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Jason V. Owens reviews how alimony reform advocates keep pushing for changes in Massachusetts law that permits lifetime alimony to continue.

Attorney Jason V. Owens

In June of 2016, alimony reform advocates in Massachusetts were riding high. Their bill, aimed at closing a loophole in the state’s alimony law that allowed so-called “lifetime alimony” to continue for some Massachusetts spouses, had just passed the Massachusetts House in a unanimous 156-0 vote. Support in the Senate seemed solid, and the bill was supposed to breeze into law. Then came the July legislative crunch, and before reform advocates could blink, the reform bill had been passed over by a state senate that was more interested in other issues.

Another Try in 2017, but Same Result for Alimony Reform Advocates

Reform advocates entered 2017 with a full head of steam, with a new bill receiving public support from the House and Senate candidates in the fall election cycle, followed by numerous co-sponsors signing on in the new year. Again, the bill seemed poised for passage as the summer legislative session heated up. The Boston Globe Magazine published a column supporting the bill.  So did the Boston Globe.

And then it happened again. Just like the year before, the 2017 legislative session ended with alimony reform mired in the state senate. This time, the culprit was Sen. William Brownsberger (D), powerful chairman of the Joint Committee on the Judiciary, standing in the way of passage.

Could Elimination of Alimony Tax Deduction Spur Massachusetts Reform?

As covered in our recent blog, the new federal tax bill will eliminate the tax deduction of alimony starting in 2019:

On its face, the language of Section 11051 suggests that divorcing spouses will have all of 2018 to enter divorce agreements that include tax deductible alimony. Indeed, it appears that all divorce and separation agreements entered before December 31, 2018 may include tax deductible alimony, and that alimony will continue to be tax deductible into the future for pre-2019 divorces. In essence, tax deductible alimony is “grandfathered in” for all Americans divorced before 2019. Individuals divorced in 2019 or later will be out of luck.

As noted in our blog on the tax bill, the alimony formula presently used under the Massachusetts alimony statute was premised on the belief that alimony payments would be tax deductible to payors:

The Massachusetts alimony statute “caps” alimony at 35% of the difference between the respective gross (pretax) incomes of the parties. The ARA, passed in 2011, based the 35% cap on the long-standing rule that alimony is tax deductible. Given that many alimony payers earn income in the highest tax brackets, the deductibility of alimony from the payer’s gross income often results in substantial tax savings that significantly “cushions the blow” for payers.

If the alimony deduction is eliminated under the new tax bill, will cause Massachusetts legislators to take another look at the law?  If so, could this be the opening reform advocates need to close the lifetime alimony loophole?

Because the alimony deduction won’t be eliminated until 2019, it seems unlikely that the moribund Massachusetts legislature will spring into action to address the 35% cap anytime soon. Of course, with anti-Trump sentiment running strong on Beacon Hill, one can’t be sure what measures Baystate lawmakers could take in response to the Republican tax bill. At a minimum, the legislature seems likely to soften the blow of the new tax bill by making alimony tax deductible on Massachusetts state income taxes at some point in the next two years. To be clear, alimony is currently deductible for state income tax purposes only because the alimony deduction exists under federal law. The Massachusetts state income tax statute, M.G.L. c. 62, s. (d)(1), defines gross income and the vast majority of its tax deductions by simply incorporating the federal tax code, word for word, into Massachusetts law.

Obviously, any federal tax deduction is significantly more valuable than a state tax deduction, given that individuals pay substantially more in federal taxes than state taxes. Nevertheless, it would be a simple matter for Massachusetts lawmakers to make alimony tax deductible for Massachusetts state income tax purposes before the federal change takes affect in 2019. For alimony reform advocates, the question is whether changes to the ARA or state tax code could be a legislative vehicle for the changes sought by reformers.

2018 is a New Year.  Will the Result be Different for Alimony Reform?

Reform advocates are nothing if not persistent. Despite two years of inaction in the state senate, advocates hope that 2018 is the year their bill will pass. In a recent email to supporters, Mass Alimony Reform President, Stephen K. Hitner, told reformers:

Due to the fact that the Joint Committee on the Judiciary has been concentrating on Criminal Law Reform, Alimony Reform has been put on a back burner.  While it is understandable that they have their priorities, H 740 is a no-brainer.

The Senate Chairman, Senator Will Brownsberger has made it clear that the Committee will deal with H 740 after the Thanksgiving Holiday.  The problem is that although he has expressed that H 740 does in fact return the ARA to it’s original intent, he is sympathetic to the arguments brought forth by the receiving ex-spouses.  It is up to YOU to convince him of the importance of finality and the fact that a Judge can deviate for special situations.

Hitner also reported that the original Alimony Reform Task Force – whose recommendations form the backbone of the 2011 Alimony Reform Act – reconvened this fall to advocate for the new bill:

Rep. Claire Cronin (House Chair of the Judiciary), hosted a meeting  back in September with the Alimony Reform Task Force Members to discuss the current status of H 740.  At the meeting the Task Force Members and Rep Cronin discussed any possible issues and was educated by the Attorneys as to how well the ARA of 2011 was working and the need to pass H 740.  Rep Cronin in in support of H 740.

Handicapping Alimony Reform in 2018.  Will it Happen?

Persistence often pays off in Massachusetts politics. Rumor has it that advocates will focus all of their attention on Brownsberger’s committee in the new year, confident that the House will support a bill if it can only get past the Senate. In 2017, Brownsberger told supporters that the Committee’s focus was criminal justice reform. With that now out of the way, there seems little reason for Brownsberger to further delay a vote on alimony reform in the face of persistent supporters.

After two years of frustration, it is hardly certain that 2018 will see a new alimony bill in Massachusetts, but supporters have good reason to hope that this will finally be their year.

Try the Lynch & Owens Massachusetts Alimony Calculator

Think you have an alimony case in Massachusetts? Estimate the amount and duration of alimony in your case with the Lynch & Owens Massachusetts Alimony Calculator:

About the Author: Jason V. Owens is a Massachusetts divorce lawyer and Massachusetts family law attorney for Lynch & Owens, located in Hingham, Massachusetts.

Schedule a free consultation with Jason V. Owens today at (781) 741-5000 or send him an email: [contact-form-7] Disclaimer

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The post Alimony Reform Effort Roles On, Despite Hurdles on Beacon Hill appeared first on Lynch & Owens.

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Jason V. Owens examines how the recently passed tax bill will eliminate alimony tax deductions starting in 2019.

Attorney Jason V. Owens

Following the passage the Tax Cuts and Jobs Act by House and Senate Republicans, divorce practitioners are slowly realizing that the bill will dramatically impact a pillar of divorce across the United States: tax-deductible alimony. Under the new tax bill, newly divorcing spouses have until December 31, 2018 to enter an agreement that includes tax-deductible alimony. For divorces  entering after that date, alimony paid will not be tax deductible.

Importantly, the bill will not affect the tax deductibility of alimony judgments entered before December 31, 2018. In addition, alimony will continue to be tax deductible for divorced spouses who modify existing alimony orders, so long as they were divorced before December 31, 2018.

Section 11051: Repealing Tax-Deductible Alimony Starting in 2019

Section 11051 of the bill provides for the elimination of the alimony tax deduction. In general, Section 11051 jumps around the Internal Revenue Code (IRC), starting with  26 U.S. Code § 71 , before jumping to other sections to of the Code to amend and replace alimony-related provisions. It will take time for tax professionals and attorneys to review each and every snippet of tax code amended, repealed or replaced by Section 11051. In the interim, we can rely on CNN Money’s review of the changes for the bottom line:

If the tax bill becomes law, the alimony deduction repeal would affect divorces carried out after December 31, 2018. The new rule wouldn’t affect anyone already paying alimony.

Timing is Everything: When Does Tax-Deductible Alimony End?

For divorce practitioners, the first concern is the timing of the bill. Page 100 of the bill provides as follows:

EFFECTIVE DATE.—The amendments made by this section shall apply to—

(1) any divorce or separation instrument (as defined in section 71(b)(2) of the Internal Revenue Code of 1986 as in effect before the date of the enactment of this Act) executed after December 31, 2018, and

(2) any divorce or separation instrument (as so defined) executed on or before such date and modified after such date if the modification expressly provides that the amendments made by this section apply to such modification.

On its face, the language of Section 11051 suggests that divorcing spouses will have all of 2018 to enter divorce agreements that include tax deductible alimony. Indeed, it appears that all divorce and separation agreements entered before December 31, 2018 may include tax deductible alimony, and that alimony will continue to be tax deductible into the future for pre-2019 divorces. In essence, tax deductible alimony is “grandfathered in” for all Americans divorced before 2019. Individuals divorced in 2019 or later will be out of luck.

In addition, parties who modify their pre-2019 divorce judgment may continue to use tax deductible alimony, even if the modification judgment enters after 2019. In other words, tax-deductible alimony will continue to be available for all Americans citizens divorce before 2019.

Some Practical Affects of the Loss of the Alimony Deduction

The starting point for any discussion about the loss of tax deductible alimony is that it means less money for divorced families. Historically, alimony has allowed individuals to give and receive financial support in a way that maximized tax savings for the family. For alimony payors – who must sacrifice a significant part of their earnings for a former spouse – the deduction reduced the financial burden of spousal support. For recipients, the deduction enabled former spouses to receive larger amounts of support, where recipients generally operate at lower tax brackets than alimony payers.

The basic impact of the loss of the alimony deduction is easy to forecast: alimony recipients will receive less alimony while the cost of paying alimony will increase. In states like Massachusetts, where base alimony orders are calculated on a formula set at 35% of the difference between each party’s gross income, the loss of the deduction will skew the statutory framework. Judges will enter smaller alimony order in many cases, to be sure, but in cases where a former spouse requires the maximum order, the cost to the paying spouse will be much higher.

The elimination of the tax deduction is likely to have other changes, including:

Eliminating Unallocated Family Support –  As we blogged this fall, the 2017 Massachusetts Child Support Guidelines encourage judges to repurpose child support as alimony and/or unallocated family support to maximize the financial benefit for families. Starting in 2019, unallocated family support will no longer be available in new divorce cases, where elimination of the alimony tax deduction effectively eliminates unallocated family support.

Reduced Flexibility in Negotiations – Alimony is a valuable tool in divorce negotiations. Former spouses often face starkly different pictures in terms of post-divorce tax liability. Although alimony is often a contentious issue, eliminating the tax deduction will not eliminate alimony itself. Instead, it will limit the ability of judges, attorneys and parties to find common ground in divorce cases by maximizing each party’s post-divorce financial position. Without this added flexibility, alimony – and divorce in general – will become more of a zero sum game, in which one party “wins” and the other “loses” based on an alimony order.

Passing Financial Burdens from Former Spouses to the State – Ironically, strong arguments can be made that alimony saves the government money by placing the financial burden for supporting a less wealthy ex-husband or wife on the wealthier former spouse, rather than the government. The stereotype of alimony only being paid to rich “trophy wives” from Bel Air is simply inaccurate. Many alimony cases involve smaller orders designed the reduce major earning disparities between middle class divorced spouses. For spouses who spent their 20’s to 40’s raising children, the prospect of entering the workforce in their 50’s to save for retirement is simply realistic. Without alimony, these former spouses often operate close to the poverty line, relying heavily on government programs.

Additional Strain on Medicaid and Means-Tested Public Programs – In Massachusetts, and many other states, eligibility for Medicaid-based programs like MassHealth is based on an individual’s taxable income. Because alimony has always been taxable income for the receiving party, a former spouse receiving alimony is often required to contribute a greater share towards his or her medical coverage.  By making alimony tax-free to recipients, we can expect more former spouses to qualify for free health care, as well as other means-tested government programs that are based on taxable income.  Whatever tax savings are achieved by eliminating the federal deduction is likely to be reduced by increased strain on federally-funded programs.

Weakening Alimony Hastens Changes in American Society

The tax deductibility of alimony has facilitated the financial support of lower-earning spouses for decades. Because most alimony-paying former spouses earn income in higher tax brackets –and the income of alimony recipients generally falls into lower tax brackets – making alimony tax deductible made good sense. The parties could stretch their dollars farther using the tax code. According to CNN, about 600,000 Americans deducted alimony from their gross income in 2015.

Eliminating the tax deduction won’t eliminate alimony. It will just make the already strained family court system less efficient, reducing total family income and making divorce negotiations more difficult. In Massachusetts, alimony is not limited to the wealthy; it is a tool used by courts to ensure that childless former spouses stay above the poverty line.

Partisans sometimes suggest that alimony undermines marriage (despite alimony being most common in states with the lowest divorce rates), but one could easily argue that the opposite. In states where alimony is limited, sacrificing one’s career to raise children or support a spouse is foolish. With no alimony safety net, spouses who fail to earn after a divorce can be left destitute. Meanwhile, in states where alimony is more common, spouses can leave the workforce or make career sacrifices without jeopardizing their future as significantly.

There is little question that historically, most alimony has been paid by former husbands. However, this is likely changing rapidly, as more women now earn bachelor’s degrees then men in the United States. Men continue to out-earn women in the workforce, but this is rapidly changing too. For Americans aged 25-34, women now earn 90% of what men earn. Birth rates are at historical lows among Americans, and couples are waiting longer and longer to get married, as more families require two incomes to support even one or two children. With immigration slowing and entitlement-hungry baby boomers rapidly aging, the American economy appears headed for a demographic cliff.

Alimony has been one of the few systemic antidotes to the modern demographic trend. By providing financial protection for spouses who choose to rear children instead of professional advancement, alimony reduces the risk for spouses who focus on family rather than career. Over the long run, weakening alimony is likely to hasten the current trend away from child-rearing, and towards a society in which both spouses must focus on their respective careers – or face financial calamity if their marriage ends. Those who wish for a return to the “good old days” in America – when Ozzie worked and Harriet stayed home to tend to the children – should remember that in modern America, Harriet would have little incentive to stay home with the kids if divorce meant financial destruction.

When is the Bill Effective for Massachusetts Divorces? More Confusion Over the “Nisi” Rule

The first Massachusetts-specific concern to consider is how the antiquated “nisi period” will affect the effective date of the bill in Massachusetts. As we have noted in our prior blogs on the “nisi period”, the Massachusetts legislature has never bothered to change the antiquated and confusing “nisi” rule, where by a typical Judgment of Divorce does not become “final” for 90 days after the Court approves a divorce agreement – or 120 days if the agreement was entered pursuant to a Joint Petition for Divorce.

On any weekday morning in counties across Massachusetts, the utter silliness of the “nisi” rule plays out for all to see. After approving the divorce agreement between two spouses who file a Joint Petition for Divorce, the judge typically says something like this:

Judgment will enter on your agreement in 30 days. The judgment will be become ‘final’ 90 days after that. There is nothing further you need to do, the court will mail you a judgment in the next several days.

The look of utter confusion on the faces of divorcing spouses who hear this speech is always quite striking. You can almost see them wondering: Am I divorced? Will I be divorced in 30 days? Or 120 days? Do I even have to follow the agreement I just signed? When do my support payments start? Am I supposed to take my son to his hockey game tonight or not?

Of course, the answer is too confusing for judges to try to explain to every party. In truth, the terms of the agreement are effective immediately under basic contact principles. The terms of the agreement become court orders upon the entry of “Judgment of Divorce Nisi” – which enters on the date the judge approved the agreement in contested cases and 30 days’ later for Joint Petitions. Typically, the only thing affected by the remaining 90-day “nisi period” is marital status. Parties must wait the 90 days for “Judgment of Divorce Absolute” to enter before they can remarry.

Just because the Nisi rules is silly doesn’t mean it’s harmless, however. Marital status dictates whether parties may filed “individually”, “married” or “married filing separately” on their tax returns. As noted in my blog last year:

This is addressed directly by the Massachusetts Department of Revenue (DOR) in Directive 89-3: Filing Status; Divorced, which states that our hypothetical parties continue to be “married” for tax purposes for the entire 90-day Nisi Period. Moreover, where marital status is purely a function of state law, the Internal Revenue Status will follow DOR’s position, meaning that federal tax filing status is also “married” for our hypothetical divorced spouses.

By summer of 2018, divorce practitioners will need to be thinking about whether the new tax bill’s effective date applies to the date a separation agreement was approved – i.e. the “Judgment of Divorce Nisi” – or the date the judgment becomes “final” – i.e. the “Judgment of Divorce Absolute”. I don’t have the answer to this question yet – the bill only passed on Friday! –  but Massachusetts attorneys who get this wrong will have malpractice exposure next year.

It would certainly be nice if the legislature would do the common-sense thing and eliminate the “nisi” rule altogether. (Given that adultery is still a felony in Massachusetts, I’m not optimistic about modern divorce law taking hold on Beacon Hill.)

Does the New Bill Affect the Alimony Reform Act of Massachusetts (ARA)?

The Massachusetts alimony statute “caps” alimony at 35% of the difference between the respective gross (pretax) incomes of the parties. The ARA, passed in 2011, based the 35% cap on the long-standing rule that alimony is tax deductible. Given that many alimony payers earn income in the highest tax brackets, the deductibility of alimony from the payer’s gross income often results in substantial tax savings that significantly “cushions the blow” for payers.

Will the Massachusetts legislature amend the ARA’s 35% cap to reflect the new economic reality under the tax bill? We wouldn’t bet on it, given the legislature sluggish response to other problems with the ARA. That said, it is likely that judges will recognize the new tax conditions in alimony cases starting in 2019, and we can expect the amount of alimony orders in Massachusetts to shrink as a result.

Given the anti-Republican fervor on Beacon Hill, one broad response to the new tax bill may involve changes to Massachusetts tax law that guarantee certain state income tax deductions. In other words, alimony may still be deductible for state income tax purposes. Of course, given that federal income taxes are three to four times greater than state taxes, this would provide only marginal relief for alimony payers starting in 2019.

Jason V. Owens, Massachusetts Divorce & Family Law Attorney - YouTube

About the Author: Jason V. Owens is a Massachusetts divorce lawyer and Massachusetts family law attorney for Lynch & Owens, located in Hingham, Massachusetts.

Schedule a free consultation with Jason V. Owens today at (781) 741-5000 or send him an email: [contact-form-7] Disclaimer

Read our Disclaimer.

The post New Tax Bill Kills Alimony Deductions, Hastens Societal Changes appeared first on Lynch & Owens.

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Tax Attorney Patrick Walter guest blogs on the challenges faced by divorcing couples who owe back taxes.

A rough divorce can cause considerable stress and trauma, leaving both the spouses scarred for years. Divorcing couples have too much on their plate and must split property, divide debts, and resolve custody issues. Additionally, to avoid tax problems with divorce, couples who have been filing taxes jointly must decide their respective tax obligations. This is especially important for couples who owe back taxes or face IRS and tax related problems at the time of the divorce. Determining who owes what helps avoid additional tax obligations.

Failure to apportion back taxes between the spouses can complicate things, often exacerbating the trauma experienced by both the parties. Divorcing couples must also understand how their tax debt will be considered, and the effect of separation on their tax filing status. In this post, we cover these two topics. Take a look.

Tax Debt is Treated Like any Other Debt in a Divorce

In most cases, joint tax debt owed by divorcing couples is considered like any other type of marital debt and will be included in the same category as outstanding credit card bills, mortgage balances, and other debts. If the divorce settlement or the state laws suggests that property and debt be divided equally among the separating couple, both the parties will also have to share the joint tax debt and must pay their share. However, in some cases, a party, to get a lion’s share in the property can argue to pay more taxes.

Legal Exceptions to Equal Division of Tax Debt

In most states, including Massachusetts, property and debt is equitably divided between divorcing couples. However, some states such as Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin distinguish between properties and debts acquired before and during the marriage. In these states, properties and debts acquired during marriage are termed as community property (and divided equitably), while assets and debts acquired before marriage are considered the individual property of each spouse. While community property may be divided equally between divorcing couples in these states, each person is responsible to pay any individual debt he or she bought into the marriage.

When Joint Tax Debt is Divided Unequally

In equitable division states, like Massachusetts, all assets and debts acquired at any time (including before the marriage) are considered marital, and therefore subject to division in a divorce. However, judges in equitable division states retain discretion to assign assets and debts in an unequal matter. For example, in Massachusetts, if spouses are only married for one year, a judge is unlikely to provide assign 50% of a wealthy spouse’s premarital assets or debts to the less wealthy spouse. Instead, the judge may assign 5% of wealthy spouse’s assets/debts – or even none at all.

Even if spouses are divorced following a long-term marriage (20+ years), there may be instances when a judge declines to assign 50% of a tax debt to one party. Indeed, if the debt is arising out of a joint tax return, there may be scenarios when a greater share of the tax liability will be assigned to one spouse versus the other. For example, if a family court judge may track the principles of the so-called “innocent spouse rule”, whereby the IRS will not hold a spouse responsible for tax liability when (a.) the liability arose out of the other spouse’s error and (b.) the innocent spouse had no reason to know about the error. (Note that the “innocent spouse rule” is a product of federal tax law; state judges presiding over a divorce need not follow the federal rule precisely, but may draw on similar principles when determining responsibility for the tax debt through the divorce.)

Another scenario in which a judge may disproportionately assign joint tax debt to one party in a state like Massachusetts is when one spouse’s ability earning capacity – and ability to pay a tax debt moving forward – far exceeds the other’s. This scenario is especially common in cases where the parties have little or assets to divide, a substantial joint tax debt, and there is a major disparity in earning power between the parties. In such cases, a judge may assign a greater share of the responsibility to pay to the higher-earning party. If one party’s actions created the tax debt without the other party’s knowledge, the responsible party may be ordered to pay a greater share.

Although most states do not distinguish between assets and debts in their asset division statutes, the reality is that courts must sometimes treat assets and debts differently in the divorce context. A marital debt represents an obligation to pay in the future. The principle of “equal division” sounds good on paper, but judges must consider whether a spouse will have the ability to pay his or her share of a marital debt in the future. In a state like Massachusetts, judges have broad discretion to disproportionately assign assets or debts in favor of one party based on more than a dozen statutory factors. Not every state gives judges such broad discretion when dividing debts, but in many cases, a judge will consider each party’s ability to pay when apportioning tax debts.

The IRS May Not Honor a Divorce Agreement

It is important to understand the limits of a judge’s authority to assign tax debt to one or both parties through a divorce. The judge’s authority extends only to the parties. A judge may order a husband to pay 100% of the marital tax debt, but this order does not affect the ability of the IRS or state tax authority to seek payment of the taxes from both parties.  In other words, if the husband fails to pay the marital tax debt after the divorce, the wife may bring the husband to court for failure to comply with the divorce order. The husband’s non-compliance with the divorce judgment will not prevent the IRS or state tax collector from seeking back taxes from the wife.

Most divorces end through settlement, not trial. A typical divorce agreement will include a provision addressing how the parties will pay for any back taxes (as well as any joint tax liability that is only discovered after the divorce is complete). Each party’s obligation to contribute to the joint tax debt is enforceable in the state or county court where the divorce agreement was entered. However, the IRS and state tax authority are not bound by a divorce agreement, and it is important for divorcing spouses to understand what the IRS and state authorities are seeking from each spouse. A well-drawn divorce agreement will seek to apportion payment for back taxes in manner that is fair and reasonable for the parties, while simultaneously striving to satisfy the requirements of state and federal authorities, such that compliance with the divorce agreement will also result in compliance with the demands of the IRS and state tax collectors.

Filing Taxes After Divorce: Massachusetts vs. Other States 

Couples, whose divorce is not finalized by 31st December of the year will have to file taxes as married for that year. Filing a joint return can result in additional savings, which would mean more money for the couple to divide among themselves. However, a spouse who is apprehensive that the other person may try to fudge their return can chose to file separately. Couples filing jointly will be held jointly responsible for any return frauds, even if only one of them is the perpetrator. Additionally, the refund for one party can be used to pay for the other party’s outstanding payments such as taxes owed from an individual return and unpaid federal loans.

Of course, Massachusetts poses special opportunities and challenges for former spouses due to the state’s anachronistic “nisi period”, which holds that the marital status of divorcing couples continues to remain “married” for a 90-day or 120-day period after the initial “Judgment of Divorce Nisi” enters. In his blog on the Nisi period, Attorney Owens wrote:

Upon the entry of Judgment of Divorce Nisi, all rights and obligations set forth in the separation agreement (child supportcustodydivision of assets, etc.) become immediately enforceable. In almost every meaningful way, the parties are divorced on the date that Judgment of Divorce Nisi enters.

Typically, the one and only issue that is affected by the 90-day “Nisi period” is marital status.  Thus, if Judgment of Divorce Nisi enters on December 1, 2016, then all parts of the the separation agreement are effective and enforceable on December 1, 2016, and the parties will be effectively divorced, except for one, small thing: the parties’ marital status will not technically change to “divorced” for another 90 days.

The Nisi period is source of serious confusion for Massachusetts residents who are divorced after October 3rd in any calendar year, given that the marital status of such parties will remain “married” past December 31st of the same year. As Attorney Owens notes, under a strict interpretation of the law, Massachusetts residents who are divorced after October 3rd in a given year are required to filed “married” or “married filing separately” for that tax year:

This is addressed directly by the Massachusetts Department of Revenue (DOR) in Directive 89-3: Filing Status; Divorced, which states that our hypothetical parties continue to be “married” for tax purposes for the entire 90-day Nisi Period. Moreover, where marital status is purely a function of state law, the Internal Revenue Status will follow DOR’s position, meaning that federal tax filing status is also “married” for our hypothetical divorced spouses.

In practice, few individuals who are divorced after October 3rd in Massachusetts even seem aware of the Nisi period, and enforcement against divorced spouses who file as unmarried “individuals” in the affected year appears limited. Indeed, the practical impact of the Nisi rule in Massachusetts seems to be added flexibility for Massachusetts residents. Individuals divorced after October 3rd can take advantage of the Nisi rule by choosing to file joint taxes with their former spouse for 90 or 120 days after their divorce has been otherwise finalized. Meanwhile, those who to file individually despite the Nisi period seem to generally avoid penalties. (It goes without saying that anyone who chooses to file individually despite DOR Directive 89-3 is taking at least some risk.)

Conclusion: IRS Debts Pose Challenges for Divorcing Couples

Tax problems with divorce can be confusing. Local and federal laws, and the parties’ situation can impact how the joint tax debt is divided. To avoid confusion and reach at an amicable settlement, both the parties must hire divorce attorneys who can negotiate the terms and conditions of the agreement on their client’s behalf.

About the Author: Patrick Walter is an experienced IRS lawyer, with extensive expertise in resolving IRS tax related problems. He works as an IRS tax lawyer with a law firm based in Dallas, TX.

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The post Things to Know for Divorcing Couples Who Owe Back Taxes appeared first on Lynch & Owens.

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Hingham Divorce Attorney Kimberley Keyes reviews the court decision suggesting an asset division can sometimes be modified following a divorce.

Attorney Kimberley Keyes

In a recent decision, the Massachusetts Appeals Court held that a Probate and Family Court judge properly awarded 50 percent of a husband’s pension to his ex-wife nearly 15 years after the parties divorced. The Appeals Court’s unpublished holding in Gexler v. Roberts rested on the fact that the parties’ separation agreement, which had been incorporated into the 2001 judgment of divorce nisi, made no mention of the parties’ retirement assets.

The court found approved the division of the former husband’s pension 14 years after the divorce was finalized because the court found that the division of the pension was neither contemplated during negotiations, nor litigated before the court at the time of the divorce. Under the circumstances, the Appeals Court held that the Probate and Family Court judge acted properly in awarding half of the husband’s pension to his ex-wife nearly a decade and a half after the divorce.

The decision is one of several in recent years that have seemingly eroded the long-standing rule that the division of marital assets is “final”, as part of a growing trend suggesting that an asset division can be modified after a judgment of divorce has entered in Massachusetts.

Separation Agreement was Silent as to Division of Either Party’s Retirement Assets

The parties signed a separation agreement that was expressly incorporated into a judgment of divorce nisi in January 2001. Although the agreement divided marital property comprised of the marital home, personal property, automobiles, and an escrow account holding proceeds from the husband’s worker’s compensation claim, it was silent as to any retirement assets of either the wife or the husband.

In 2014, the wife filed a complaint for property assignment of the husband’s pension under G.L. c. 208, §34.  The husband responded by raising the affirmative defenses of laches, res judicata and collateral estoppel.  In other words, he alleged the wife’s claim was barred because she waited too long to bring her cause of action, or in the alternative, because the claim or the issue had been previously litigated. The case was heard by Hon. Beth A. Crawford of the Franklin Probate and Family Court.

Following a trial during which both parties testified, the Probate and Family Court judge determined that the defense of laches was unavailable in a case seeking a post-divorce division of assets. The defense of laches is generally defined as “unreasonable delay in making an assertion or claim, such as asserting a right, claiming a privilege, or making an application for redress, which may result in refusal”. Thus, it seems clear that the mere passage of time between the original Judgment of Divorce and the filing of post-divorce action to divide an asset will not hinder the claim.

Judge Crawford also ruled that the husband failed to meet his burden of proof on the defenses of res judicata and collateral estoppel, “as the issue of [the husband’s] pension was not actually litigated.” In short, this means that the former husband failed to adequately raise res judicata or collateral estoppel – both defenses that would center on the “finality” of the original judgment of divorce – at trial. Issues not properly raised at trial cannot be raised on appeal as a matter of law. (As a legal blogger, I would have preferred for the Appeals Court to rule on both, but we can’t always get what we want.)

Ultimately, Judge Crawford issued a judgment in October 2015 directing that the husband’s UPS pension be divided equally, which the Appeals Court affirmed.

Chapter 208, §34 Allows Actions for Property Division to be Brought Any Time After Divorce

As we have written in the past, G.L. c. 208, §34 expressly allows parties to seek the division of a marital asset “at any time after a divorce.” The key question in such cases is whether the asset in question was divided at the time of the divorce. If the asset was part of the division of assets at the time of the divorce, a party filing after the divorce is generally out of luck. However, if an asset was not divided at the time of the divorce, the Appeals Court has increasingly held that a post-divorce division of the asset is appropriate.

The Appeals Court in Gexler upheld the trial court’s denial of the husband’s claim of laches, deeming his reliance on this defense as “misplaced.”  This left only one issue for the Appeals Court to analyze. Namely, whether the parties had either contemplated (during negotiations) or and actually litigated (before the court) the division of the husband’s pension at the time of the 2001 divorce.

As noted by Attorney Owens in his 2015 blog, recent decisions by the Appeals Court show an increasingly willingness among Massachusetts courts to allow the post-divorce division of assets that were not divided at the time of the divorce:

Spilhaus significantly broadens the class of assets that can be divided after a divorce by suggesting that even if the parties knew about and discussed an asset during the mediation process, the asset could still be divided many years after the divorce if (a.) the asset was not specifically identified in the divorce agreement and (b.) there is evidence that the parties failed to divide the property due to a mistaken understanding of the asset’s value.

The same would be true in Gexler:

At issue here is whether the parties contemplated and actually litigated the division of Gexler’s pension. … If the issue of the pension had been litigated at the time of the divorce, then Gexler may have met his burden of establishing the facts to support these affirmative defenses. Indeed, a judgment of divorce is res judicata as to those issues that have been actually been litigated and determined. … Here it is undisputed that the agreement makes no mention of any pensions, and Gexler’s financial statement, filed at the time of the divorce hearing pursuant to rule 401 of Supplemental Rules of the Probate and Family Court, lists the hand-written word “NONE” under the § 10b heading for “pensions and other retirement plans.” (Citations omitted.)

Res Judicata and Collateral Estoppel: Defenses Against Modifying Judgments

As the Supreme Judicial Court explained in Heacock v. Heacock, 402 Mass. 21, 26 n.2 (1988):

“Res judicata” is the generic term for various doctrines by which a judgment in one action has a binding effect in another. It comprises “claim preclusion” and “issue preclusion.” “Claim preclusion” is the modern term for the doctrines traditionally known as “merger” and “bar,” and prohibits the maintenance of an action based on the same claim that was the subject of an earlier action between the same parties or their privies. “Issue preclusion” is the modern term for the doctrine traditionally known as “collateral estoppel,” and prevents relitigation of an issue determined in an earlier action where the same issue arises in a later action, based on a different claim, between the same parties or their privies.

Here, the Appeals Court ruled it was “undisputed” that the parties’ separation agreement contained no reference to any pensions. Moreover, on the husband’s Rue 401 financial statement filed with the court at the time of the divorce, the word “NONE” was hand-written under the section where pensions and other retirement plans are to be listed. The court noted that the trial judge found the husband’s testimony “contradictory and confusing” about the omission of the pension from the financial statement.

The wife, on the other hand, testified that she only found out about the husband’s pension years after the divorce, spurring her to file her complaint to divide the asset. The trial judge credited the wife’s testimony and did not credit the husband’s testimony. As credibility determinations are within the purview of the factfinder, the Appeals Court did not disturb the judge’s ruling on that issue.

Interestingly, although the pension was at least arguably concealed by the husband at the time of the divorce (by virtue of the omission of the pension on his financial statement), the Appeals Court declined to award attorney’s fees and costs to the wife. Thus, pursuing a post-divorce division of assets that was not addressed at the time of the divorce may very well be successful – but plaintiffs should be prepared to pay the legal fees and costs required to go after them.

Bottom Line: If Parties Fail to Identify Assets on their Financial Statements and/or Divorce Agreements, Issues Can Arise

Although post-divorce division of assets claims are rare, they often involve high-dollar assets that have undergone substantial gains since the divorce was finalized. These kind of low-probability, high-dollar events are the kinds of things that keep divorce attorneys up at night, since such issues often take years to discover, and come with a steep price tag if and when they arrive.

As Gexler makes clear, fifteen years is a very long time for evidence and memories to go stale – a reality that left the former husband vulnerable to post-divorce claim on his pension. Indeed, the husband in Gexler argued that the pension was part of the divorce negotiation, and that the wife had agreed to waive the pension in exchange for receiving a part of the husband’s workman’s comp claim. The only problem? The husband’s former attorney – whom the husband said would support these events – died in 2012:

Gexler contends that the parties agreed that Gexler would retain his pension in exchange for Roberts receiving a portion of his worker’s compensation settlement and that his attorney at the time could verify his claim. This attorney died in November of 2012, two years before this action was filed.

The lesson for attorneys and parties alike is to make sure that all assets are always disclosed on each party’s financial statement. Preferably, a final Separation Agreement should specifically and separately include language that divides every category of property disclosed on each party’s financial statement, so there is no confusion over where a particular asset was considered during the negotiation or litigation.

About the Author: Kimberley Keyes is a Massachusetts divorce lawyer and Massachusetts family law attorney for Lynch & Owens, located in Hingham, Massachusetts and East Sandwich, Massachusetts.

Schedule a free consultation with Kimberley Keyes today at (781) 741-5000 or send her an email: [contact-form-7] Disclaimer

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The post Can a Court Divide a Former Spouse’s Pension 14 Years After a Divorce Was Finalized? appeared first on Lynch & Owens.

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Massachusetts divorce lawyer Carmela Miraglia discusses the dangerous fallout when clients fail to carefully read court orders and agreements.

Carmela M. Miraglia

There is one question every Judge asks both parties before accepting an agreement as part of a judgment, “Did you read the agreement you signed?” That is also the question every family law attorney has asked a hundred times when reviewing an Order with a potential client. The scenario is often the same: after a long and exhausting negotiation, two parties finally enter a written agreement in their divorce or family law case. The agreement provides for everything from the parenting schedule, to how child support will be paid, as well as a dozen other smaller details that are unique to the case such as, who picks the children up from soccer practice on Wednesdays, or who pays the car lease for the next three months. It’s all in the agreement; the same agreement the client now says he or she has not read since leaving court.

As attorneys, we understand why clients don’t read orders and agreements after leaving court. Litigation is stressful and exhausting. Negotiations often include hard compromises that disappoint or frustrate clients. Re-reading an agreement can trigger feelings of anxiety or panic. And yet, it must be done.

How Hand-Written Agreements Become Orders: Court-House Stipulations

When parties to a divorce or other family law case reach an agreement, their attorneys prepare a written stipulation capturing all the elements of the agreement. Attorneys for divorce litigants can often prepare stipulations by exchanging electronic versions of a draft agreement from the comfort of their respective offices, but that is not always the final agreement, and the end product may be filled with hand-written additions or deletions. Family law is uniquely different from other forms of law in that stipulations often consist of hand-written documents that are prepared by the attorneys in court, on the same day the parties are called for one reason or another.

Hand-written stipulations are a function of necessity and compromise at the temporary orders stage of family law cases. Family law cases can move extremely quickly, and major decisions about child custody and financial issues are often put before a judge weeks (or days) after a complaint is filed, with one party filing a motion for temporary orders. There is often no time for attorneys to exchange type-written proposals in advance of a motion hearing. The result is hand-written stipulations that are negotiated under pressure, at the court house, where parties decide to compromise. The alternative to compromise, the parties learn from their attorneys, is to take their chances with an overburdened judge who will hear 50 motions that day, and who will decide hugely important issues for the clients after just 10 minutes or less of argument from the attorneys.  (Note, it is not the judge’s fault that Massachusetts chooses not to adequately fund or staff probate and family courts, which have ten times the case-load of better funded Superior Courts.)

If the parties can reach an agreement and draft a stipulation, they avoid a contested hearing before the judge. The hand-written stipulation is submitted to the Probate and Family Court judge, who incorporates the agreement into an Order or Judgment. The agreement, negotiated between the parties and their attorneys in the hallway of the courthouse, has transformed into a court order, backed by the full power and authority of the Probate and Family Court judge.

The hearing to enter the stipulation as an order is usually short. Unlike the judge’s colloquy that precedes the entry of a full Separation Agreement as a Judgment of Divorce, a judge at temporary order hearings will simply ask the parties: “Did you read the agreement? Do you understand it?  And will you comply with is terms?”

After both parties say “yes”, the hearing ends and the terms of the stipulation become a Temporary Order.

What is an Order that Incorporates a Stipulation? It’s just an Order.

A court order represents law that is specific to a particular case and set of parties. What the order says is the law, at least as far as the parties go. The fact that the parties negotiated the terms of the agreement themselves does not negate the enforceability of an order once the agreement has been incorporated. Indeed, many Probate and Family Court judges believe that parties who voluntarily sign a stipulation have an especially high burden to comply with its terms – terms chosen by the very parties themselves. Why agree to the terms if you have no intention to abide by them?

After the short hearing to enter the stipulated agreement as an order, the parties typically leave the courthouse with a photocopy of the stipulation that was reached. An official copy from the court will soon follow in the mail. After a long negotiation, parties who leave the courthouse with an order are often exhausted and perhaps even traumatized by the stress of the process. The client may think: What a relief that’s done! Now I can stop thinking about the case, at least for a little while. Unfortunately, things are rarely that simple, though.

The Order is not just a piece of paper that proves the parties went to court; nor is it a general guideline for how the parties will deal with financial and child-related issues. The Order is a roadmap that dictates exactly how the parties must conduct themselves moving forward. A court Order is tantamount to a mandatory “to do” list. A party has the duty to read the Order, understand it, and abide by it. A court order is just that, an Order. It must be followed, to the letter, at all times.

Once the parties leave the courthouse, they cannot simply check-out. The parties have quite literally been ordered to do things. For a party to ensure that they are complying with the Order, the first thing “to do” is review the Order – really read it, and understand it. The parties must then start making note of any tasks and/or deadlines that are required to be met. Parties who fail to read their orders often find themselves before the Court answering a Complaint for Contempt.

The Typical Temporary Order in Probate and Family Court

For the sake of clarity, let’s review a fictional example of a Temporary Order that was reached by agreement of the parties and incorporated into an Order of the Court in the hypothetical divorces of Jane Doe v. John Doe.

Jane and John were married in 2005 and have 2 children together, Jason (12) and Julie (10).  John works as a veterinarian and Jane is a stay-at-home mother and homemaker. Jane filed for Divorce on the grounds of Irretrievable Breakdown.

After filing the Complaint for Divorce and serving the complaint and summons on John, Jane’s attorney files a Motion for Temporary Orders, seeking orders that would stay in effect during the pendency of the divorce. Jane requests physical custody of the children; child support; and temporary alimony. She also requests the keys to a safe deposit box at Mutual Bank, and that John name her as beneficiary on his life insurance policy.

Jane and John, appear in court along with their attorneys on the day of the hearing and negotiate an agreement with the assistance of the probate and family court probation department. Their agreement reads as follows:

Jane Doe, Plaintiff

v.

John Doe, Defendant

It is hereby agreed by the parties that the following stipulation shall be made an Order of this Court pursuant to the Complaint for Divorce filed December 29, 2016.

  1. The parties agree to share legal custody of the parties’ minor children, Jason and Julie, with Mother to have primary physical custody of the children.
  2. Father shall have parenting time with the children every Wednesday afternoon starting at 3:00 pm and ending at 8:00 pm, and alternating weekends starting Friday at 3:00 pm and ending Sunday at 8:00 pm.
  3. Beginning the Friday after this stipulation is signed, and continuing each and every Friday thereafter, Father shall pay the sum of $400.00 per week as child support directly to Mother by check or money order.
  4. Beginning the Friday after this stipulation is signed, and continuing each and every Friday thereafter, Father shall pay the sum of $200.00 per week as temporary alimony directly to the Mother by check or money.
  5. Father shall deliver keys to the safe deposit box held in the parties’ names at Mutual Bank to Mother no later than January 1, 2017.
  6. Father shall name Mother as beneficiary of his life insurance policy in the amount of $100,000.00 no later than January 1, 2017.
  7. Mother shall name Father as beneficiary of her life insurance policy in the amount of $100,000.00 no later than January 1, 2017.
  8. Mother shall turn over all jewelry inherited from Father’s grandmother no later than January 1, 2017.
How is a Stipulation for Temporary Orders Born?

The agreement above took hours to negotiate and included provisions that were not requested in the initial Motion filed by Jane.

By the time the judge enters the agreement as an Order, Jane and John are exhausted and would like to forget the whole day.  Unfortunately, this is not an option.  There are things that each must do, per the Order of the Court.

  • John MUST begin making support payments to Jane every Friday.
  • John and Jane, both, MUST update their life insurance beneficiary designations by January 1st.
  • Jane MUST turn over all jewelry inherited from John’s grandmother by January 1st.

If either of the parties misses compliance with any of these provisions, he or she could face a Complaint for Contempt. This includes the possibility of having to also pay for the other party’s legal fees and costs.  Even if they did not comply with the Order due to an oversight (i.e., accidentally failed to comply), they have still breached an Order and could face legal consequences.  Here’s an example:

Jane leaves the courthouse remembering only the provisions in her original Motion for Temporary Orders (what she asked for). The Motion did not include her naming John as a beneficiary on her life insurance policy and did not require her to turn over jewelry to John. Jane forgets to give John his grandmother’s jewelry before January 1, and does not designate John as beneficiary to $100,000.00 of her life insurance policy.

On January 2, John asks Jane for proof of the beneficiary designation and his grandmother’s jewelry, which was due to him the day before.  Jane has forgotten. She does not give John the jewelry, nor did she make him the beneficiary of her life insurance policy.

John files a Complaint for Contempt.  At the Contempt hearing, Jane is found in Contempt and ordered to comply with the Order AND to pay John’s legal fees and costs.

It is important for parties to recognize that the obligation to comply with a Court Order is their responsibility alone. The opposing party has no obligation to remind them of their duties. The Order also doesn’t require a party’s lawyer to complete the required task for their client or send them a reminder notice of relevant dates. The parties must comply with the terms themselves.

Parties should best protect themselves by taking the following steps as soon as possible after an Order is issued:

  1. Re-read your Order word-for-word;
  2. Make sure you understand what you are required to do (if you don’t understand, ask your attorney to review it with you and explain it to you);
  3. Mark your Calendar with the dates you must complete certain tasks by; and
  4. Do what you are ORDERED to do.

Remember: it is the parties who are bound by the Order, not their attorneys.

About the Author: Carmela M. Miraglia is a Massachusetts family law attorney for Lynch & Owens, with offices in Hingham, Massachusetts and East Sandwich, Massachusetts. She is also a mediator for South Shore Divorce Mediation.

Schedule a free consultation with Carmela M. Miraglia today at (781) 741-5000 or send her an email: [contact-form-7] Disclaimer

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The post Carefully Read Your Court Order, and Other Lessons Learned in Family Law appeared first on Lynch & Owens.

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Nicole K. Levy comments on reports that Republican tax bill would eliminate state and federal alimony tax deductions.

Attorney Nicole K. Levy

CNN is reporting that the Republican tax plan that is currently being debated on Capital Hill includes a provision that would kill the federal income tax deduction for alimony. Because the deductibility of alimony in Massachusetts arises out of alimony’s deductibility under the federal tax code, it appears possible that eliminating the federal deduction would also eliminate the state tax deduction for alimony paid. Notably, the GOP plan would not affect the tax deductibility of existing alimony orders; only new alimony orders would lose deductibility under the plan.

CNN Money reports:

The legislation, which was made public Thursday, would eliminate the tax deduction that divorcees receive on their payments to ex-spouses.

These payments, typically codified in the terms of a divorce settlement, are different than child support and are usually referred to as alimony or spousal support.

If the GOP tax bill passes as written, the change would affect divorces carried out after December 31. So it wouldn’t affect anyone already paying alimony.

Lawyers say it would have a big impact on how divorce proceedings play out.

Seismic Shift if Alimony No Longer Tax Deductable

Needless to say, the elimination of tax deductible alimony would drastically change the family law landscape in Massachusetts. Alimony itself would continue to exist, but a statute like the Alimony Reform Act (ARA), which caps alimony at 35% of the difference between the spouses’ respective incomes, would need to re-written to account for the change in tax treatment.

Why the Alimony Tax Deduction Matters

The tax deduction has always represented a “silver lining” for alimony payors, since it allows tax paying responsibility to shift from the higher-earning spouse – who is typically in a higher tax bracket – to the lower earning spouse.  Because the alimony recipient must pay taxes on alimony received, the alimony deduction has generally been regarded as less of a “loophole” than other tax breaks. However, there is no question that the shift in tax-paying responsibility from a spouse in a higher tax bracket to the spouse in the lower tax bracket does result in reduced revenue for the government overall.

What Would the Impact Be of the Elimination of Tax Deductibility for Alimony

Eliminating the alimony tax deduction would eliminate one of the few incentives that exists for higher-earning spouses to agree to pay alimony. Alimony is already widely recognized as the most contentious issue in many divorces, and eliminating the tax break will make an already bitter pill even harder to swallow for payors.

It should be noted that CNN’s expert, Attorney Malcolm Taub, told CNN that “[t]he vast majority of divorce settlements include some sort of spousal payment provision.” While this is technically true, it is somewhat misleading. While most divorce agreement mention alimony, only a fraction of divorce cases include an actual alimony order. (The majority of divorce agreements simply note that neither party is paying alimony.) It is doubtful that Taub meant to conflate the inclusion of a spousal support provision with actual alimony orders.

Red vs. Blue State Politics a Factor in Elimination of Alimony Deduction?

Although most states have some form of alimony on the books, a quick survey of the internet suggests in very general terms (and with several exceptions) that more alimony is paid in blue states versus red.  Several reviews of the GOP tax plan suggest that the elimination of tax deductions under the plan would negatively impact blue states while benefiting red states. Obviously, the exact financial impact of eliminating the alimony deduction would be difficult to calculate, but in general, it appears that the change would increase the tax burden in blue states, where alimony is generally more common.

Try the Lynch & Owens Massachusetts Alimony Calculator

Think you have an alimony case in Massachusetts? Estimate the amount and duration of alimony in your case with the Lynch & Owens Massachusetts Alimony Calculator:

About the Author: Nicole K. Levy is a Massachusetts divorce lawyer and family law attorney for Lynch & Owens, located in Hingham, Massachusetts.

Nicole K. Levy, Massachusetts Divorce & Family Law Attorney - YouTube

Schedule a free consultation with Nicole K. Levy today at (781) 741-5000 or send her an email: [contact-form-7] Disclaimer

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The post Republican Tax Bill Would Eliminate Alimony Tax Deduction Nationwide and in Massachusetts appeared first on Lynch & Owens.

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Massachusetts Divorce Lawyer (and Mediator) Carmela M. Miraglia compares mediation with divorce.

Carmela M. Miraglia

Through Lynch & Owens, I offer potential divorce clients a free initial consultation. I do the same through South Shore Divorce Mediation. During these consults, I am frequently asked “what’s the difference between mediation and divorce?” The answer is always the same – mediation and divorce are not the same thing at all: divorce is a legal outcome – an end, if you will – and mediation is a means to that end. Mediation is one way to help parties reach the status or goal that we call divorce.

What potential clients do not realize is that what they’re really asking is: what’s the difference between mediating and litigating in a divorce?

Divorce is a Goal, Mediation is a Method

There are different ways to get a divorce, and mediation is one means to that end. As a mediator at South Shore Divorce Mediation, I help spouses who no longer want to be married reach resolution on the major issues in their divorce, such as parenting time, child support, alimony and/or the division of marital assets.

s a mediator, I am trained at assisting the parties in reaching agreement on major divorce-related issues and memorializing it for submission to the Probate & Family Court. But a mediator is a neutral professional who cannot advocate for either spouse. Unlike when I am acting as an attorney, I cannot defend or press for one party’s side as a mediator.

Litigation: Resolving Your Divorce Through the Court

Litigation, which is another avenue to divorce, means the spouses hire attorneys to navigate the divorce process by taking steps including filing Motions for Temporary Orders (to give the parties direction while the litigation process ensues); performing discovery (to ensure that both parties are fully aware of the financial situation of the marriage); and proposing agreements (which eventually become the final contract in the divorce). In litigation, the two sides negotiate, and, in situations where the parties have failed to reach an agreement on all issues, the lawyers will advocate for their respective clients by arguing points of law and the merits of the case to a judge, who will then make the final decisions for the parties.

Many people describe this as “letting the lawyers battle it out” which sometimes leads to the parties reaching a full separation agreement, a partial agreement with only one or two issues presented to the Judge for resolution. If no resolution can be reached, the case proceeds to trial, where the Judge will make the decisions for the parties’ futures.  As a practical aside, it is always better to walk into a courtroom knowing what you will walk out with.

How Are Mediation and Litigation Different?

The two big differences between mediation and litigation are the cost and advocacy. In a typical mediation, costs are generally lower, as the parties do a majority of the decision making and advise the mediator of their decisions which are then memorialized into the separation agreement. The mediator charges the parties hourly and the parties usually share the costs.

In a litigated divorce, both parties rely on the advocacy of their attorneys, at a cost borne by each spouse. The attorneys negotiate between themselves, relating the communications to the client, generally at a greater cost to the parties compared to mediation. If the case proceeds to trial, the cost could double or triple with the preparation that is required to bring a case before the Judge.

Not all divorces can be mediated, however. Mediation works best when the parties can work cooperatively toward a shared goal. If the spouses are diametrically opposed, the only option may be litigation and “letting the lawyers battle it out.”

About the Author: Carmela M. Miraglia is a Massachusetts family law attorney for Lynch & Owens, with offices in Hingham, Massachusetts and East Sandwich, Massachusetts. She is also a mediator for South Shore Divorce Mediation.

Schedule a free consultation with Carmela M. Miraglia today at (781) 741-5000 or send her an email: [contact-form-7] Disclaimer

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The post Ever Wonder, What’s the Difference Between Mediation and Divorce? appeared first on Lynch & Owens.

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Kimberley Keyes reviews a recent Appeals Court decision granting alimony to a former wife six years after her divorce, following the termination of child support.

Attorney Kimberley Keyes

Can the emancipation of a child and the resulting termination of child support trigger a material change in circumstances sufficient to justify an alimony award? A recently published decision from the Massachusetts Appeals Court suggests that it can.

In Flor v. Flor, the Appeals Court held that because the parties had expressly reserved the right to revisit future alimony in their separation agreement at the time of divorce, the former wife could seek alimony after child support ended following the emancipation of the parties’ children. The Court found that the decrease in the former wife’s income that resulted from the loss of child support constituted a “material change in circumstances” that warranted a modification in the judgement of divorce.

The resulting judgment of modification in Flor required the former husband to begin paying alimony to the former wife more than six years after the divorce. Moreover, because the parties were divorced before 2012, the former husband was subject to a so-called “lifetime alimony” order, meaning his alimony obligation to the former wife will be indefinite in nature.

The decision was consistent with an unpublished Appeals Court that we blogged about last year. In her blog on that case, Attorney Levy wrote:

This case serves as an example of what can occur years after a divorce. Children becoming emancipating or the enactment of the Alimony Reform Act does not bar litigants from returning to the court to revisit support issues. Where the courts continue to debate which areas of the Alimony Reform Act will apply prospectively, and which will apply retrospectively, I anticipate that the issue of when alimony should begin (or end) will continue to be a pressing concern.

Wife Reserved General Right to Seek Future Alimony in Separation Agreement

The parties were married in 1984 and had one child, a daughter, born in 1993. The husband was the primary breadwinner during the marriage, while the wife was the primary homemaker and caregiver to the child. By the time the parties divorced in 2008, the wife had not worked outside the home in eight years. By the time she filed her complaint for modification seeking alimony in 2016, the now former wife had not worked outside the home in 15 years.

The Probate and Family Court issued a Judgment of Divorce Nisi in 2008, incorporating a separation agreement of the parties.  The agreement provided that the husband would pay child support to the wife until their daughter was emancipated, which would occur at the latest when she turned 23.  The agreement further provided that the wife waived any claims to past and present alimony, but did not waive “her rights to future alimony and/or support.”

Termination of Child Support Paves Way for New Alimony Order

In 2015, as their daughter’s 23rd birthday was approaching, the wife filed a complaint for modification of the divorce judgment. The husband moved for summary judgment, which the court denied because there was a genuine issue of material fact as to whether a material change in circumstances had occurred (the standard for granting a modification of a divorce judgment). The case ultimately proceeded to trial in the Berkshire Probate and Family Court, where it was heard by Hon. Richard A. Simons, who entered his decision in the spring of 2015.

The wife was 56 and the husband was 59 at the time of trial.  The judge found that after the divorce, the wife made a conscious choice not to work outside the home; made “minimal efforts” to find employment, that she was “ambivalent” about finding a job, and that her lack of motivation was the only thing keeping her from working “in some capacity.”  As a result, the trial judge attributed income to the wife based on a full-time minimum wage job.  Even still, he found that she would be unable to meet her then-current needs without alimony from the husband, who had the ability to pay.

The judge ruled that the child’s imminent emancipation and simultaneous termination of child support from the husband “constituted a material change in circumstances that authorized him to consider whether an order for general term alimony was appropriate.”  The judge concluded that an alimony award was appropriate, based largely on his findings “that the husband’s expenses had decreased, the wife’s expenses had increased, and the husband’s total financial circumstances were far superior to the wife’s.”  The court ordered the husband to pay $145 per week in general term alimony to the wife for an indefinite period of time.

Reserving the Right to Revisit Alimony Acknowledges that Emancipation Changes the Financial Circumstances of the Parent Receiving Child Support

On appeal, the husband argued:

[T]he emancipation of the couple’s only child could not serve as the basis for a determination that there had been a material change in circumstances because that event was anticipated by the parties when they entered their separation agreement. In particular, the husband maintain[ed] that Downey v. Downey, 55 Mass. App. Ct. 812 (2002), holds that a party in the position of the wife has the right to raise the issue of alimony at the time of a child’s emancipation only when that party explicitly reserved such a right in the separation agreement.

The court in Flor rejected that argument, pointing out:

[I]n Downey, we recognized that a general reservation of the right to revisit alimony, as in this case, ‘constitutes a tacit acknowledgement that the real financial circumstances of the wife could well change upon the child’s emancipation.’ This view is in keeping with the general rule that ‘[c]hanged circumstances are those that occur subsequent to the judgment of divorce or subsequent to a prior modification.’ (Internal citations omitted.)

Thus, the Court found that it was enough that the wife did not waive future alimony in the separation agreement. In other words, it wasn’t necessary for the agreement to explicitly state that the wife could receive alimony after child support ended. By simply leaving the option of future alimony open in the separation agreement, the wife did enough to reserve the right to seek alimony after child support ended.

Change in Circumstances Should Include Reference to Parties’ Income and Expenses

It is important to note that the Court did not endorse a bright line rule in which child support ending automatically results in a new alimony order. In a footnote, the Court made clear that it was the financial impact of child support ending – not the emancipation itself – that provided grounds for a new alimony order:

Contrary to the husband’s claim, this is not a case in which the judge made an order for alimony based simply on the fact that there was a cessation of child support. Here, the judge’s subsidiary findings that led to his conclusion that a material change in circumstances had occurred do not even mention the cessation of child support. Instead, they describe the changes in income, expenses, assets, and liabilities of each of the parties. The decision is not based solely on the emancipation of the child, but also on the factors that are appropriate to consider in making an award of general term alimony.

The holding suggests that if a party has reserved the right to seek alimony in the future, then the loss of child support that arises out of the emancipation of the children is valid grounds for seeking an alimony award on modification.  However, the decision includes cautionary language suggesting that the party seeking alimony should argue the change in circumstances broadly rather than pointing to emancipation alone. In other words, the loss of child support should be placed in in the context of the parties’ changed income and expenses at the time of the modification.

Recent Alimony Blogs by Lynch & Owens

We have blogged in the past about the end of child support being grounds for triggering alimony.  Also, a recent SJC case suggesting that the “need” of a party seeking alimony on modification should be limited to lifestyle actually enjoyed during the marriage now seems even more relevant for cases when the Court is entering the first alimony order many years after the divorce. Check out Attorney Owens’ blog on how the Flor decision resulted in a “lifetime alimony” order for the former husband more than six years after the divorce was finalized.

About the Author: Kimberley Keyes is a Massachusetts divorce lawyer and Massachusetts family law attorney for Lynch & Owens, located in Hingham, Massachusetts.

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The post End of Child Support is Grounds for New Alimony Order in MA Appeals Court Case appeared first on Lynch & Owens.

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Jason V. Owens reviews a recent Appeals Court decision that confirms that lifetime alimony is alive and well in Massachusetts for spouses divorced before 2012.

Attorney Jason V. Owens

In a recent decision, the Massachusetts Appeals Court held that a husband who was divorced in 2008 could be ordered to pay “lifetime alimony” to his former wife after his child support obligation ended. In the case, Flor v. Flor (2017), the Appeals Court not only allowed alimony payments to begin eight years after the divorce, but held that the husband’s alimony obligation would be “indefinite” – i.e. so-called lifetime alimony. The entry of a lifetime alimony order against the husband in Flor stands in stark contrast with the terms of the Massachusetts Alimony Reform Act, which restricts the length of alimony in new divorces to the federal retirement age of the alimony payor.

Why the Flor Decision Matters: When Child Support Ends, Lifetime Alimony Starts for Some Former Spouses

The Flor decision is not complicated. The case stands for two basic propositions:

  1. After a divorce, when child support ends, alimony can start. When child support ends due to the emancipation of the children, the child support recipient may file a Complaint for Modification seeking a new alimony order from the Court. The basis of the Complaint is largely (although not exclusively) based on the recipient’s loss of income due to child support ending.  The Flor decision suggests that many plaintiffs who seek to replace lost child support with a new alimony order will succeed.
  2. For Pre-2012 divorces, a “lifetime alimony” award may start after child support ends. It bears repeating that a new “lifetime alimony” can only occur if the divorce entered before 2012 and followed a marriage of at least 20 years.

We will explore Point #1 (alimony starting after child support ends) in a separate blog. The focus of this blog is how Flor provides for the entry of a lifetime alimony award that can start many years after the parties were divorced.

Lifetime Alimony: Alive and Well in Massachusetts for Pre-2012 Divorcees

The Alimony Reform Act (ARA) provides that the presumptive termination date (i.e. alimony will end) when an alimony payor reaches federal retirement age, which is currently 66 years old. However, as I discuss in more detail below, the rule is different for alimony-paying individuals who were (a.) divorced before Mach 1, 2012 and (b.) were married more than 20 years.  For these pre-2012 cases, the old “lifetime alimony” rule remains in effect.

(To be clear, the old “lifetime alimony” rule did not mandate the absolute payment of alimony until the payor’s death. However, without any clear trigger to end alimony, the net result under the rule is that many alimony payors continue paying alimony until death. The new rule under the ARA also is not absolute. A former spouse can ask a court to extend alimony beyond the alimony payor’s retirement age in narrow circumstances.)

From 2011 to early 2015, lifetime alimony appeared destined for the dust bin of history in Massachusetts. The ARA passed in 2011, taking effect on March 1, 2012. The ARA limited alimony in a variety of ways, but in the context of this blog, the most important feature of the ARA was that it included a presumptive termination date for all Massachusetts alimony orders to end when the alimony-paying party reached federal retirement age. The ARA included exceptions to the retirement cut-off rule, but the burden fell on the receiving party to prove that alimony should continue past the paying party’s retirement date.

Upon becoming effective, judges across Massachusetts applied the ARA’s retirement provision with near uniformity. When alimony payors became eligible for Medicare, their alimony obligations ended. This was true in nearly all cases, regardless of when the parities were divorced.

The Chin Legacy: How the SJC Resurrected Lifetime Alimony

On January 30, 2015, the Massachusetts Supreme Judicial Court (“SJC”) revived lifetime alimony in Massachusetts. Despite nearly all Massachusetts Probate and Family Court judges interpreting the ARA to require the termination of alimony when the payor reached retirement, the SJC entered a series of three controversial decisions that eviscerated a core part of the ARA.  The three decisions – Chin v. MerriotDoktor v. Doktor; and Rodman v. Rodman – were all decided on January 30, 2015.

The Chin, Doktor and Rodman decisions – all written by the now-retired Justice Fernande R.V. Duffly – make for dense, difficult reading. The impact of the decisions was monumental, however. The decisions held that the provisions of the ARA calling for the elimination of alimony when the payor reaches retirement age (or if the recipient begins cohabitating with a new partner) would no longer apply to any long-term marriage that ended in divorce before March 1, 2012 (i.e. the ARA’s effective date).

In short, the SJC’s 2015 decisions restored lifetime alimony in Massachusetts. The resulting backlash has spurred several years of furious lobbying for a legislative fix on Beacon Hill, but so far, lifetime alimony survives in Massachusetts for individuals who were (a.) divorced before 2012 after (b.) being married at least 20 years.

What Types of Cases Are Affected by the Flor Decision

The Flor decision is narrow enough that it will not affect many pre-2012 cases. However, the criteria are not particularly rare either. Flor is likely to impact cases with the following attributes:

  1. The parties were divorced before March 1, 2012.
  2. The parties were married for at least 20 years before the divorce.
  3. At the time of the divorce, child support was being paid.
  4. The parties’ divorce agreement did not include a waiver of future alimony.
  5. At the time of emancipation, one party continues to earn more than the other.

The presence of these 5 factors does not guarantee that a lifetime alimony order will enter after child support concludes. There are a variety of defenses and arguments against the entry of a new alimony order, and the burden rests with the recipient former spouse to file a Complaint for Modification seeking alimony after child support ends.

Make no mistake about it, however. Child support-paying parents who fit the 5 criteria above have reason to be worried, while child support-receiving parents in the same scenario have reason to investigate a modification.

A Changed Landscape: How the ARA Has Changed Alimony Law in Massachusetts since 2011

To close this blog, I want to note one underrated aspect of Flor and decisions like it, which is this: when the ARA passed in 2011, the law changed the meaning of existing divorce agreements. Here is what I mean. In 2008, the husband in Flor negotiated and entered a final separation agreement that left open the possibility that the wife could seek future alimony. Back in 2008, leaving the possibility of future alimony open was a relatively low risk gamble. Under the Massachusetts alimony framework in place back in 2008, the wife would have had a difficult (although not impossible) time filing a Complaint for Modification seeking alimony nearly a decade after divorce, following the children’s emancipation.

The ARA changed the meaning of future alimony waivers in a way that neither the husband nor his attorney could have foreseen back in 2008. Today, the ARA specifically dictates the duration of alimony based on factors such as the length of the marriage. For example, if two parties are married for 19 years, the ARA now provides that alimony will have a duration of 15.4 years. Accordingly, if a former spouse receives 7 years’ of child support after a 19-year marriage, he or she has a strong argument for asking the Court to enter an alimony order for the remainder of the 15.4 years of alimony that he or she was eligible for under the ARA.

The ARA Made Complaints for Modification Seeking Alimony After a Divorce Easier

In short, the ARA has imposed structure over the duration of alimony in Massachusetts that was previously absent. Back in 2008, the law surrounding alimony was vague. Just because a spouse reserved the right to future alimony back in 2008 didn’t mean that spouse was likely to receive future alimony under the old Massachusetts scheme. The structure imposed by the ARA has changed how modifications seeking future alimony operate. What was difficult in 2008 (i.e. seeking future alimony) has become more achievable today.

Despite placing limits on alimony in general, the ARA actually makes it easier for many former spouses to return to Court seeking alimony through a Complaint for Modification, long after a divorce. For individuals who were married for more than 20 years, and were divorced before 2012, the Flor decision amplifies the reality by not only imposing a new alimony order long after the divorce was complete, but imposing a lifetime alimony order.

Jason V. Owens, Massachusetts Divorce & Family Law Attorney - YouTube

About the Author: Jason V. Owens is a Massachusetts divorce lawyer and Massachusetts family law attorney for Lynch & Owens, located in Hingham, Massachusetts.

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Think you have an alimony case in Massachusetts? Estimate the amount and duration of alimony in your case with the Lynch & Owens Massachusetts Alimony Calculator:

Schedule a free consultation with Jason V. Owens today at (781) 741-5000 or send him an email: [contact-form-7] Disclaimer

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The post MA Appeals Court: When Child Support Ends, a Lifetime of Alimony (for Some) Begins appeared first on Lynch & Owens.

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Nicole K. Levy reviews an SJC decision limiting Massachusetts alimony to the lifestyle enjoyed by spouses during the marriage.

Attorney Nicole K. Levy

In a recent case, Young v. Young (2017) the Massachusetts Supreme Judicial Court (“SJC”) held that the amount of alimony a former spouse receives should be based on the lifestyle enjoyed by the spouse during the marriage. In a clear and well-reasoned opinion, Chief Justice Ralph D. Gants clarified multiple points of law about alimony in Massachusetts, including how to determine a former spouse’s need for alimony, whether alimony should increase after a divorce if the payor’s income increases, and when it may be appropriate for a judge to order alimony calculated as a percentage of the payor’s income.

SJC Delivers Clear and Decisive Opinion on Alimony Limits in MA

It’s no secret that this blog has occasionally criticized the SJC for issuing dense (some might say impenetrably dense) alimony decisions that have sometimes resulted in confusion and unpredictability for judges, attorneys and parties in Massachusetts probate and family courts. I am pleased to say that the Young decision suffers from none of these traits. The opinion is a remarkably clear and cogent exploration of several deceptively complex subjects. Chief Justice Gants sets down several clear markers for Massachusetts alimony practitioners to follow moving forward with an analysis supported by voluminous and well-selected citations.

As an attorney, I generally don’t pick sides when it comes to particular issues of law, including alimony. I represent spouses on both sides of the alimony docket. What I do cheer for, however, are well written appellate decisions that advance the law. That is what we have in Young v. Young. Regardless of how one feels about alimony in general, or the specific issues raised in this case, one cannot deny that a well-written decision merits recognition, regardless of the outcome it advocates. Bravo, Mr. Chief Justice.

The Marital Lifestyle vs. the Post Marital Lifestyle: How Much Alimony Should a Former Spouse Pay?

Rather than review the particular details of the trial court case, this blog will focus on capturing portions of the Young opinion that best articulate the issues reviewed in the case.  The decision begins with a clear and concise announcement of the Court’s rulings:

We conclude that, where the supporting spouse (here, the husband) has the ability to pay, the need for support of the recipient spouse (here, the wife) under general term alimony is the amount required to enable her to maintain the standard of living she had at the time of the separation leading to the divorce, not the amount required to enable her to maintain the standard of living she would have had in the future if the couple had not divorced. We also conclude that, although there might be circumstances where it is reasonable and fair to award a percentage of the supporting spouse’s income as general term alimony to the recipient spouse, those circumstances are not present in this case.

From this summary, we can understand that there were two issues in the case. The first question centers on whether former spouse’s “need” for alimony should be limited to maintaining her lifestyle during the marriage, or whether courts should base future alimony on the lifestyle a spouse would have enjoyed if the parties stayed married. This question is particularly relevant in cases in which the paying spouse’s income increases after the divorce. The question being: if an alimony-paying spouse’s income doubles after the divorce, should the former spouse’s alimony also increase?

Back in March, Attorney Owens previewed the Young decision by focusing on the second issue, so called “self-modifying” alimony order:

Young appears to [focus] on when courts may enter variable or self-adjusting alimony orders when the obligor’s income arises out of bonuses, commission or equity compensation, such as stock options or RSUs.

The question here is whether a judge can enter an alimony order in which the amount of alimony is calculated each year as a percentage of the payor’s income. Although we see these provisions quite commonly in negotiated Separation Agreements, the SJC and Appeals Court have historically disfavored judges entering “self-adjusting” orders after trial because such orders cause alimony to automatically increase without considering the alimony recipient’s need. While the Courts have conceded that self-modifying alimony orders may be appropriate in very specific cases, the clear message has been that judges should stick to alimony orders based on fixed weekly or monthly payments that do not automatically increase or decrease based on the paying spouse’s future earnings.

In Young, the SJC reaffirms the dislike for self-modifying alimony orders. More importantly, the decision adds clarity to the law by reviewing the narrow circumstances in which such a self-adjusting alimony order might be appropriate. This added clarity will aid attorneys and judges by limiting the grounds on which self-modifying alimony orders may be sought.

Why Alimony “Need” Matters Under the Alimony Reform Act

The Massachusetts Alimony Reform Act (ARA) is perhaps best known for its “formula”. The ARA presumptively caps alimony awards at 30 to 35% of the difference between the parties’ incomes. Thus, if the paying spouse earns $100,000 per year and the receiving spouse earns $0 per year, the ARA caps the amount of alimony the recipient may receive at $35,000.

However, the ARA is more than just a formula. Under Ch. 208, s. 53, the Act reads as follows:

[T]he amount of alimony should generally not exceed the recipient’s need or 30 to 35 per cent of the difference between the parties’ gross incomes established at the time of the order being issued. (Emphasis added.)

The “or” is critical here. In setting alimony under the ARA, the amount of alimony is limited in two ways. First, the recipient’s need for alimony. Second, by the 30-35% cap. What is especially important to understand is that the concept of “need” for alimony predates the ARA for several decades. In other words, there are at least a dozen Massachusetts appellate decisions from the last twenty years defining “need” in the alimony context.

In practice, Massachusetts judges do not robotically calculate alimony using the 30-35% formula presented by the ARA. The requirement that a party prove his or her “need” for alimony is very real, and it is quite common for Massachusetts judges to set alimony considerably lower than the 35% of the difference between the parties’ incomes because the recipient fails to prove that he or she “needs” 35% of the payor’s gross income. (I place “need” in quotes to emphasis that in the alimony context, “need” has a very particular legal definition. If asked, most of us would say, “yes, of course I need an extra $25,000 per year.” Suffice it to say that defining “need” in the alimony context is a bit more complicated than this.)

“Need” Defined in Young: The Lifestyle at the Time of the Separation Leading to the Divorce

I will not bore you with a detailed review of all of the appellate decisions touching on the “need” for alimony in the last twenty years. What is important is that the Young decision offers us the clearest definition of “need” in the alimony context we could hope for. I will let the decision speak for itself:

Both the act and the case law interpret “need” in terms of the marital lifestyle the parties enjoyed during the marriage, as established by the judge at the time of the order being issued, in this case, the judgment of divorce. …. Here, given the husband’s substantial ability to pay, the determination of alimony rested solely on the wife’s needs, that is, the amount necessary to allow her to maintain the lifestyle she enjoyed prior to the termination of the marriage. Where, as here, the husband’s income grew considerably over the years and the marital lifestyle grew with it, the wife’s need for alimony reflects the need to enjoy the more expensive lifestyle she had grown accustomed to before the marriage ended.

Note the use of underline for the phrase “during the marriage” is not my addition; the extra emphasis is found in the opinion itself. We see immediately, that the Court is not defining the “need” for support in terms such as the need for food, water, housing, etc. Instead, the Court is focusing on the lifestyle enjoyed by the spouse during the marriage.  If the spouses’ lifestyles during the marriage included vacations, fancy cars and expensive meals, then such luxuries are part of the recipient’s “need” for alimony after a divorce.

The Interplay Between “Need” and the ARA’s 30-35% Cap

After defining “need” in terms of the lifestyle enjoyed during the marriage, the Young Court immediately moves to resolve the biggest problem with defining “need” in terms of maintaining the marital lifestyle. Here’s the problem: if a former spouse’s “need” for alimony means that he or she has the right to maintain the marital lifestyle after the divorce, how can we square this right with this with the 35% “cap” under the ARA, which gives one spouse 65% of the available income and the other spouse only 35% of the income. The Court skillfully sidesteps this paradox:

Where, as so often happens, the couple’s collective income is inadequate to allow both spouses to maintain the lifestyle they enjoyed during the marriage after their household is divided in two through divorce, “the recipient spouse ‘does not have an absolute right to live a lifestyle to which he or she has been accustomed in a marriage to the detriment of the provider spouse.'” … Instead, “[t]he judge must consider all the statutory factors and reach a fair balance of sacrifice between the former spouses when financial resources are inadequate to maintain the marital standard of living.” … The act presumptively provides that the “fair balance of sacrifice” means that the supporting spouse generally should not be required to pay more than thirty-five per cent of the difference between the parties’ gross incomes. [Internal citations omitted]

Why not split the payor’s income 50/50? The Court’s elegant explanation boils down to this: the ARA is a statute, and the statute is clear: alimony is capped at 35% of the payor’s income. Period. Thus, the alimony recipient’s right to maintain the lifestyle he or she enjoyed during the marriage is constrained by the ARA’s percentage cap.

After the Divorce: Should the Alimony Recipient Receive a Share of the Payor’s Increased Earnings After a Divorce?

The Young decision specifically addresses a question that has been troubling attorneys since the ARA becomes law. Namely, what happens if an alimony payor’s income dramatically increases after a divorce? Can the recipient file a Complaint for Modification and seek 30 to 35% of the additional income as alimony? The decision answers these questions as follows:

Even if the parties enjoyed an upwardly mobile lifestyle for the duration of their marriage, nothing in the language of the statute or our case law suggests that the recipient spouse is entitled, by way of alimony, to enjoy a lifestyle beyond what he or she experienced during the marriage.

In short, if a payor’s lifestyle increases beyond the lifestyle he or she enjoyed during the marriage, Young makes clear that a recipient is not entitled to enjoy this extra wealth through increased alimony. Interestingly, Young leaves a more subtle question unanswered: what happens if the 35% cap under the ARA prevents a former spouse from fully reaching the marital lifestyle that she enjoyed during the marriage? In this scenario, would the former spouse be entitled to an upward modification in alimony – in order to replicate the former marital lifestyle – if the payor’s income doubles?

One common sense interpretation of Young is that it limits future alimony to the “peak” earnings achieved during the marriage. In other words, no alimony should be paid from income earned by the payor that is over and above his or her top earnings from the marriage. I am not sure that Young says exactly this, but the broader principle is clear: a recipient is not entitled to share in a payor’s superior post-divorce lifestyle to the extent that the payor’s lifestyle is measurably better than the lifestyle he or she enjoyed during the marriage.

Self-Modifying Alimony Orders: Still Disfavored in Most Cases

In Young, the trial judge ordered the Husband to pay alimony to the Wife each year in the amount of thirty-three per cent of his annual gross income, which included base salary and annual bonus, as well as several of the additional components of the Husband’s compensation package. The judge found that the parties’ spending had increased on an upward trajectory throughout the marriage, consistent with the Husband’s ever-increasing income. The judge reasoned that the alimony order – which automatically increased with increases in the Husband’s income – should reflect the constantly improving lifestyle the parties enjoyed during the marriage.

The lower court judge’s reasoning was actually quite clever here. Previous appellate decisions had not fully defined the “lifestyle enjoyed during the marriage”, and the judge filled this gap by finding that the parties’ lifestyle was one of constantly increasing wealth and spending. If the Wife was entitled to alimony that allowed her to maintain the lifestyle she enjoyed during the marriage, the judge reasoned, then order for constantly increasingly alimony made sense.

The Young Court does not criticize the judge’s reasoning; the decision simply explains that the judge’s basis for entering a self-modifying alimony order was insufficiently persuasive where such “percentage-based” orders are generally disfavored.

The fluctuations in the husband’s income in this case do not present a comparable “special case” warranting the judge’s percentage-based formula for two reasons. First, given the substantial financial assets available to the husband, the fluctuations in his annual income do not materially affect his ability to pay a fixed alimony award that would meet the wife’s needs. Second, as earlier noted, the percentage-based formula was intended to allow the wife’s lifestyle to become more lavish than the marital lifestyle as the husband’s income increases over time, not to approximate over time the amount needed to meet the wife’s need to maintain her marital lifestyle. (Internal citations omitted.)

This is not the first time that the SJC and/or Appeals Court has rejected an automatically-adjusting alimony order entered by a lower court judge. Indeed, the reason these cases continue to arise is because the SJC and Appeals Court have consistently held that even while self-modifying alimony orders are “disfavored”, they may be appropriate in special cases. By leaving the door open in this way, the appellate cases have essentially invited lower court judges to try their hand at self-adjusting orders in cases the judge deems “special”.

What makes Young different from prior decisions is that the opinion offers an expansive review of when self-modifying alimony orders are mostly likely to be appropriate. This should significantly reduce the ambiguity surrounding when such order are (or are not) appropriate, resulting in fewer appeals in the future.

When Are Self-Adjusting Alimony Permissible in Massachusetts?

A complete review of the Court’s analysis of self-adjusting orders would mean reproducing the much of the opinion in this blog. (Readers with this level of curiosity should simply read the opinion itself.) Instead, I will highlight some of the of the Court’s analysis, with internal citations omitted:

We reject the argument, as we have before in a different context, that a judge lacks statutory authority to order a supporting spouse to pay alimony in an amount that may vary according to variables or contingencies set forth in the order, such as the income of the supporting spouse, the rate of inflation, or, where the spouses reside in different countries, changes in the currency exchange rate.

Translation: Judges do have the authority to enter self-modifying alimony orders in special cases.

We do not consider every change in the amount of payment under such an alimony order to be a modification of the judgment, which we recognize would require a showing “by the party favorably affected that conditions [have] changed justifying the modification, and . . . procedural due process for the party adversely affected.”

Translation: Not every self-executing change in alimony amounts to a “modification” of the alimony order.

[T]he fact that the statute does not bar alimony orders with variable or contingent provisions does not mean that such orders are “advisable on the merits, or compatible with the fundamental purposes of alimony.” Here, the percentage-based award ran afoul of the act and therefore was an abuse of discretion not because of its variable nature, but because it was intended to award the wife an amount of alimony that exceeds her need to maintain the lifestyle she enjoyed during the marriage.

Translation: Although self-modifying orders are sometimes acceptable, the reason for the order in this case was not acceptable. The Wife’s “need” was limited to the lifestyle she enjoyed during the marriage, and she wasn’t entitled to a share of future improvements in the Husband’s lifestyle through a variable order.

There may be cases in which a variable or contingent award is warranted, but such cases are the exception rather than the rule, and must be justified by the special circumstances of the case. In most cases, setting the amount of alimony at a fixed amount, subject to modification upon a material change in circumstances, is preferable in order to provide “a clean break between the parties” and avoid “continued strife and uncertainty”.

Translation: To justify a self-adjusting order, a judge must provide special reasons that outweigh the problems inherent in such orders.

[V]ariable or contingent award may make alimony judgments more difficult to enforce, especially where the variable or contingency is inadequately defined or where it may not be clear whether the contingency has been triggered. … Awarding alimony as a percentage of income may encourage income manipulation in order to reduce the alimony obligation. Relatedly, where alimony is a percentage of income, proving contempt becomes more difficult because, instead of simply proving that payments have fallen short of a specified amount and that the supporting spouse had the ability to pay, the parties may be forced to litigate what is and is not “income.” … We note that the judge thought it necessary to appoint a special master, paid for by the parties, to ensure compliance “[d]ue to the complicated nature of . . . the ongoing obligations between the parties regarding the payment of alimony.” Not everyone can afford to pay a special master.

Translation: Attorneys seeking self-adjusting orders should address these problems and explain why a self-adjusting order is the best solution despite the concerns inherent in such orders.

We do not suggest that variable or contingent awards are warranted only in extraordinary circumstances. We recognize that returning to court to modify a judgment may be an unnecessary and costly burden where it is based on a foreseeable change of circumstances that can be anticipated in the alimony judgment.

Translation: The Court is not suggesting that self-adjusting orders are impossible to obtain; they are just the exception to the usual rule.

For instance, where the inflation rate is significant, a cost-of-living..

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