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One of the most difficult aspects to handle in a divorce case is the issue of alimony or "spousal support" as it is called in Michigan.  Alimony is still alive and well in Michigan and if you are the person that is faced with paying alimony, it almost always seems like you are paying too much to someone after you are no longer with them, and if you are the potential recipient of the alimony it often seems like it is not enough to reimburse you for the sacrifices you made for the family and to help you continue to maintain the same standard of living as your ex-spouse.  This blog written to generally address the specific issue of whether bonus income is included when it comes to paying spousal support in Michigan.  If you have any questions concerning separation, divorce, postnuptial or prenuptial agreements; please contact us to schedule a consultation by clicking on this link or calling (248) 608-4123. 

Are Bonuses Included When Determining Alimony In Michigan?

While child support is based upon a formula, alimony or spousal support is determined by an analysis of several factors and is not based upon a strict formula.  Some of the factors that are included in the formula are the length of the marriage, the income of the parties, the age of the parties, whether one party was the primary care provider for the children, and fault for the breakdown of the marriage.  There are some spousal support prognosticator programs out there that are useful tools for helping to provide an estimate of potential alimony but those do not take into account all of the factors and are not determinative of what a judge might decide when taking into account all of the factors.

That being said, it does appear that the primary factors that we focus on when working out alimony in a divorce case is the length of the marriage, the age of the parties, the income of the parties, whether either of them gave up working to raise the kids, and to some extent fault for the cause of the breakdown of the marriage.  This brings us to the issue at hand, does alimony include bonus income?  The answer is yes, alimony will take into account all income or other benefits that come to either partner to the marriage, potentially even recurring gifts of cash from relatives that occur on a regular and ongoing basis.

The issue with bonuses is that they are not always the same amount every year, in most cases the bonus amounts vary from year-to-year and in some years there are no bonuses at all.  To account for this, typically the court or family law attorneys will use a three-year average to determine what a person's total income should be for the purposes of figuring out alimony where bonuses or seasonal income are a concern.  There are many reasons that this may not be considered fair by the person that is paid the bonuses, either because of an oddly large bonus in one of the three years, the fact that the person is starting a new job or position and there is no real track record of bonuses or simply because there is such a variation in the potential bonuses that it would cause a serious hardship in the years when no bonus is awarded.

To deal with this type of problem, divorce lawyers and judges will sometimes work out a monthly alimony payment determined by the payor's base income.  First, we determine what the monthly alimony payment should be based upon the base salary.  Second, we take that and determine what percent of the payor's total base monthly income is attributable to the spousal support payment.  Third, we determine at the end of the year how much more income the payor earned over their base salary.  Finally, we apply that percent to the difference between the base salary income and the total actual income earned over the year to determine the amount of an additional lump sum payment that the payor must pay to the other parent in order to recapture the bonus income earned over the year.

The easiest way to understand this approach is to use a simple example.  Suppose Alex earns a base salary of $100,000 annually which results in him paying $1,000 a month in alimony or 12% of his monthly gross income.  At the end of the year Alex's 2024 W2 reflects a gross income of $150,000 dollars or $50,000 in additional income which means he will have to pay an additional lump sum of $6,000 for the bonus income earned over the base $100,000 ($150,000 - $100,000 - $50,000; 12% x $50,000 = $6,000).

If you have any questions concerning prenuptial agreements, separation, divorce or alimony, please do not hesitate to contact us to schedule a consultation by clicking on this link or calling us at (248) 608-4123.