Divorce Mediation Blog

Musing on Massachusetts Alimony: Do "Needs" Still Matter for the “One Percent”?

Wednesday, May 08, 2013

The year-plus-old Massachusetts alimony "reform" statute provides that the court may not include the capital gains, interest and dividend income which derive from property received in divorce equitable asset division in the consideration of alimony rights and obligations. This is of little consequence -- and makes sense -- in most cases, where neither party can reasonably expect to collect income on assets that is enough to affect self-support; especially in a half per cent bank interest environment; and where few people have a critical mass of investable assets to chase stock market returns that would impact the ability to meet current needs.

But, what about cases in which high net worth parties divide large productive estates? In some families, investment returns can meet all reasonable needs, or even both parties’ actual expenses. Before March 1, 2012, this fact alone might have trumped an alimony claim because "need" was a longstanding pillar of alimony law. Even then, need was an elastic term as interpreted by appellate courts, encompassing the specific standard of living of the parties during the marriage. Judges had very broad discretion, to award alimony where the overall equities justified it, or to decline because need was not evident.

While the definition of alimony in the new law expressly includes need, the exclusion of investment income may have the effect of changing that for the “one per cent”.

Consider an extreme set of facts: the parties divide $100 million arising from entrepreneurial success, and the 45 year-old business spouse, out of a job after sale, chooses to take a job with a non-profit employer that pays a salary. A literal reading of the alimony statute would demand that the employee "generally" pay not more than the other spouse’s need, or 30-35% of the difference between the parties' respective gross incomes, but excluding that income produced by their divided assets. In other words, alimony seems mandatory even where no need exists.

If this reading is correct, we suppose that a judge could award $1 of annual alimony and fulfill the statute's mandate, but is that the legislature's intent? As divorce mediators, we look at the economics of every case carefully, but informed clients will know about the law; and we wonder the long-term implications of this statutory provision.

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