Retention Bonus is not Marital Property under Michigan Family Law:

The Michigan Court of Appeals decided a case of first impression recently in Skelly v. Skelly. The issue was the husbands retention bonus he would earn if he stayed employed with Ford Motor Company for a certain period of time.

His 2007 earnings totaled $289,257.58, which included a performance bonus of $13,500.00 and the first installment payment of his retention bonus totaling $108,000.00. The retention bonus was designed to “entice” plaintiff to remain with the company. If plaintiff remained employed by Ford on May 31, 2008 and on May 31, 2009, he would receive second and third installment payments of his retention bonus totaling $36,000.00 each. However, if plaintiff did not remain employed at Ford through May 31, 2009, he was required to pay back all the retention bonus monies. At the time of the divorce, defendant was unemployed and was a homemaker.

The trial court also ordered that the first two installment payments of the retention bonus be equally divided between the parties. As to the third installment that would be paid on May 31, 2009, the trial court commented: “while the Court understands that this would probably be considered separate property, because it would represent a year of work that the Plaintiff commits to with Ford without the assistance of the Defendant, the Court’s invading separate property. And I’m doing so because I think the Defendant’s income or ability to earn is very limited at this point. And also because that Retention award in the Court’s mind, is based on performance during the marriage. And so I’m dividing that 60 percent to the Plaintiff and 40 percent to the Defendant.”

The trial court further divided any of plaintiff’s future bonuses, granting plaintiff 60 percent and defendant 40 percent.

The Michigan Court of Appeals reversed the decision of the trial court. Here, the retention bonus was not earned during the marriage; thus, no portion of the retention bonus was marital property. Plaintiff had not yet earned the $180,000.00 retention bonus at the time of the parties’ divorce. It is undisputed that plaintiff was required to work until May 31, 2009 in order to receive the $180,000.00 bonus. Although two installation payments were made during the marriage, plaintiff had not earned that money when it was disbursed because he had not satisfied the condition subsequent (i.e. remain employed until May 31, 2009) required by the agreement between him and his employer. If plaintiff had not remained employed by Ford until May 31, 2009, plaintiff would have been required to repay the installments he had previously received. Consequently, plaintiff did not earn the retention bonus until May 31, 2009, which occurred after the judgment of divorce was entered even though part of it had been advanced to him. Unlike in Byington, where the compensation package was earned before the entry of the judgment of divorce, no portion of plaintiff’s retention bonus was earned during the marriage. The trial court erred when it determined that any portion of the retention bonus was marital property.

Furthermore, the trial court erred when it concluded that the third payment was separate property subject to invasion. A party’s separate estate is the property the party generally takes away from the marriage separate from the marital assets, Reeves, supra at 490. However, plaintiff did not take his retention bonus away from the marriage because he had yet to earn it. Therefore, the third installment of the retention bonus should not have been considered as separate property, and, as a result, was not subject to division by the trial court at all. We reverse the trial court’s award of any portion of the retention bonus to defendant.

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