Compensating the Contribution of a Spouse

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Spouses help each other out in different ways during a marriage. For example, one spouse can work for the other without receiving a salary, support the other person's career, or take on all household responsibilities while the other person goes back to school. When the spouses divorce, will the one who made this contribution receive compensation for it? 

Compensatory Allowance

A compensatory allowance is an amount of money to compensate a person for contributing to a spouse's wealth, whether the contribution was in the form of property or services.

A compensatory allowance is awarded out of fairness. Its purpose is to correct certain financial inequalities between the spouses when they get divorced. A spouse can apply for a compensatory allowance when filing for divorce. It is ordered if all the conditions have been met and proved to a judge.

Here are the conditions for compensation:

  • A spouse put herself at a financial disadvantage by helping her spouse
  • The contribution increased the spouse's wealth.
  • There is a connection between the contribution and the spouse's increase in wealth.
  • There is no justification for the situation.

Here are a few examples of real situations where a spouse got a compensatory allowance:

  • One spouse helped the other earn a degree. For several years, the wife provided for the family on her own so her husband could go back to school and earn his MBA. She played an active role in her husband's career by organizing receptions and trips, and by doing volunteer work. She also took care of the children's education and the special health needs one of them required. Compensatory allowance awarded: $100,000.
  • One spouse helped the other build up his business. While they were married, the wife worked tirelessly on her husband's farm instead of taking a job as a secretary. She looked after the children almost entirely on her own, and she did all the household chores. Compensatory allowance awarded: $100,000.
  • One spouse transferred property to the other without intending to benefit her. The husband transferred his investment certificates to his wife. He proved to the judge that he hadn't intended to benefit her and that he only did it for tax reasons. Compensatory allowance awarded: $87,255.17.

Reasons Compensation Is Refused

Here are a few examples of real situations where a spouse's request for compensatory allowance was refused:

  • The wife worked for her husband, but she received a fair salary in return.
  • The wife did nothing out of the ordinary to help her husband earn his degree. He worked, studied and did his share in the home.
  • The spouse spent a few hours here and there working in her husband's business. Her contribution was small, and there was no proof that she put herself at a financial disadvantage by working for him.

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