781.708.4445

info@levinedisputeresolution.com

Divorce Mediation Blog

Divorce Agreements: Where Have All the COLA’s Gone? Part 3 Four Reasons Why COLA’s May Hurt

Wednesday, April 03, 2013

In previous entries, we recalled the days when cost of living adjustments (COLA) provisions were a common feature of Massachusetts alimony and child support settlements, and their virtual disappearance. Then, we focused on 7 reasons why COLA’s may be beneficial to divorcing parties.

Here, we look at 4 risks of COLA’s :

  1. COLA’s are very technical. The structure of COLA’s vary quite a bit, from “simple” to quite complex. Complexity results from the negotiator and drafter’s efforts to cut risks, to accommodate competing interests and to effectuate compromise. A “blown” COLA can result in betraying the parties’ intentions, increasing tensions and litigation costs in efforts to rectify poor or problematic drafting.
  2. The unknown is unknowable. In a relatively benign inflation environment, the sting of a periodic automatic increase may seem manageable, especially with a payor’s career ascending. But, as discussed in our last 2 blog entries, the cost of living is subject to unexpected changes. An inflation spike may be accompanied by wage hikes, or it may reverse the arc of a rising career. The payor’s perceived need for insulation from upward support modification can become a resented memory; and the recipient’s sense of protection from rising costs may ring hollow, when trumped by the other party’s poor work fortunes.
  3. The unknowable may stay that way. Mostly, the economic lives of divorced parties become opaque to each other. Certainly, houses, cars and vacations with kids give clues to changes in the other’s economic life. But, appearances can be deceiving. The flip side of the support modification disincentives noted in our last entry, is that one party may never know that he/she might be eligible for a great increase or decrease in support, for reasons that would become known only through the information exchanges that are mandatory in modification cases. The well-functioning COLA may mask other changes of circumstances that one party might dearly like to know, suggesting that a substantial shift of equities between the parties has rendered the previous deal unfair.
  4. Security can feel insecure. Being free(er) of inflation pressures (recipient), or insulated from unwanted upward modifications (payor), can make both parties feel freer to move forward with their lives, and less burdened by worry about future litigation. Yet, the parties can also come to feel victimized by their own success. A recipient who feels protected by the COLA may later encounter a judge who is less likely than otherwise to increase support. At the same time, a payor, especially one who has a COLA that is sensitive to the comparison of his/her income changes relative to inflation, may find a judge who is less apt to reduce support based in changes in his/her own purchasing power, when this issue has already been addressed by the parties’ agreement. Both parties may have compromised their access to the safety net of court-ordered modification, which for all its costs, inefficiencies and risks, may feel like a loss.



Get e-mail notifications of new blog posts! Enter email address below.:



Delivered by FeedBurner

other articles


recent posts


tags

General term alimony divorce and family law Baseball Arbitration SJC Family Law Arbitration Massachusetts divorce mediators Defense of Marriage Act health insurance Baseball alimony orders traditional negotiations family law arbitrators private dispute resolution mediators divorce mediator medical benefits divorce judgment divorce arbitrator family and probate law disputes arbitrator Massachusetts Lawyers Weekly divorce agreement Massachusetts divorce lawyers divorce lawyers Alimony Reform Act Child Support Guidelines Levine Dispute Resolution Center LLC Chouteau Levine Massachusetts lawyers mediator family law arbitrator Levine Dispute Resolution lawyer-attended mediation resolve disputes DOMA med/arb MLB labor agreement divorce mediators Massachusetts alimony and child support lawyers Divorce Agreements divorce arbitration support orders how baseball arbitration works alimony statute Act Reforming Alimony in the Commonwealth Massachusetts child support Major League Baseball Arbitration Baseball Players facilitated negotiations arbitrators The Seven Sins of Alimony litigation Levine Dispute Resolution Center Massachusetts alimony alimony reform legislation family mediation divorce process lawyer divorce mediations Boston disputes Levine Dispute Resolutions Cohabitation med-arb IRC §2704 health coverage Self-adjusting alimony orders Same Sex Marriage family law annulment divorce arbitrators Matrimonial Arbitration fraud conciliation divorce mediation Obamacare family support arbitration Uniform Arbitration Act self-adjusting alimony separation high-risk methodology special master alimony law alimony divorced Divorce pre-ARA alimony divorce and family law mediators mediations mediation LDRC divorce litigation family law mediation Massachusetts Alimony Reform Act dispute resolution COLA rehabilitative alimony