The Massachusetts Supreme Judicial Court (“SJC”) recently decided Cavanagh v. Cavanagh (2022). This decision has major implications for alimony and child support orders, adding more complexity for judges, attorneys, and parties.
The SJC in Cavanagh made multiple holdings, many of which we’ll explore in more depth below. Briefly stated, the most interesting and significant determinations regarding alimony and child support that came from the SJC in Cavanagh include:
Concurrent Alimony and Child Support Orders
The Massachusetts Alimony Reform Act of 2011 allows for concurrent alimony and child support orders. The SJC further implements a three-step framework that Probate and Family Court judges must follow in cases where alimony and child support are both available. In making alimony determinations, the Probate and Family Court must:
- Calculate alimony first in light of the factors enumerated in the Alimony Reform Act, then calculate child support based on the parties’ post-alimony incomes;
- Calculate child support first, then calculate alimony based on the remaining income, if any; and then,
- Compare the two awards and the tax consequences of each, and choose the award that is more equitable (i.e. fair).
Income for Child Support Purposes
The SJC also made determinations as to what counts as income for child support calculation purposes. The Court made the following findings:
- Employer contributions to an employee’s retirement account and to a health savings account are income for child support purposes.
- Interest and dividends are income for child support purposes, and capital gains may also be income.
Summary of the Facts: Cavanagh v. Cavanagh
In 2016, Michael and Lynn Cavanagh divorced after 21 years of marriage. During the marriage, the couple had three sons together. At the time of the decision, the youngest son, a minor, was the only child who was not emancipated.
Before and during the first year of the marriage, Michael was studying to become a physician’s assistant. During this time, he incurred about $80,000 in educational debt. Michael and Lynn lived with Lynn’s parents during the first year of the marriage before moving into a home that Lynn purchased together with her father–Michael could not get on the mortgage because of his debt. That debt, however, was ultimately paid off during the course of the marriage.
During the marriage, the family lived a comfortable middle-class lifestyle. Since 1997, Michael has worked at an orthopedic surgical practice. In 2012, he took a second job at a medical center in order to pay for a private school education for the children.
Meanwhile, Lynn worked as a Catholic school teacher prior to and during the first years of the marriage before becoming a stay-at-home mom. In 2016, about two months before the entry of the divorce judgment, Lynn again began working at the Catholic school.
Procedural History: Probate and Family Court
Divorce Judgment
Michael and Lynn divorced in 2016. In the divorce, the trial court gave Lynn physical custody of the then-minor children. The parents shared legal custody.
The trial court ordered Michael to contribute financially to the private education of the middle and youngest sons. Michael was to pay up to $20,000 annually for the middle son’s preparatory school education for his three years there. He was also to pay up to $20,000 annually toward an agreed-upon preparatory school for the youngest son.
The court further ordered Lynn to pay for the youngest son’s education at the Catholic school he was attending at the time.
Regarding weekly child support payments, the court ordered Michael to pay Lynn $800 per week as child support for the three boys. Lynn did not get alimony at the time. However, Michael and Lynn agreed, and the divorce judgment reflected, that Michael’s job at the medical center would not be used in calculating any future child support or alimony.
Modification of Child Support & Contempt Complaints
In 2021, there was a Probate and Family Court trial following Michael’s child support modification complaint. In response, Lynn filed a counterclaim for alimony, legal fees, and a determination that the youngest son could continue attending the private preparatory school where she had enrolled him (after removing him, without Michael’s agreement, from the Catholic school he was attending).
Before the 2021 trial, Lynn and Michael each filed a Complaint for Contempt against the other regarding the youngest son’s enrollment at the preparatory school. Michael argued in his contempt that Lynn enrolled the youngest son in the preparatory school over his objection, while Lynn argued that Michael failed to contribute towards the preparatory school costs.
Regarding Lynn’s contempt complaint against Michael, the judge found he was not in contempt for failing to contribute to the preparatory school costs of the youngest son. However, the judge did find Lynn in contempt for unilaterally enrolling the youngest son at the preparatory school over Michael’s expressed disagreement.
Subsequently, in September 2020, Michael brought a second complaint for contempt saying the mother had not withdrawn the youngest son from the preparatory school (despite the judge’s ruling).
Trial Court Judge’s Rulings on Modification Claims and Michael’s Second Complaint for Contempt
At the 2021 trial on the modification actions and Michael’s second contempt complaint, the judge ruled that Michael was not obligated to contribute to the youngest son’s preparatory school education costs. The judge further reduced Michael’s child support obligation to $650 per week for the youngest son, finding that Lynn and Michael’s two older sons are emancipated for child support purposes.
The judge did not award alimony to Lynn, reasoning that all of Michael’s gross income had already been considered in determining child support, and so there was no remaining income on which to determine alimony.
Furthermore, the judge dismissed Michael’s second contempt complaint as duplicative.
Supreme Judicial Court: Direct Appellate Review
Michael and Lynn both appealed the modification judgment. Such appeals typically go to the Massachusetts Appeals Court for review. In this case, however, Lynn filed an application for direct appellate review with the Supreme Judicial Court (“SJC”), Massachusetts’ highest court. The SJC granted Lynn’s application for direct appellate review and heard the case (skipping over the Appeals Court).
Calculating Alimony and Child Support Awards in Massachusetts after Cavanagh
In Cavanagh, the SJC made major changes to the way judges award alimony when child support is also in play. In doing so, the SJC introduced a three-step analysis for probate court judges to follow. The SJC also made clarifications regarding the definition of income for child support purposes.
Alimony is not precluded solely because the court orders child support.
The Massachusetts Alimony Reform Act (“ARA”) details when and how a court may award alimony. ARA is codified as Massachusetts General Laws (“M.G.L.”) chapter 208, sections 48-55.
Section 53(c)(2) of M.G.L. chapter 208 states that the court, when ordering alimony, must exclude from its income calculation gross income that it already considered in making a child support order. Taken alone, this section essentially precludes an alimony award in the majority of the cases where the court orders child support. The exception: High-earning parents whose combined available gross income exceeds the maximum amount prescribed in the Massachusetts Child Support Guidelines. Under the 2021 Child Support Guidelines, that amount is $400,000. In fact, after ARA, probate judges commonly awarded child support or alimony–one, not both–in cases where the parents’ gross income fell within the Guidelines.
In Cavanagh, however, the SJC holds that ARA does not preclude concurrent alimony and child support awards. The SJC states the provisions of ARA must be taken as a whole. Essentially, a judge cannot rely only upon Section 53(c)(2) to deny alimony when child support is ordered. The SJC notes that other ARA provisions: expressly contemplate alimony orders that are concurrent with or subsequent to child support orders; detail factors judges must consider in making alimony determinations; and, require judges to make a fact-specific inquiry into the parties’ circumstances before denying alimony.
Under M.G.L. chapter 208, section 53(a), the factors a judge must consider in calculating alimony include:
- Length of the marriage;
- Age of the parties;
- The health of the parties;
- Income and employment of both parties;
- Employability through reasonable diligence and additional training, if necessary;
- Economic and noneconomic contributions of both parties to the marriage;
- Martial lifestyle;
- Lost economic opportunity as a result of the marriage; and,
- Such other factors as the court consider relevant and material.
Steps a judge must take before awarding or precluding an alimony award
In Cavanagh, the SJC does not simply hold that ARA allows for concurrent alimony and child support orders. The SJC goes further, outlining a three-step framework that judges must follow in cases where child support and alimony are both on the table. This three-step analysis is as follows.
Step 1: Calculate alimony first
The judge must calculate alimony first, keeping in mind the statutory factors of section 53(a) and the idea that, except for reimbursement alimony, alimony should be determined based on the recipient spouse’s need for support in order to keep the lifestyle they had during the marriage. The court notes that it would be unfair for one spouse to keep the marital lifestyle while the other loses it.
The court must then calculate child support using the parties’ post-alimony income.
Step 2: Calculate child support first
Next, the judge must calculate child support first, then calculate alimony considering, to the extent possible, section 53(a) factors. The SJC notes that, in the overwhelming majority of cases, calculating child support first will preclude alimony in this step.
Step 3: Compare the base award and tax consequences of both orders
Comparing the resulting awards in step (1) and step (2), and their respective tax consequences, the judge is to determine which order is the most equitable for the specific family before them, again considering the statutory factors of section 53(a) along with the public policy that children should be supported by their parents’ resources as much as possible.
If the judge issues an order based on the calculation of child support first (step 2), or if alimony is otherwise not awarded, the judge must articulate their reasoning.
Computation of Income for Child Support Purposes
Massachusetts Child Support Guidelines (“CSG” or “the Guidelines”) govern child support calculations. There is a rebuttable presumption that the child support amount derived from the CSG calculation is appropriate. This calculation is based largely on the combined available gross income of the parties. Therefore, it is extremely important that the parties disclose all of their income from all sources.
The Guidelines provide that gross income includes that from “whatever source, regardless of whether that income is recognized by the Internal Revenue Code or reported to the Internal Revenue Service or state Department of Revenue or other taxing authority”. The Guidelines further provide a non-exhaustive list of what parties should include in gross “income” calculations. The list includes, in relevant part:
- Salaries, wages, overtime, and tips;
- Bonuses;
- Interest and dividends;
- Capital gains in real and personal property transactions to the extent they represent a regular source of income;
- Perquisites or in-kind compensation to the extent that they represent a regular source of income;
- a “catchall” provision encompassing “any other form of income or compensation not specifically itemized above, including, but not limited to, alimony consistent with Calvin C. v. Amelia A., 99 Mass. App. Ct. 714 (2021).”
In Cavanagh, the SJC further clarified what income should be included under gross income for child support calculations.
When calculating child support, employer contributions to a retirement account are income.
The SJC in Cavanagh held that employer contributions to an employee’s retirement account are income for the purposes of calculating child support.
Noting that this issue has yet to be ruled on, the SJC turned to decisions in other states. Ultimately, the conclusion of the Superior Court of Pennsylvania persuaded the Massachusetts Court. The Pennsylvania Court warned that excluding from a party’s income their employer’s contributions to their retirement account could allow employees to shield their income from support obligations. For example, employees could enter into agreements with their employers to take fewer wages in exchange for a heightened contribution. Similar to the Superior Court of Pennsylvania, the Massachusetts Supreme Judicial Court found that permitting the shielding of income would violate Massachusetts public policy.
Employer contributions to a health savings account are income for child support purposes.
The SJC ruled that employer contributions to employee health savings accounts (“HSA”) “constitute ‘income’ for the purposes of calculating child support…”
The Court recognizes that the tax implications of HSA withdrawals depend on whether or not the beneficiary uses the withdrawn funds for qualified medical expenses. If a beneficiary uses HSA funds to pay for qualified medical expenses, the funds are not taxable income.
However, the SJC notes that the beneficiary may generally withdraw HSA funds “at any time and for any purpose.” Accordingly, the SJC states that employers’ HSA contributions are income for child support purposes–much like employer contributions to a retirement account.
Interest and dividends are income for child support purposes, and capital gains may be, too.
When calculating child support in this case, the Probate and Family Court did not include Michael’s receipt of income and capital gains on his savings and 401K plan. It also did not include his in-kind income from his work as an instructor on wilderness medicine adventure trips. The lower court judge reasoned that that income should be excluded because none of it was a regular source of income for Michael.
The SJC, however, disagreed in part with this exclusion, turning to the Child Support Guidelines in its analysis. The SJC explained that “interest and dividends” are always includable as part of gross income under the Child Support Guidelines. Regarding capital gains, the SJC again turned to the Guidelines, noting that “capital gains need only be a ‘regular source of income’ where they relate to “real and personal property transactions.'”
Ultimately, the SJC decided “to the extent that the ‘income and capital gains on Father’s savings and 401K plan’ included interest, dividends, and capital gains on transactions other than those related to real and personal property, the judge abused her discretion in excluding them from the calculation of the father’s gross income for purposes of calculating child support.”
Divorce judgments cannot exclude certain income in future child support calculations.
In Cavanagh, the parties’ separation agreement (part of the divorce judgment), included a provision providing that Michael and Lynn would not count income from Michael’s second job at the medical center for future support calculations (neither for child support nor alimony). Recall that Michael took that job to help pay for the children’s education.
The SJC deemed this provision “void” to the extent that it seeks to preclude that income in future child support calculations, stating that parents cannot bargain away their child’s right to financial support.
Furthermore, the SJC notes that Michael’s income from his second job falls directly within the Child Support Guidelines’ list of sources of income under “salaries, wages, overtime and tips.” So, the trial court judge could have used that income when calculating child support. The SJC added that the trial court judge would have abused their discretion if they did not count that income after concluding that Michael, in fact, was not contributing to the children’s educational expenses.
Notably, Section I(B) of the Child Support Guidelines states in part that the court “may [emphasis added] consider none, some, or all overtime income or income from a secondary job.” And families sometimes do agree to deviate from the Child Support Guidelines. In reaching this decision, however, the SJC took note of evidence indicating that Michael was not using the income from his second job to contribute to the children’s educational expenses (the reason why he took the job in the first place). Even so, the SJC does not say the provision does not apply given the circumstances in the case. Instead, the SJC’s decision simply says the provision is “void.” Broadly speaking, it is possible that that determination will limit parents’ ability to negotiate and compromise in future child support cases.
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