We introduce the subject that the Supreme Judicial Court (SJC) addressed in Young v. Young by examining the kinds of orders from which the case arose: variable or self-adjusting support orders. Here, we address the basics.
What are self-adjusting support orders? They are alimony orders expressed by a formula rather than a sum. The payor computes alimony periodically by applying a percentage to his or her defined income. Sometimes, different (usually declining) percentages apply to different tiers of income, and increasingly, thanks to M.G.L., ch, 208, § 53(b) (of the Alimony Reform Act (ARA) of 2011, eff. 3.1.12) the percentage(s) may apply to the parties’ income differential.
Think: Client A pays Client B 32.5% of the difference between the two parties’ gross pre-tax employment income each year, as received, and subject to a periodic true up after sharing of agreed income verification.
Who makes self-adjusting orders? Most often, self-adjusting alimony orders are a creature of agreement. A judge then approves and incorporates the agreement in its judgment, making the self-adjusting features court orders. For reasons discussed in previous and subsequent blog entries, judges rarely initiate such orders, being limited to doing so only in “special circumstances”, which Massachusetts caselaw has thus far identified only two: where an alimony recipient lives on another continent during high inflation times, which may justify an automatic cost-of-living provision; and one in which the payor was ill at the time of divorce, with resulting depressed earnings, but the court expected return of his historic income when his health recovered. We will discuss this standard more fully in a later blog entry.
Who uses self-adjusting orders? Most parties adopt this approach because the alimony payor’s income is subject to significant fluctuation, sometimes on the upside (think: bonuses or commissions) and sometimes up or down (think: profits). It protects the payor from having to pay alimony on income that he or she does not actually receive (downside risk protection), and the recipient is compensated by sharing when income is higher (upside benefit sharing). It echoes the way an intact couple live, economically.
Why don’t courts initiate many self-adjusting orders? The general answer is that self-adjusting orders “feel” like a violation of “due process” rights because they change the amount of support without the right to a court hearing for the purpose of showing current facts and circumstances that might mitigate against the change. The more precise reason is that case law discourages it. Young v. Young will likely reinforce the reticence of cautious judges; but we will suggest later that this ought not necessarily be the case.
In the next blog entry, we will begin to discuss the analysis that the SJC used in Young, and the standards suggested by it and earlier law.