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Divorce Mediation Blog

Much Ado About Double Counting: Massachusetts Alimony and Child Support - Part 3

Wednesday, May 21, 2014

Previously, we blogged (December 4th and December 11th, 2013) about controversy regarding the interaction between the 2013 Child Support Guidelines (CSG) and M.G.L., chapter 208, section 53(c)(2). Specifically, we explored conflict that appear in applying statutory exclusion of income that has already been used to calculate child support to calculate income for alimony purposes, in tandem with the CSG provision that permits a judge to calculate alimony first, and then child support. In Part 2, we reviewed competing arguments and concluded the conflict is not fatal, and that as divorce mediators, we see the silver lining of a conflict that broadens our clients’ discussion and encourages them to examine the economics and efficiency of their support arrangement more openly and carefully.

We were gratified when reader (we are always glad to hear about readers) and Falmouth Mediation’s, Alan Jacobs, phoned in a fact pattern that that he recently encountered, that resonated with our March 11th entry. With Alan’s permission, we relate the facts, slightly obscured for confidentiality reasons.

After 23 years of marriage a primary care parent earns $225,000.00 per year. A partially disabled non-custodial parent earns $25,000.00 per year. The parties have one child. By calculating the CSG first, the non-custodial parent is to pay $3,016.00 per year as child support. Since the aggregate family income is $250,000.00, the inquiry regarding alimony never occurs because of Section 53(c)(2).

Net result: the custodial parent has $225,000.00 of gross earnings plus $3,016.00 to support a two-person household; and the non-custodial parent lives on a gross $25,000.00 minus $3,016.00 of child support. After 23 years marriage and a disability-impacted income capacity, this literal application of the alimony statute results in an inequitable and unworkable result, in our view.

Alan felt the same way, and he wondered how the result would differ if support were determined, beginning with alimony. Using the .325 mid-range of Section 53(b) the custodial parent has an alimony obligation to the other spouse of $65,000.00 per year. By applying the resulting reallocated income figures ($90,000.00 and $160,000.00) to the CSG, the alimony recipient would pay primary care parent $14,040.00 of annualized child support.

Net result: the custodial parent has $160,000.00 of post-alimony gross earnings plus $14,040.00 of non-taxable child support for a two-person household; and the non-custodial parent lives on a gross $90,000.00 minus $14,040.00 of child support. Using estimated tax rates, the net income split is about $130,000.00 (71.5%) v. $52,000.00 (28.5%).

Which seems fairer to you?

As we said earlier, the CSG does not license confiscatory results, which may well result from application of vastly different income proportions to the alimony statute and child support rules; but don’t we need flexibility to achieve sensible results?

Thanks to Alan Jacobs for his thoughtful input.

 

Alimony: Double Dipping In a New Light?

Wednesday, September 11, 2013

Massachusetts appellate courts have long struggled with whether a “seeming[ly] unjust” double counting of income occurs when a trial judge divides property that includes a closely held business, values that business using an “income theory”, and then orders alimony to be paid from the same source. The cases boil down to a definite maybe, requiring a court to discern an unfair double dip from an acceptable one, including whether or not there are “separate parts” of the asset. A variety of circumstances could lead the fact-finder to different outcomes.

Now, alimony “reform” legislation (eff. 3/1/12) precludes the Court counting expected capital gains, interest or dividend income from any divided assets, as income for alimony computation. Does this settle the double dip question for all time and purposes? Is the judgmental task of fair or unfair double counting over?

We doubt that the business valuation question was squarely in mind of the legislators when they passed the alimony bill; but it seems inconceivable that the next time an appellate panel hears this issue that the business owner will not argue for a blanket exclusion of any business income for alimony computation purposes, citing the alimony statute. If the argument succeeds, and there is no other source of income to tap for the support of a dependent spouse, where does that leave the parties?

Settlement of one issue always seems to beget another.

 

Alimony Reform: One Year Later – Part 1

Wednesday, January 09, 2013

A year plus after the state legislature enacted and Governor Patrick signed the Massachusetts alimony overhaul, bar association groups have devoted many of their seminar offerings to retrospectives by Probate and Family Court judges about their experiences with the complex new law since its effective date of March 1, 2012. From what we are seeing and hearing from these programs, and from talking to lawyers constantly in our practice about their experiences, some trends seem to emerge.

  1. Judges, by and large, do not want to strictly enforce the presumption that alimony terminates at the full social security retirement age (usually 66-67 for the current divorcing population) of the payor if the parties have been married for a very long time and the recipient spouse has been out of the workforce for a long time, too. This is especially true if the judge is addressing the issue in a case when the divorce entered before the alimony reform legislation occurred and the parties are appearing in court on termination issues by complaint for modification; and particularly if the payor is continuing to work beyond “retirement age”.
  2. Judges seem to believe that the statute’s mandate not to apply income of the payor to alimony calculation after having already counted it in determining child support, does not require that they determine child support first, and alimony second. In some circumstances judges apply the child support guidelines to the first $250,000 of combined parental income and then implement the alimony statute on excess income only; while in others, judges feel free to determine alimony obligations first, and then look at child support contributions in light of resulting adjusted incomes.
  3. In cases where alimony would have been open-ended (and not bounded by the durational limits of the new alimony law) and where property would have been presumed to be split equally, judges are open to persuasion that the time limited alimony recipient, who does not have clear and obvious prospects of substantial self-support) may be entitled to something more than half of the assets.

A few more observations will follow in our next entry.

 



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