Divorcing a Banker? Understanding Bankers’ Bonuses, Deferred Compensation & Divorce Settlements
Divorcing a banker presents unique challenges, particularly when it comes to understanding and dividing complex forms of remuneration such as bonuses, share options and deferred compensation. These financial packages impact both spouses and are often highly structured, variable, and contingent on future performance or continued employment — making it far from straightforward to achieve a fair and accurate divorce settlement.
Having a clear understanding of financial settlements is crucial, especially in the context of divorcing a banker, as recent changes like the uncapping of bankers' bonuses can significantly affect the distribution of assets.
At Ribet Myles, we are highly experienced in advising clients involved in high-value and high-complexity financial divorces, particularly in the financial services sector. Here, we break down the key issues to consider when divorcing a banker.
Introduction to Banker Divorces
Understanding Bankers’ Remuneration
Unlike a fixed salary, a banker’s total compensation package typically includes several performance-related and equity-based components. These can include:
Base salary – often quite modest in the context of overall remuneration
Annual cash bonuses (discretionary or formula-based)
Deferred bonuses (cash or shares, paid over several years)
Restricted stock units (RSUs)
Share options or carried interest
Long-term incentive plans (LTIPs)
Sign on bonuses
Severance or “golden parachute” or “golden handshake” payments
While a fixed basic salary is relatively simple to value and divide, bonuses and share-based awards — particularly those not yet vested — require careful legal and financial analysis.
Are Bonuses Marital Assets?
In English law, bonuses received during the marriage are generally considered matrimonial property, especially if they were earned through performance during the relationship. Timing matters, although it is not always clear cut.
For example, a bonus paid after separation but based on performance during the marriage is likely to be subject to sharing. Conversely, a bonus awarded after separation — and related to post-separation performance — is more likely to be treated as non-matrimonial property, particularly in cases where each party is financially independent.
However, this distinction is often blurred, especially when a bonus spans multiple performance years or includes both deferred and immediate components, or when the bonus is referrable to a period post the parties’ separation, but when the parties have still not formally resolved their finances.
Dealing with Deferred Bonuses in Divorce
Deferred bonuses — whether in cash or shares — are a major component of banker remuneration. They are typically awarded now but paid in the future, often subject to continued employment, performance, and “good leaver” conditions.
In divorce proceedings, these can be a point of complexity and contention.
If earned during the marriage, deferred bonuses are usually considered marital assets and may be shared.
If vesting is conditional, courts may apply a discount or allocate them proportionally, depending on the specific conditions.
Where bonuses include clawback provisions, the risk may be retained by the recipient spouse.
The court’s task is to determine the real value of these deferred assets and to assess whether, and how, they should be included in the matrimonial pot.
What About Share Options and RSUs?
Share options and RSUs (restricted stock units) are often granted on a rolling basis and vest over several years. This means they may be unvested or partially vested at the time of divorce. The express intention behind granting these share options and RSUs is often to incentivise long-term performance and loyalty, which can complicate their division during a divorce.
Key issues include:
Valuation: Future share prices are speculative, so valuing unvested shares can be complex.
Attribution: Courts will consider whether the share award was for past, present, or future performance — and whether that period overlaps with the marriage.
Tax implications: Transferring or liquidating share awards can trigger tax liabilities.
Courts often adopt a “percentage sharing” approach — where a proportion of the asset’s value (or future proceeds) is allocated to the non-owning spouse, depending on how much of the vesting period falls within the marriage. In some cases, courts may decide that these assets should be split equally, especially if they were intended to benefit both spouses and their children, reflecting the complexities of property rights in marriage.
Strategies for Settlement
Settlements in banker divorces often require a blended approach, combining:
Immediate capital payments (using cash or other liquid assets).
Deferred payments tied to vesting schedules (sometimes via trust or escrow).
Offsetting: One spouse may retain deferred bonuses while the other receives a larger share of other assets, such as real estate or pensions.
Where a party is waiting for their share of a deferred payment received by the other. it is common to include ongoing disclosure and enforcement mechanisms, especially if bonus figures or share values are likely to change significantly post-divorce. These arrangements requires ongoing communication between the parties which can be challenging, and it delays a clean break, but it is inevitable when the receipt of a matrimonial asset will be delayed beyond the conclusion of the financial settlement. .
Confidentiality, Disclosure, and Regulatory Considerations
High-earning bankers are often subject to employment confidentiality clauses, which can complicate financial disclosure during divorce proceedings. There may also be tensions between the parties as to the scope of any ongoing disclosure required to be provided to the recipient spouse. Courts may make disclosure orders and parties may give confidentiality undertakings to balance transparency and privacy.
It’s essential that all sources of income — including off-payroll incentives, carried interest, and retention bonuses — are comprehensively disclosed through the disclosure process. Failure to do so can result in the court reopening a financial settlement at a later date.
How Ribet Myles Can Help
At Ribet Myles, we specialise in high-net-worth and complex financial divorces, including cases involving bankers and City professionals. Our lawyers have the expertise to:
Identify and value deferred bonuses, share options, and incentive schemes
Work with financial and tax experts to assess post-separation awards
Build settlement structures that reflect both current and future remuneration
Advise on enforcement, clawback protections, and disclosure
Whether you are divorcing a banker or are a financial services professional yourself, our goal is to ensure a fair and forward-looking financial settlement that fully reflects the complexity of your financial position.
Final Thoughts
Divorcing a banker involves far more than dividing up salary and property. With complex bonus structures, deferred shares, and unpredictable income, it’s crucial to take a bespoke and strategic approach. Courts will look at when the remuneration was earned, its value, what conditions apply, and how future awards should be dealt with — all of which require expert legal and financial insight. These settlements significantly impact the future financial stability and personal lives of the individuals involved, making it essential to plan meticulously.
If you are facing a divorce where bankers’ bonuses, RSUs, share options, or pensions are involved,
contact Ribet Myles today on 020 7242 6000
We’ll help you navigate every step of the process with clarity, strategy, and confidence.