How does the court handle unpredictable income, like bonuses or stock options, when calculating spousal maintenance?

When divorce involves executives, business owners, or professionals with variable compensation, calculating fair spousal maintenance becomes a delicate balancing act between financial reality and legal precision.

The Lynch* Approach: When Bonuses Become Predictable

In 1987, the Minnesota Court of Appeals faced a common modern dilemma in Lynch v. Lynch. Here was a marriage where one spouse had built a career that included not just a steady salary, but substantial bonus income that varied from year to year. For the receiving spouse, these bonuses had become part of the family’s standard of living—funding vacations, home improvements, and children’s activities. For the paying spouse, the bonuses represented unpredictable windfalls that couldn’t be guaranteed.

The court in Lynch established a crucial principle: “If the bonus income has been relatively consistent, the court may include some average of this income in the ability to pay and require the paying spouse to budget for the frequency of the payments.” Lynch v. Lynch, 411 N.W.2d 263 (Minn. Ct. App. 1987).

This holding recognized that when bonus income shows a pattern of consistency over time, it becomes a reasonably foreseeable part of the paying spouse’s financial capacity. The court wasn’t requiring mathematical precision—it was acknowledging that some level of variable income, when predictable enough, should factor into maintenance calculations. For the Lynch family, this meant the receiving spouse could count on some level of support that reflected the couple’s actual lifestyle during marriage, rather than being limited to base salary alone.

The McCulloch* Reality Check: When Sporadic Means Speculative

Two years later, the Minnesota Court of Appeals drew a different line in McCulloch v. McCulloch. The McCulloch case involved bonus income that was truly unpredictable—sometimes substantial, sometimes nonexistent, with no discernible pattern that would allow either spouse to plan their financial future.

The court held that “very sporadic bonus income may not be considered” in calculating spousal maintenance obligations. McCulloch v. McCulloch, 435 N.W.2d 564 (Minn. Ct. App. 1989).

For the receiving spouse in McCulloch, this ruling likely felt like a harsh financial reality. During marriage, those sporadic bonuses may have provided memorable family experiences or financial breathing room during tight months. But the court recognized that maintenance must be calculable and enforceable. Basing ongoing support obligations on income that might never materialize again would create an impossible situation for both parties—the payor couldn’t budget for unpredictable obligations, and the recipient couldn’t rely on uncertain support.

The Percentage Solution: Sharing Risk and Reward

Between the Lynch consistency standard and the McCulloch sporadic exclusion lies a third approach that Minnesota courts sometimes employ: percentage-based sharing of unpredictable income. This method acknowledges that some income streams—like stock options, restricted stock, or highly variable bonuses—are too unpredictable to average but too significant to ignore entirely.

Under this approach, rather than trying to predict the unpredictable, the court orders that the parties share in the bonus income on a percentage basis when it actually materializes. This creates what the legal community calls “shared risk”—if the bonus income doesn’t materialize, neither party benefits, but when it does, both parties participate in the windfall proportionally.

For couples dealing with stock options or restricted stock, this approach can make particular sense. These compensation vehicles often depend on company performance, market conditions, and vesting schedules that make precise prediction impossible. A percentage-sharing arrangement means the receiving spouse isn’t left out of significant financial gains, while the paying spouse isn’t locked into fixed obligations based on speculative income.

However, this solution comes with distinct disadvantages. It requires ongoing financial disclosure and accounting between divorced spouses—exactly the kind of continued entanglement that many couples hope to avoid post-divorce. Each year, the paying spouse must document and report variable income, and the receiving spouse must trust that the reporting is complete and accurate. For some couples, this ongoing financial relationship can perpetuate conflict rather than promote healing.

The Schreck* and Bourassa* Warnings: Why Percentage Approaches Face Scrutiny

The Minnesota appellate courts have generally been skeptical of percentage-based maintenance arrangements, as demonstrated in Schreck v. Schreck and Bourassa v. Bourassa. In Schreck, the court noted that percentage approaches are “typically rejected by the appellate courts, unless there are clear parameters on the payments.” Schreck v. Schreck, 445 N.W.2d 861 (Minn. Ct. App. 1989).

The Bourassa court went further, explaining that percentage approaches do not “properly consider the spouse’s actual needs.” Bourassa v. Bourassa, 481 N.W.2d 113 (Minn. Ct. App. 1992).

These holdings reflect a fundamental principle in Minnesota spousal maintenance law: maintenance should be based on the receiving spouse’s reasonable needs and the paying spouse’s ability to meet those needs, not simply on a mathematical formula applied to income. The Schreck and Bourassa courts recognized that a percentage approach can result in maintenance awards that bear no relationship to what the receiving spouse actually needs to maintain a reasonable standard of living.

For the families in these cases, the court’s skepticism likely reflected competing concerns. The receiving spouse may have argued that percentage-based support was the only way to fairly participate in the paying spouse’s variable success. The paying spouse may have countered that their ex-spouse’s needs shouldn’t fluctuate wildly based on business performance or market conditions beyond anyone’s control.

Understanding Minnesota’s Statutory Framework

These case law principles operate within the framework of Minnesota Statutes § 518.552, which governs spousal maintenance determinations. The statute requires courts to consider multiple factors, including each spouse’s financial resources, earning capacity, and the standard of living established during the marriage. Importantly, the statute’s definition of income is broad, incorporating “any periodic payment” as outlined in Minnesota Statutes § 518A.29.

This statutory framework means that courts have flexibility to consider various forms of compensation, but they must always return to the fundamental question: what does the receiving spouse reasonably need, and what can the paying spouse reasonably afford? Variable income complicates this analysis but doesn’t eliminate the court’s obligation to make individualized determinations based on the specific circumstances of each family.

The Litigant’s Challenge: Showing Economic Reality

Perhaps most importantly for divorcing couples, the case law makes clear that courts need to understand the complete financial picture. As the legal community recognizes, it’s the practitioner’s responsibility to show the court the “economic push and pull” of all income sources and financial obligations, ensuring that no spouse is left in the untenable position of having to pay money they don’t actually have available.

This means that when variable income is involved, both parties need to present clear evidence about patterns, predictability, and the role such income has played in the family’s actual standard of living. The court can’t consider what it doesn’t understand, and complex compensation arrangements require careful explanation and documentation.

For couples navigating divorce with unpredictable income streams, the Minnesota courts have created a framework that prioritizes fairness and enforceability over mechanical formulas. Whether bonus income is averaged in (Lynch), excluded as too sporadic (McCulloch), or shared on a percentage basis depends on the specific facts of each case and the court’s assessment of what arrangement will best serve both parties’ legitimate interests while remaining practically enforceable.

The ultimate goal remains creating a maintenance arrangement that allows both former spouses to move forward with reasonable financial security and the ability to plan for their futures—even when those futures include the inherent uncertainty of variable income.

📚 Citations

• Lynch v. Lynch, 411 N.W.2d 263 (Minn. Ct. App. 1987) (holding that consistent bonus income may be averaged and included in spousal maintenance calculations)
• McCulloch v. McCulloch, 435 N.W.2d 564 (Minn. Ct. App. 1989) (holding that sporadic bonus income that lacks predictable patterns may not be considered in maintenance determinations)
• Schreck v. Schreck, 445 N.W.2d 861 (Minn. Ct. App. 1989) (noting that percentage-based maintenance approaches are typically rejected unless clear parameters are established)
• Bourassa v. Bourassa, 481 N.W.2d 113 (Minn. Ct. App. 1992) (holding that percentage approaches fail to properly consider the receiving spouse’s actual needs)
• O’Brien v. O’Brien, 343 N.W.2d 850 (Minn. 1984) (addressing the treatment of business income in valuation contexts and reasonable compensation issues)
• Minnesota Statutes § 518.552 (2025) (governing spousal maintenance determinations and establishing factors courts must consider)
• Minnesota Statutes § 518A.29 (2025) (defining income broadly to include any periodic payment for support calculation purposes)

*The identities of these parties and facts of their matter were publicly published and thus not confidential. While the case holding and statutory references are accurate, creative liberty has been imposed for the emotional portrayal of the parties.