam! Form Interrogatories in the mail, or at least Supplemental (please
update prior response) Rogs!
Sad to say, high earners and family law litigants who bend over forwards
to be honest rarely get stars or a break because they were ethical or
followed the spirit of the law. But, of course, those people are rewarded
in another way. They pay the freight, spend less on attorneys, learn or
don't learn from their relationship mistakes for purposes of the next
one, and they take their lumps and finish their cases. Which, for some,
isn't nearly as satisfying as attempting to burn that person whom
you once loved so much.
Here are some more articles about bonus income!
That is my New Year's message. For tonight.
Author: Thurman W. Arnold