Measuring the Start of the Durational Period for Alimony

The durational period for alimony is the length of time for which alimony payments will be ordered by the court. In a situation where alimony is awarded years after a divorce decree is entered, what is the starting point for the durational period of those alimony payments? Does the durational period begin to run at the time of divorce, or at the time of the alimony order? If there is a temporary alimony order, does the date of the first temporary payment affect the durational period?

This has become an important issue in recent years, as Massachusetts no longer recognizes lifetime alimony in most cases—therefore, the duration of alimony payments must be closely looked at under most circumstances.

In the recent case of Snow v. Snow, [1] the Massachusetts Supreme Judicial Court addressed this issue. In that case, the wife did not pursue her alimony claim during the divorce proceedings, but she sought an alimony order more than four years after the divorce was final. The wife explained that circumstances had changed: the husband had been supporting her with weekly payments of $1,000 but stopped making them. The wife became homeless and was living out of her car. She filed a request for alimony and received an order of temporary alimony in the amount of $850 per week. Approximately four months later, she received an order of general alimony in the amount of $810 per week, to be paid for the duration of 179 months. The judge noted that the start date for the durational period was the date of the first temporary alimony payment. Both parties appealed.

Transferring the case on its own, the Supreme Judicial Court held that the durational period for former wife’s general term alimony began to run on the award of general term alimony, and not on the date of the divorce judgment nor the date of the award of temporary alimony. Temporary alimony, the high Court reiterated from previous cases, is NOT general alimony. Here, the wife’s complaint was an initial request for alimony, rather than a modification, and the general term began at time the alimony order was issued.

In addition, the Court addressed two other issues. First, the Court held that Probate and Family Court was required to consider the husband’s post-judgment overtime income in determining the award of alimony. The trial judge erred because he only considered the husband’s base pay as his income for purposes of calculating alimony payments. Second, the Court held that the Probate and Family Court was required to make a specific determination as to whether health insurance should be provided by the husband to the wife. The wife successfully argued that this issue should have been addressed by the trial court.

If you have any questions about divorce or other domestic relations issues, you may schedule a free consultation with our office. Call 978-225-9030 during regular business hours or complete a contact form here, and we will get back to you at our earliest opportunity.

[1] Snow v. Snow, 476 Mass. 425 (2017).

Unvested Stock Options: What Constitutes “Double-Dipping?”

May the calculations for alimony payments include a spouse’s unvested stock options, particularly if those options were not considered to be part of marital property for purposes of equitable distribution? This question was recently answered by the Massachusetts Supreme Judicial Court. In Ludwig v. Lamee-Ludwig, the Court said yes. [1]

At issue was a practice colloquially known as “double-dipping,” which brings up “the seeming injustice that occurs when property is awarded to one spouse in an equitable distribution of marital assets and is then also considered as a source of income for purposes of imposing support obligations.” [2] As an example, double-dipping would occur where a party’s unvested stock options were divided equitably during the divorce, and later, when vested, counted as the party’s income for purposes of calculating alimony payments.

In the case at hand, the parties were divorced in 2014. Under their separation agreement, the wife was awarded alimony based on a portion of the husband’s annual base salary, and also awarded additional alimony based on a sliding-scale calculation of the husband’s bonuses and other forms of compensation. The trial court applied “the time rule” to this case: this rule considers the number of unvested options, as well as the length of time the employee spouse has owned those options PRIOR to the dissolution of the marriage.

The Court noted that because the trial judge did not consider the unvested stock options as part of the marital property to be divided among the parties during the divorce, no double-dipping occurred. “Here, there is no such injustice because the contested shares were not part of the equitable distribution of assets; by operation of the time rule, they were assigned to and retained by the husband outright.” [3] The source of property assignment only included options which were attributable to the marital partnership, and did not include stock options which were given for post-marital efforts. Therefore, the Court noted, those unvested options could be considered income for alimony calculation purposes.

Interestingly, the Court also pointed out that the practice of double-dipping is not prohibited as a matter of law—it may be done, so long as the trial judge considers the equities of each situation.

 

 

[1] Ludwig v. Lamee-Ludwig, No. 15-P-1177 (October 17, 2016-February 7, 2017).

[2] Id., at 5, quoting Champion v. Champion, 54 Mass. App. Ct. 215, 219 (2002).

[3] Id., at 5.

Case of the Week: Deviation from Alimony Termination Dates

Is “lifetime alimony” truly dead in Massachusetts?

The Alimony Reform Act became effective on March 1, 2012, and it allowed for an alimony award to be modified in amount and duration if there is a material change in circumstances. The Alimony Reform Act also provided presumptive termination dates for any alimony obligations for a marriage which lasted fewer than twenty years. For example, if the marriage lasted five years or less, then alimony would continue for no longer than half of the months of marriage. If the marriage lasted five to ten years, then alimony would continue for no longer than 60% of the months of marriage.

The Alimony Reform Act, however, did provide an exception to this rule on termination dates: a judge may deviate from the dates if the judge finds that it is in the “interests of justice” to do so.

Under what circumstances may such a deviation be in the “interests of justice?” That question was clarified in the recent case of George v. George,[1] where the Supreme Judicial Court considered the appeal of a claim for modification which had been dismissed by the Probate and Family Court judge below.

The judge had denied the modification claim based on two reasons:  first, the payor’s claim for modification was filed prematurely, before the permissible filing date set out in the Alimony Reform Act; second, deviation from the durational time limits set out in the Alimony Reform Act was warranted. The judge noted that at the time of the divorce, the wife “bargained for” a specific termination date for alimony payments in exchange for a certain division of property. If the wife had known that alimony payments would terminate prior to that, the judge theorized, she would likely have insisted that the property division terms be different.

The Supreme Judicial Court agreed that the modification claim was filed prematurely. However, it disagreed with the Probate and Family Court judge in his holding that deviation from the time limits was warranted. In particular, the Supreme Judicial Court noted that a judge must evaluate circumstances regarding alimony modification “in the here and now:” not at the time of divorce, but rather at the time of the modification being sought. (The Court noted that if there are continuing circumstances which existed at the time of divorce and continue to exist at the time modification is sought – such as the disability of one of the spouses – then those circumstances may be considered in determining whether to deviate from the time limits.)

But here, the trial court’s analysis was flawed, the Supreme Judicial Court noted, in theorizing that the payee spouse would have bargained for a different property division award if she knew that alimony payments would cease. “[T]his logic might prevent nearly all payor spouses with alimony obligations predating the act from ever gaining the benefit of the act’s durational limits, because recipient spouses could argue that, had they known that their alimony payments would be affected by the act, they would have negotiated their separation agreement differently,” the Court stated. “This is in direct contravention of the Legislature’s intent that the durational limits apply to preexisting alimony awards.”[2]

[1] George v. George, SJC-12059 (September 6, 2016-November 23, 2016).

[2] Id., at 11.

Considering the Employability of the Parties in Calculating Alimony and Property Division

When Peter and Polly were married twenty years ago, they each really felt optimistically when considering employability of the other. Peter was a graduate student and Polly was a secretary. Polly supported Peter while he obtained his Ph.D. in Economics, serving as the sole bread winner for the first four years of marriage. By the time their second child was born, Peter had received a full-time faculty position at a local university, and Polly stayed home with the children.

Now, Peter has filed for divorce. He recently quit his job over a disagreement with the Dean, and Peter claims that he will have no income for the foreseeable future, thereby owing no alimony to Polly. Peter also claims that his lack of income should be considered in dividing the marital property. Polly believes Peter’s assertions to be false—she believes that Peter will be able to find either another full-time faculty position or a position in the business sector which will potentially yield an even higher salary than Peter had as a professor. Polly wonders if the Massachusetts Probate and Family Court will consider Peter’s vocational skills and employability in awarding alimony and dividing property.

The short answer, of course, is yes. The Massachusetts Probate and Family Courts use a process called equitable distribution to divide marital property in general. Here, the term “equitable” means “fair,” and not necessarily equal: the court will determine how best to divide marital property in the fairest manner in each particular case. There are many factors that the Court considers as part of this process. The employability of the parties and the vocational skills of the parties are two of those factors; they are closely related in the Court’s analysis.

The term “employability” typically refers to the reasonable probability and prospect that a party will derive income from his or her vocational skills; it is a factor which attempts to measure the opportunities available to the party for utilizing his or her vocational skills in his or her field of work. Some additional, related factors which the Court may consider include the education of the parties, the parties’ vocational skills, age, and health.

Employability in most cases may be established by reviewing the party’s history of employment. Generally, employment history provides a reasonably clear picture of a party’s future prospects for employability. In some cases, however, the Court will look at other factors—for instance, in the case of a party who has stayed home to take care of children, the Court might recognize that employment opportunities may now be limited as a result of that decision. In other cases, where the Court finds that a party appears to be avoiding employment prospects, the Court may actually impute income to that party.

In one case, for example, the Court held that a husband’s potential income as a design engineer may be considered as the basis for alimony payments, rather than his actual income as a consultant. Schuler v. Schuler dealt with an alimony modification request by the husband, who had been bought out of his closely held corporation, of which he was the President at the time of divorce. The husband asked that the Court modify his alimony payment amounts, arguing that he was no longer working in the same position. The Court noted that the husband could apply for (and reasonably easily find) employment in his line of work, and attributed a salary which was reasonably available to the husband as his income. [1]

In another case, the Court heard the argument of a husband who voluntarily retired from his position as an attorney and petitioned for termination of his alimony payments. The Court held that voluntary retirement did not warrant a termination of alimony payments outright, but the payments might be modified downward.[2] “People often prefer careers that may not maximize their lifetime income, and divorce should not entirely deprive an individual of this freedom,” the Court noted. “But these considerations must be balanced against a provider’s obligation to support the former spouse.”[3]

If you have any questions about property division issues, you may schedule a free consultation with our office. Call 978-225-9030 during regular business hours or complete a contact form here, and we will get back to you at our earliest opportunity.

[1] Schuler v. Schuler, 382 Mass. 366 (1981).

[2] Pierce v. Pierce, 455 Mass. 286 (2009).

[3] Id., at 287.

Are Marital Liabilities and Debts Considered in Division of Property and Alimony?

Ken and Kora are going through a divorce in Massachusetts. Although they were only married for a short time, Ken managed to rack up a substantial credit card debt during the marriage. Ken and Kora both work full-time, but Kora makes significantly less money than Ken. She is worried about the Court’s division of marital property—will the Court saddle her with parts of Ken’s debt?

This is a possible scenario. Typically, the debts incurred by the couple during the marriage are considered marital liabilities, and they will be factored into the Court’s decisions regarding marital property division. The Massachusetts Probate and Family Courts use a process called equitable distribution to divide marital property in general. Here, the term “equitable” means “fair,” and not necessarily equal: the court will determine how best to divide marital property in the fairest manner in each particular case. There are many factors that the Court considers as part of this process.

In addition to assets, the parties’ liabilities are also considered. As some examples, the courts have considered tax liabilities, student loans, and bank loans owed by one or both parties. Debts are examined by the courts not only regarding responsibility for payment of those liabilities, but also regarding whether they will have any effect on the equitable division of proceeds and grating of alimony. For instance, the courts may find that, although both parties have their own debts, because one party makes significantly more than the other, it would be unfair to burden the other party with some or all of the liabilities incurred during the marriage.

The Court will take into consideration many factors and questions in regards to the parties’ debts and liabilities. For example:

  • Did one or both parties accumulate the debt? Did either party object to the prospect of accumulating this debt?
  • Was the debt incurred before or after the marriage took place? Was it incurred after separation, or even in contemplation of divorce?
  • Was the debt incurred for the benefit of both spouses, or only one? Was it incurred for the benefit of the family?

Of course, in cases where one party profligates and incurs debt (particularly debts which were the result of significant unreasonable spending or mismanagement of finances), the Court may order that party to settle his or her own debts, rather than assigning the debt to both parties as part of the marital assignment. For example, in one case, the Court noted that the couple’s debt was largely due to the husband’s financial mismanagement and living beyond his means. The Court held that a fifty-fifty split of liabilities and assets was not necessary. [1]

If you have any questions about division of marital property, you may schedule a free consultation with our office. Call 978-225-9030 during regular business hours or complete a contact form here, and we will get back to you at our earliest opportunity.

[1] Duckett v. Duckett, 27 Mass. App. Ct. 1164 (1989).

What are the Tax Implications of a Divorce, Specifically Child Support and Alimony?

For most of us, taxes are generally unavoidable.  Many events in life impact what taxes we pay and divorce is one of them.  In fact, there are various issues in a divorce with potential tax implications and today we’ll focus on one of the main categories:  support, meaning child support and alimony. Just as people benefit to a greater degree with tax planning, people who don’t consider tax implications when resolving their divorce are more likely to pay higher taxes. The best practice is to have a solid understanding of the taxes associated with the various elements of a divorce, prior to settling for divorce case.

Overview of Divorce Issues Impacting Tax Liability?  Tax issues fall into three main categories in a divorce. The first is the issue of support, including alimony and child support, which we’ll cover more below.  The second relates to property transfers, which ordinarily occur through equitable distribution. The third issue includes the various filing statuses, credits and exemptions that one or both parties may claim when filing their taxes.

Support Taxation: Alimony and Child Support.  Alimony and child support are two types of support that one former spouse may pay the other. Logically, child-support is only available when there are dependent children. Conceptually, the child-support is actually paid by both parents for the benefit of the children, with one party paying some support through the other parent so that the children’s needs our comparably met in each household.  Consider that that “child support” is the money used to pay the expenses of the children.  You pay much of these expenses yourself when the children are with you.  But, when we discuss child support, we are usually referring to the portion that’s paid by one parent to the other.  Because child-support is viewed as a benefit to the children and not to the parents, child-support is post-tax money. Meaning, there is no income tax deduction for paying child support and the parent who receives the support does not consider it income for income tax purposes.

Alimony, on the other hand, is for a different purpose altogether. The purpose of alimony is for one former supposed to pay the other money on an ongoing basis so that the spouse receiving the support may live a lifestyle comparable to that which was enjoyed during the marriage. The idea is that both parties can live a lifestyle comparable to that which was enjoyed during the marriage because the former spouse paying the alimony still has the ability to pay the support without sacrificing his or her lifestyle.  Because alimony is viewed more as an augmentation to income, the person paying alimony may deduct it from his or her income tax and the person receiving alimony will treat it as ordinary income for tax purposes.  There is ordinarily a net tax benefit when alimony is paid in a case because the party paying the alimony is typically in a higher tax bracket than the party receiving alimony. Accordingly, between the two former spouses, there is ordinarily less tax paid overall.

Now, in many cases, particularly on a temporary basis, an award of support may be “unallocated”.  That is, there may be one total support order, obligating one spouse to pay unallocated, sometimes called undifferentiated, support. In those orders, it may not be clear which portion of the support order accounts for child support and which portion of the order accounts for alimony.  Is in on allocated support order deductible like alimony or is it after-tax dollars as is the case with child support? The answer is that when there is an unallocated award of support, the entire amount maybe deductible to the party paying it and taxable to the recipient. However, if the portion that accounts for child support or alimony can be identified and separated out, the different tax treatment should be applied to each portion.

Clearly the tax implications of a support order, or in a case generally, are relevant and important to settlement.  A party doing the math to determine if he or she will be able to survive with a proposed support figure can’t accurately come to a conclusion without considering the resulting income taxes.  Accordingly, it’s really crucial to do the math and even better to have a divorce lawyer who understands how this works and can do the calculations.  The first step in any such analysis is to schedule an attorney consultation.  To schedule your free attorney consultation, call our office today at 978-225-9030 during regular business hours or complete a contact form here and we’ll reach out to you at our first opportunity.