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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.

 

Massachusetts Alimony and Child Support: Much Ado About Double Counting – Part 2

Wednesday, December 11, 2013

Previously, we blogged about the conflict between the Massachusetts alimony law and our Child Support Guidelines, and the now raging chicken-and-egg question: which is calculated first?

We attended three events in late 2013 where this was addressed: the MBA Family Law Conference Annual Conference, the Probate and Family Inn of Court November dinner meeting, and most recently, the Massachusetts Council on Family Mediation Institute on Nov. 22. What we know for sure is that judges and lawyers are debating two distinct views:

  • computing child support first (and in most cases eliminating alimony because there is less than $250,000.00 of annual family income to apply), and then alimony if any income remains from which child support has not already been taken; or
  • calculating alimony first, and applying the re-allocated income to the Child Support Guidelines formula, to determine the presumptive minimum child support sum.

As we have said here before, this conflict does not trouble us as divorce mediators, because the differing approaches encourage parties to look at a broader spectrum of possible results that meet their needs, and not simply flop into a formula. We believe that neither approach mandates a particular result or licenses abusive orders. To that, we might add that the generally reduced 2013 Child Support Guidelines amounts may compel a more flexible process to assist in finding a fair and sustainable result. Time and again, our mediation clients (all of whom have lawyers) have taught us that the truth often lies somewhere in between.

The arguments, essentially, are these:

Anti-Double Counting

  1. Statute trumps rule, therefore the alimony law’s ban on double counting of available dollars for two kinds of support negates the court’s discretion to follow the Child Support Guidelines’ permission to calculate alimony first; and that
  2. The Child Support Guidelines themselves define income by a laundry list that includes alimony from a prior spouse but does not mention alimony from a current one.

Pro-Double Counting

  1. The rules of bridge don’t apply because the double counting prohibition of the alimony law does not exist in the Child Support Guidelines, and sometimes it’s necessary and justifiable;
  2. The Child Support Guidelines’ definition of income is not exhaustive but is inclusive and expressly not limited to the laundry list provided; and that
  3. The 2013 Child Support Guidelines punish dependents by their reduced yield (except in very few, very low income cases).

It would be silly to deny that the alimony law and Child Support Guidelines conflict at some level; but, the conflict is not irreconcilable. As we blogged previously, the Child Support Guidelines don’t require that alimony be calculated first. They permit consideration of that approach. And, historic law of the purposes and parameters of “fair and equitable” support are not checked at the door of either construct. Considering alimony or child support first is a process, not a result. If one or the other view leads to an insufficient or a confiscatory result, the product of either is defective.

On the income definition side of the argument, it is true that the Child Support Guidelines expressly allow alimony received from a prior spouse to be tapped as a source of child support for a current child. Some argue that this means that alimony from a current spouse may not be used to fund child support, and that by computing alimony first, that is exactly what happens. To us, this seems circular.

Both alimony and child support are tools to re-allocate external income, such as wages,within the family. Until alimony has actually been ordered, there is no alimony income. Until child support is set, there is no child support. Therefore, when one is setting alimony and child support simultaneously, there can be no impermissible double count: there are merely two different ways to search for a sufficient and non-confiscatory order.

There is nothing in the alimony law that says that alimony must cover 30-35% of the difference in the spouses’ incomes. Alimony generally may not exceed that range. Similarly, the court is not required to apply the Child Support Guidelines resulting presumptive order. It may order less or more for good reasons. Taken together, the alimony law and the Child Support Guidelines can be used in tandem to fuel a process of inquiry that leads to a fair and tax-efficient result.

The legislature chose one way to address what they viewed as a potential for an impermissible double count. The Trial Court chose another for child support. Both bodies were authorized by law to act as they did. There’s no substitute for good lawyering, negotiating, mediating and judging. Default to formulas is easy and in many cases sufficient: not all by a long shot.

As we noted earlier, the new CSG include the Good, the Bad and the Huh? We don’t view this particular provision as fatal.

Of course, we reserve the right our change our minds!

 

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?

 

High-Low Agreements: Mitigating Finality Anxiety In Family Law Arbitration

Wednesday, September 18, 2013

One of the most prevalent fears that lawyers have in using divorce and other family law arbitration is that under the Massachusetts version of the Uniform Arbitration Act, the parties waive the right to appeal an adverse award for abuse of discretion or errors of law. This is largely true for property and alimony matters, less clearly so for custody and child support.

One way of cutting the sense of risk is to borrow a practice from the commercial litigation world, by entering to a high-low agreement. As examples only, the parties can agree that:

  1. The overall percentage division shall be no broader than 60-40.
  2. The value of the house will be no more than $750,000 and no less than $600,000.
  3. The alimony sum shall be no less than $30,000 and no more that $50,000; and it shall run for a minimum term of 60 months but not longer than 84 months.

The parties may disclose the agreement to the arbitrator or not, as they see fit.

In most cases most of the time, the parties can agree on a reasonable range of outcome but can’t zero in on a final result. Why give up an expedited, cost-effective, flexible and private remedy for fear of lost appellate rights, when a high-low understanding can essentially rule out any motivation to appeal in advance? The costs, delays and high bar for successful appeal make it impractical anyway for all but a very few people in an exceedingly small number of instances.

 

2013 Child Support Guidelines Preview Part 5: Slicing The Parenting Plan?

Wednesday, August 28, 2013

For as long as we can remember, child-support-payors-in-waiting, generally fathers, have pressed for greater time with their children at the risk of being accused of posturing for lower payment obligations. Primary caretakers, often mothers, face the opposite suspicion. Sometimes the charges are on-target, often not.

Lawyers, courts and divorce mediators alike have long struggled to convince people to think about parenting first, then consider the support obligations that should flow from a well-reasoned parenting plan. The initial Massachusetts Child Support Guidelines (CSG) supported the parenting-first approach, by not addressing – as some other states’ CSG had – child support as calibrated by hours of care.

The 2009 CSG premiered two steps in the opposite direction, yet both of them had logic, and perhaps addressed a need. First, CSG established that the presumption of minimum child support payments assumes that the recipient parent provides about 2/3 of parenting responsibilities, a proxy for “primary care”. Second, for cases of approximately equal time parental care, the 2009 CSG established another minimum child support presumption: by running the support formula twice, once as if each parent were the primary caretaker, subtracting the larger form the smaller sum and having the higher income party pay support to the other.

The two-thirds responsibility assumption was a helpful if imperfect measure of primary care. It provided some guidance, if not clarity. What does 2/3 of responsibility mean? Is it 2/3 of overnight periods? Two-thirds of hours of the 24-hour clock? Or, does it mean 2/3 of waking care time? The shared custody comparison had a simple appeal to it, and it gained great acceptance. Did courts and negotiators by and large accept this approach for cases with less than equal but substantially shared parenting time, such as plans in which one parent cared for children 8 out of 14 overnight periods? For the most part, yes, with some adjustments.

Now come the 2013 CSG. This year’s model perpetuates the 2/3 standard, but without any clarification: a missed opportunity; and one that is compounded as we describe below. It also keeps the 2009 approximately equal parenting model. But beyond that, 2013 CSG expands conscious parenting time calibration in two directions: a new provision for parenting plans with a parent assuming less than 1/3 of parenting responsibilities, and another for child support payors who assume more than a third but less than half of parenting responsibilities.

The first scenario (call it primary care plus) simply says that “the Court may consider an upward adjustment” of the minimum presumptive child support amount. Logical enough: if a payor is not providing a certain minimum assumed responsibility level and corresponding costs, a child support adjustment may be appropriate. But, how shall this be measured? And, without knowing what 2/3 care really means, how shall deviation from it be measured? The failure to clarify what 2/3 parenting means makes this discretionary adjustment murkier.

The second scenario (call it greater but not equal sharing) takes the opposite approach: it is way specific. This, time, CSG begins with the equal parenting approach of calculating child support twice, once as if each parent were the primary caretaker. Then, compare those two, subtract the smaller from the larger and call that the “shared custody” amount. Take the result of the primary care support calculation for the parent who actually will have more than half but less than 2/3 of parenting responsibilities, and average it with the shared parenting model. Confused?

Does it have an economic rationale? And, perhaps more importantly, have we now descended to the place that earlier CSG iterations avoided, by fueling parenting plan negotiations or litigations as shadow battles over which CSG category shall apply?

Is it primary care?

Primary care plus?

Greater but not equal shared parenting?

Equal parenting?

As Massachusetts divorce mediators, we worry that our state’s previously virtuous attempt at keeping clear the divide between child support and substantive co-parenting is eroded to the point of those other states that tie child support to parenting hours, but without their precision. Will this fuel greater suspicion about the desire for more time with kids, or a child-centered need for limits? Will it encourage bad faith parenting negotiations? We need to help parents succeed in spite of what some may perceive as perverse incentives in 2013 CSG.

 

2013 Child Support Guidelines Preview Part 4: Where’d It Go?

Wednesday, August 21, 2013

For the first time in the 3-decade history of Child Support Guidelines, the minimum presumptive amounts for payors with up to $250,000.00 of income is lower at many payor income levels. The Final Report of the Massachusetts Child Support Guidelines Quadrennial Review, of the 2012 Task Force, appointed by former Trial Court Chief Justice Robert M. Mulligan explains.

The report states the 2009 CSG amounts were “somewhat high, especially at middle-and-high income levels” (p. 52) as compared to cited economic studies, and to 5 neighboring states. The task force found that:

Relative to neighboring states, the 2009 Guidelines for more than one child are higher in most, but not all cases. (…) For three children, the 2009 Guidelines amounts are comparable to, or just higher than guidelines amounts in neighboring states in most, but not all, cases and likely not after accounting for the presence and handling of child care costs and health insurance.

None of the above comparisons account for the above average income and expenses in Massachusetts, especially the high costs of necessities such as housing, child care, food and health insurance costs experienced by Massachusetts families. From an economic perspective, Guidelines amounts that are higher than the benchmarks are appropriate due to overall higher incomes and child costs in Massachusetts. (p. 56) (emphasis supplied)

[Interestingly, the task force found significant differences in the child support rates in New England for multiple children. While the 2009 Massachusetts CSG inflated by 20% for a second child, Connecticut (34%) and New Hampshire (37%) weighted the second child more than we did, flattening the disparity overall. This resulted in the 2013 CSG increasing the “add-ons” for multiple children.]

Given that conclusion, what should we make of the general reduction in Massachusetts child support standards? The task force does not suggest that costs of living for families have reduced since 2009: it documents the opposite. Nor have these costs dropped relative to our neighbors. Child support payor interests pressing for reductions had representation on the task force that created the 2009 CSG, but did not in 2012. The task force reported no data about the affordability of 2009 CSG for payors or the existence of excess in the lives of recipients.

Child support payors and payees will naturally view these changes differently. For those with sufficient resources to make alimony an issue, the differences in 2013 CSG may well be mitigated by overall family support calculations. But for many other recipients, they may well see less child support than they might have earlier, or even find reductions coming their way in modification proceedings; while the payor’s load is a bit lighter.

As Massachusetts divorce mediators, we need to understand these changes and be prepared to explain them when pertinent, while dealing with disparate client reactions to the perceived fairness or unfairness of the ongoing evolution of child support.

 

Divorce Mediation Mentoring Opportunity: And Public Service, Too

Wednesday, July 31, 2013

Our friends at Mediation Works Incorporated (MWI) in Boston have partnered with the Probation Office of the Norfolk Probate and Family Court to match mediators who are seeking experience and mentorship with high quality and experienced mediators who are staff or other friends of the MWI. The Probate Court receives help in the form of mediated divorce, modification child support, child custody, parenting plan and never-married parent issues cases; and participants gain guidance and hands-on learning.

Josh Hoch is the program creator and MWI’s mediaton services director; and he welcomes inquiries. The link for those interested is www.mwi.org/divorce-mediation-opportunities-and-mentoring.html. Sign up for the program ends September 10th, and space is limited. As divorce mediators ourselves, wish MWI and the Court well in this excellent effort.

 

2013 Child Support Guidelines Preview Part 3: Whose Income is It, Anyway?

Wednesday, July 24, 2013

Since their 1987 inception, our Child Support Guidelines (CSG) scheme has confined its presumed “mandatory minimum” child support formula to family income falling within a fixed threshold. Initially, the annualized income limit was $75,000.00. Since 2009, it has been $250,000.00. The 2013 CSG do not change the threshold amount; but they do clarify a financially meaningful ambiguity: in two earner high-income families whose income comprises the first $250,000.00 and who’s the “excess”?

Historically, there were two common approaches: count the payor’s income first or apportion the parties’ joint income based on their percentage contribution to the whole income stream. Each created a different child support sum and its own version of excess income (income not absorbed by the presumed minimum child support but still available for alimony and/or additional child support with discretion unbridled by formula, and/or ancillary expense obligations such as medical, extra-curricular and education costs).

Here is an illustration, based on the following assumed facts: payor income of $300,000.00; and payee income of $50,000.00; and one child. For simplicity, without permitted medical insurance or childcare adjustments, the results are:

1. Count the payor’s income first:

Child support = $40,144.00 per year
Excess income = $50,000.00 for and each parent
Likely alimony = none.

2. Allocate the parties’ incomes:

Child support = $34,944.00 per year
Excess income = $85,000.00 payor; $15,000.00 payee
Likely alimony = $22,750.00

These two very different results illustrate a potential for inconsistent outcomes that are anathema to CSG, so the 2013 version settles the question: option 2 is now the rule. This resolution is conceptually consistent with the underlying “income shares” theory of CSG. It also has an economic effect on the parties. In this case, if the payee’s combined effective tax rate is 18% (which it would be assuming no other taxable income or itemized deductions), the net after tax yield is $18,655.00: a result of $53,599.00 of combined alimony and child support vs. $40,144.00 of child support alone.

So, what appears at first blush to be reduced child support is actually a 34 per cent increase in net-after tax total support. This increase might be tempered by shifting more ancillary child costs to the payee, but the differing outcomes are nonetheless stark. We wonder if this was an intentional effort to increase periodic family support payments in high-income cases (despite that many child support payments under 2013 CSG will be lower), or simply an effort to promote uniformity.


  1. Assuming application of CSG before the 2012 alimony law, and not the reverse, as is now permitted under 2013 CSG. See our last blog entry.
  2. The payor’s income is 86% (300/350) of the family’s income, so $215,000.00 ($250,000.00 x .86) of the payor’s income applies against the threshold; and $35,000.00 ($250,000.00 x .14), of the payee’s income comprises the rest.
  3. Using the .325 mid-point of the “general” alimony range.

 

2013 Child Support Guidelines Preview Part 2: Which Comes First? The Alimony or The Child Support?

Wednesday, July 17, 2013

In an earlier blog entry, we wondered about how various judges might apply what are arguably competing aspects of the presumptive formulae for alimony and child support. Since 2009, the Child Support Guidelines (CSG) have presumptively absorbed the first $250,000.00 of combined family income, while the Massachusetts alimony “reform” statute (eff. 3/1/12), forbids the use of dollars for alimony analysis, when they have already been exposed to CSG treatment. Since neither specifies which calculation comes first, which is the chicken and which the egg?

This is no idle wondering. Given the opposite tax impacts of alimony (taxable/deductible) and child support (not taxable/not deductible), the economic differences in the two approaches can be substantive, even substantial. We noted earlier that judges addressing lawyers’ groups about their own practices in this regard seemed open minded to hearing both sides of the equation. Meanwhile, as Greater Boston and Western Massachusetts divorce and family law mediators, we have been running the calculations both ways all along, not in an undereducated effort to mirror judicial thinking, but to help inform our clients of the differing possible economic outcomes, in seeking consensus on fair and tax-efficient family support arrangements.

The 2013 CSG resolves the question expressly, if not definitively. They state that neither approach is improper, and that under appropriate circumstances, judges may apply either approach. We applaud this approach as it maximizes flexibility, elevating inquiry and analysis over form, in the search for equity and efficiency.

 

Divorce Arbitration: Nine Reasons For a Family Law Arbitration Statute in Massachusetts

Wednesday, March 06, 2013

As discussed in earlier entries, we are advocate for the adoption of a comprehensive family law arbitration act, based on a model created by the American Academy of Matrimonial Lawyers, and customized locally by the AAML Massachusetts Chapter. Here are nine reasons that we believe would make such a new law beneficial.

  1. Parties would no longer seek the permission of a judge to arbitrate. Instead, they would present their negotiated agreement to arbitrate for incorporation into an enforceable order based on their own, binding, determination.
  2. Except for parenting and child support determinations, which would be subject to best interests review by the court at the request of either party, the award would be binding on the court, subject to arbitration review standards only.
  3. The parties could opt in to appellate rights.
  4. Standards for contesting an agreement to arbitrate would be specific, without compromising existing contract remedies such and fraud and duress.
  5. A judge would have clear authority to appoint an arbitrator if the parties have agreed to arbitrate but they have failed to name an arbitrator, or a methodology for replacing one, if necessary.
  6. The obligations of an arbitrator to disclose all possible conflicts would be specific and comprehensive.
  7. Arbitrators would be automatically authorized to enter temporary orders and regulate discovery, allowing speedy determination of preliminary matters, and permitting efficient case management (avoiding the cumbersome aspects of master proceedings).
  8. Awards on family law matters that are subject to modification would be clearly subject to later modification, consistent with substantive law.
  9. Litigants could avoid the costly and inefficient down time that occurs while parties and counsel wait for motion list and trial calendar openings, crowded courtrooms and while they await court decisions. They would have a legally enforceable right to a timely award, maximize their autonomy, privacy, convenience and efficiency.

 



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