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Massachusetts Alimony and Child Support: Much Ado About Double Counting

Wednesday, December 04, 2013

Massachusetts alimony law and child support rules conflict. What's new about that?

As the state's matrimonial bench and bar grapple with the comprehensive spousal support overhaul (eff. 3/1/12), and the quadrennial review and revision of the Chief Justice of the Trial Court’s Child Support Guidelines (CSG) (eff. 8/1/13), a prominent conflict grabs much of the attention:

-- The CSG formula, old and new, requires that all family income equal to or less than $250,000.00 per year be considered a formulaic source of child support

-- The alimony statute says that once a dollar is subjected to child support treatment, it may not be counted again, as a source of alimony.

-- The new CSG say that a judge may calculate alimony first, and then apply the re-allocated family income shares to the formula for casting the presumptive minimum child support payment.

Did the Trial Court contradict the legislature? Probably, but to what effect?

In cases where family income is equal to or less than $250,000.00 per year, the alimony law suggests that there never be any alimony. This is because the CSG applies all of this income to its presumptive minimum child support payment. Since that income has already been subjected to CSG treatment, the alimony law precludes its second use, as a source of alimony. The result in higher income cases: a presumptive support sum that is paid in the most inefficient economic way possible, all non-taxable, non-deductible child support; and with 2013 reductions in most CSG amounts, this will challenge many payees.

Yet, CSG has long given courts leave to re-cast child support payment as taxable alimony or unallocated support, enhancing tax efficiency, so long as the payee's net economic benefit does not fall below that of a pure child support order. So, that is nothing new. What is new, is a tool that permits judges to assay alimony first, creating the potential for conflict.

There is no doubt that if a judge calculates general term alimony first, then uses the resulting income shares to run the CSG formula, a substantially higher payor support burden can result. It seems to be most dramatically true in cases of great income disparities. The results, if applied indiscriminately, can be fairly termed confiscatory. But, neither CSG nor alimony reform laws have repealed decades of case law that otherwise contours support law; nor does the CSG grant a judge leave to impose confiscatory orders.

To be sure, fear of irrational results in a court system where appeals of court orders are beyond practical utility for most people, is fueling this anxiety. But, there are some cases where flipping the order of alimony and child support calculations can result in a rational and more tax-efficient result. There is nothing in CSG that prevents a judge from determining alimony first, then applying the results to CSG and concluding, under the circumstances, that the minimum child support payment has been rebutted, reducing or eliminating non-taxable payments.

As divorce mediators, we are all about clients knowing and understanding the ramifications of what they are doing. The new CSG support what we have been doing right along: applying legal tools and economic analysis critically and with an eye towards getting to fair and tax-efficient results. As business valuation case law demonstrates, not all double counting is avoidable, let alone forbidden. If addressed uncritically, abuse can result. Isn't that the challenge?



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