B.O.T. (Husband) and C.M.T. (Wife) had been married for 12 years when they decided to end their marriage. Their dissolution of marriage case filed in Colorado’s Jefferson County District Court seemed to be moving smoothly towards resolution until they hit a snag. While Husband and Wife were able to resolve most of their financial and parenting disputes, they could not agree on whether some bonuses Wife may receive after their divorce case concluded should be considered marital property and equitably divided as part of their marital estate. As is the case when divorcing spouses cannot come to an agreement on their own, they would have to appear at a permanent orders hearing where they would each have an opportunity to present their case and then let a judge decide their fate.

At the permanent orders hearing, Wife explained that the year-end bonuses–one from an annual incentive plan and the other from a supplemental incentive plan–were “highly variable and highly discretionary.” Wife further testified that she was “not guaranteed” to receive a bonus and that any bonus payments would be dependent on her and her company achieving certain performance goals and objectives. Furthermore,

the chief executive officer of [W]ife’s employer [had] ‘full discretion and final authority to adopt, amend, alter, or rescind the [annual incentive plan] without advance notice for any reason at his/her sole discretion based upon financial or operating conditions or otherwise.’

The director of compensation of Wife’s employer confirmed Wife’s explanation at the hearing and testified that an “employee’s past bonuses were no indication of a future payment because each year the eligible employees ‘start[] at zero.”

The Colorado district court judge was convinced, and he concluded that because Wife did not have “contractually enforceable rights” to any potential future bonuses, they could not be considered marital property that could be divided as part of the couple’s marital estate.

A few weeks after the permanent orders hearing had concluded, Wife’s company awarded her “substantial bonuses.” Husband appealed the district court’s property division and distribution orders, arguing that Wife’s bonuses should have been considered marital property.

The Colorado Court of Appeals disagreed with Husband and affirmed the district court’s decision. The court of appeals emphasized how the Colorado Supreme Court “has directed…that a court’s determination of whether a spouse’s interest in an employment-related benefit constitutes property focuses on a spouse’s enforceable rights to the interest.” In re Marriage of Turner, 2022 COA 39, ¶ 24. Thus,

contrary to [H]usband’s claim, contractual enforceability at the time of the permanent orders hearing (or, if earlier, the date of the decree) is essential to the determination of whether this type of benefit is property.

Id.

Because Wife had not been awarded any bonuses–and there was no evidence that she had an enforceable right to them–at the time of the permanent orders hearing, the district court “did not err by excluding wife’s potential bonuses from the division of marital property.”

Lessons Learned

• When dissolving a marriage, a district court judge must order an equitable division of the parties’ marital property.
• In order to determine whether an interest is marital property, a court must decide whether a spouse’s interest constitutes property subject to the court’s division, and, if it is, whether the property is marital.
• The determination of whether a spouse’s interest can be divided as marital property turns on whether the spouse has an enforceable right to receive a benefit.
• If a spouse does not have an enforceable right and the spouse’s interest is only speculative or a mere expectancy, then the spouse’s interest is not property subject to division in a dissolution of marriage case.