Future Income and Property Acquisition in Dividing Marital Property

Zelda and Zack have been married for ten years and are undergoing a divorce. Zack recently found out two things: first, that Zelda has won a professional award which will likely allow her to increase her income substantially in the future; and second, that Zelda is likely to come into a large inheritance from her mother, of which Zack had no idea. Zack wants to know if the Massachusetts Family Law Court is likely to take these two things into consideration when dividing the marital property and ordering alimony.

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 to best divide marital property in the fairest manner in each particular case. There are many factors that the Court considers as part of this process. Massachusetts General Laws, chapter 208, section 34 defines the factors the Court will use in determining how marital property should be divided. Under the statute, the Court may include in its analysis the opportunity for the parties to acquire future income and property.

The opportunity to acquire future income and property is a comprehensive factor: it includes the likelihood of earning future salaries, bonuses, royalties, and other sources of income. It also includes family trusts, inheritances, and other property which may befall one of the parties in the future.

In one Massachusetts case, the Court considered the effect of the husband’s Nobel prize on his future acquisition of assets. As the Appeals Court explained upon appeal:

In explaining her division of assets, the judge relied “heavily” upon the statutory factor of the “ability of the parties to acquire future income and assets.” The judge concluded that the husband’s ability is excellent, as he retains a retirement asset in which his employer “matches his future contributions dollar for dollar,” and his “receipt of the Nobel prize opens wide new horizons for his income potential.” The wife’s future prospects were found to be “paltry and stagnant by comparison.” The judge found that the wife had “no likelihood of acquiring significant future assets or increasing her earned income.”

The Appeals Court affirmed, holding that the trial court properly considered the above factors in computing the parties’ opportunity to acquire future income. “The husband’s and wife’s ability to acquire future income and assets are therefore strikingly different and justify the judge’s heavy reliance on this factor,” the Court noted.

In the case of future property acquisition, however, the Court will carefully consider whether there is a realistic prospect of receiving the future income or property, or whether future acquisition is merely expected. If it’s the latter, the Court may not include it in its consideration of assets. In one case, the courts considered a husband’s future interests in many different family trusts and other property. In some trusts, the husband was deemed to have a present, enforceable right, and those trusts were ordered by the court to be considered as opportunity for future acquisition of capital assets and income in determining alimony and child support. In some other trusts, however, the husband’s interest was deemed too remote or speculative, and those trusts were not considered to be part of the marital estate.

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

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.

The Conduct of the Parties During the Marriage: A Factor in Dividing Marital Property

Larry and Leah have been married for a decade, during which Leah was the main bread-winner through her job as a human resources director. Though Larry has held a string of low-paying jobs, he has not managed to hold down a job for very long, and he can’t seem to manage saving any money—on top of that, Larry has spent substantial amounts of money on his gambling habit for the past ten years.

Leah has recently filed for divorce. She is concerned about the division of the property she has accumulated while she was married to Larry, particularly the marital home which was purchased with a down payment that she saved up from her job. Is the Court possibly going to order that Larry take half of the things Leah has worked so hard to accumulate and maintain, or will the Court take into consideration Larry’s lack of contribution and detrimental decisions?

Larry’s conduct during the marriage will likely be considered by the court here. 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, and one of those factors is the conduct of the parties during the marriage.

As of the passage of the Massachusetts Alimony Reform Act, the conduct of the parties is no longer a factor in awarding alimony. However, the conduct of the parties remains a factor in the division of marital property. In what ways might it affect the judge’s decision? Past cases have looked at a slew of issues with conduct, including the following:

  • Failure to take care of the marital assets and responsibilities: in one case, the Court conveyed to the wife the primary home where the husband “did very little in house maintenance and spent much time outside the home” and the wife “was responsible for raising the children and taking care of the marital domicile.” [1]
  • Using the marital assets for a spouse’s own purposes, while relying on the other spouse to pay the family bills: in one case, where the wife contributed her money to home repairs while the husband, supported by his wealthy mother, spent his on motorcycles and a motor home, the Court considered the husband’s conduct and assigned almost all of the marital assets to the wife; [2]
  • Conveying marital property to another person in anticipation of divorce: the court in one case, where the husband obtained by fraud and coercion his wife’s permission to establish a trust to benefit his siblings, and moved marital property into that trust, the judge was able to invalidate the trust; [3]
  • Using the marital funds to “entertain” an extramarital affair; and [4]
  • Causing waste of the marital assets, such as by gambling; among other things. [5]

Typically, the conduct of the parties will be considered a factor in marital division only when it impacts the financial or economic state of the marriage. In other words, conduct which does not affect the couple’s finances or economic status—such as one spouse who is perhaps mean and condescending to the other but pulls his or her weight in maintaining the couple’s financial status—likely won’t be a controlling factor. Should that conduct impact finances, however, it may be considered by the Court.

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] Tanner v. Tanner, 14 Mass. App. Ct. 922 (1982).

[2] Johnson v. Johnson, 53 Mass. App. Ct. 416 (2001).

[3] Yousif v. Yousif, 61 Mass. App. Ct. 686 (2004).

[4] See, for example, the cases of Ross v. Ross, 385 Mass. 30 (1982) and McMahon v. McMahon, 31 Mass. App. Ct. 504 (1991).

[5] See, for example, Yee v. Yee, 23 Mass. App. Ct. 483 (1987).

Does the Court Consider the Parties’ “Station in Life” In Dividing Marital Property?

Audra and Adam have been married for fifteen years. In that time, Audra has supported Adam while he finished medical school, underwent a medical residency, and established his practice. Audra also took care of the couple’s children. Through the years, the couple enjoyed a nice standard of living, with a primary home in a wealthy town, a vacation home in Vermont, and a boat docked in Massachusetts.

When Adam filed for divorce, he argued that most of the marital property should be considered his, as he was at times the only source of income. Audra is worried—will her life now change dramatically, and will she need to adjust to an entirely different standard of living?

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 to best divide marital property in the fairest manner in each particular case. There are many factors that the Court considers as part of this process, and one of those factors is the “station” of the parties. Likewise, the station of the parties is considered by the Court when deciding whether to grant alimony for one spouse.

The term “station in life” refers generally to the standard and mode of living that the parties enjoyed during the marriage. The Courts look to order an award of property division and alimony which would allow the parties to maintain approximately the same economic station as they enjoyed during marriage. In one case, the Massachusetts Appeals Court considered the parties’ modestly affluent lifestyle (where they had vacations, foreign travel, and private school education for their children) in granting alimony for the wife. [1]

In another case, 85% of a couple’s substantial assets were given to the wife during divorce by the Probate and Family Court, with the judge noting that the wife and her family were the source of most of the assets. On appeal, the Appeals Court held that it the trial judge gave excessive weight to the source of the assets, and “failed to allocate assets in such fashion as would enable each party to sustain an approximation of the living standard each enjoyed while married to the other.” [2]

If you have any questions about divorce and property division, 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] Kehoe v. Kehoe, 31 Mass. App. Ct. 958 (1992).

[2] Denninger v. Denninger, 34 Mass. App. Ct. 429 (1993).