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Income Subject to Alimony

Ludwig v Ludwig, 15-P-1177 (slip opinion) (2017).

Massachusetts Appeals Court case in which husband appealed a Probate Court’s alimony decision to include unvested stock options as income that had not been included in the parties’ equitable division after the implementation of the time rule laid out in Baccanti v Morton, 434 Mass. 787 (2001). At the probate court level, the Judge rejected the husband’s argument that inclusion of these stock options amounted to “double-dipping”, which occurs when one spouse’s property of one spouse is considered both during equitable distribution of marital assets and is then considered as a source of income when calculating a support obligation.

The Appeals Court affirmed the Probate Court’s decision on the issue of double-dipping, stating that, “Here, there is no such injustice because the contested shares were not part of the equitable distribution of assets; by operation of the time rule, they were assigned to and retained by the husband outright.” In other words, precisely because the shares were not part of the division of marital assets, they could then be considered a source of income when calculating alimony. The Appeals Court further pointed out that the income for the source of the property assignment was distinguishable from the source of the alimony obligation.

The court discussed situations in which property has been divided, and nonetheless, income earned from the part of the property retained by a husband was part of the income subject to alimony. The court cited two specific cases: In Adams v Adams, 459 Mass. 361 (2011) the SJC supported the ruling of the trial court to identify a husband’s partnership interest as a marital asset to be divided and valued, and to also include any expected future income from this interest when calculating child support. In Champion v Champion, 54 Mass. App. Ct. 215 (2002), the Appeals Court affirmed the ruling of the trial court that assigned a value for husband’s interest in his business for the purposes of division of marital assets, and then considered any future earnings from this business when determining husband’s support obligations.

Hassey v. Hassey,  85 Mass. App. Ct. 518 (2014)

This was a divorce after an eleven year marriage. Upon divorce, the probate judge ordered husband to pay monthly alimony that was approximately forty-one percent of the difference in incomes, which exceeded the thirty to thirty-five percent range set forth in the Alimony Reform Act. The Appeals Court stated that although such a deviation is “reasonable and lawful” under the Act, the probate court made no “finding as to the amount of alimony the wife needed in order to maintain the lifestyle she enjoyed during the marriage.” Thus, the probate court’s ruling on general support alimony was vacated.

Next, the Appeals Court reviewed the “self-modifying” portion of the alimony order. The Appeals Court detailed two major issues with this part of the order. First, the Appeals Court focused on the fact that the way the modification was ordered, the burden to show a change in circumstances was improperly shifted to the husband. The wife had no corresponding burden. Second, the Appeals Court found the ‘self-modifying” order gave the Wife access to the Husband’s financial information but did not grant the same right to the Husband. The husband would not be privy to information regarding the wife’s income and whether a material change had occurred in her needs.

Chin v Merriot, SJC-11715 (Jan. 30, 2015)

Ex-husband already had reached the age of retirement by 2011 divorce. He sought to terminate his alimony obligation under M.G.L. ch. 208, section 49(f). The alimony provision was merged into the judgment.   In addition, he raised the cohabitation provision under M.G.L. ch. 208, section 49(d) as a reason for termination of alimony. Court held that both provisions were prospective only, and the ex-husband had not shown a material change of circumstance warranting modification or termination of his alimony obligation. This option under the pre-Act law of modification is still available for ex-spouses with merged alimony judgments, because the issue of alimony remains under the continuing jurisdiction of the Probate and Family Court.

Doktor v Doktor, SJC-11727 (Jan. 30, 2015)

Ex-husband reached retirement age after 1992 divorce with merged alimony provision in separation agreement.   He sought to eliminate alimony under G.L.G. ch. 208, section 49(f). Court held that presumptive termination of alimony at full retirement age in the Alimony Reform Act is was meant to be prospective and does not apply to cases that were concluded before the law went into effect. In this case, the ex-husband did not establish that there had been a material change in circumstances that would warrant modification of the alimony provision, which is the pre-Alimony Reform Act method of modifying alimony in a merged agreement.   Changes due to difference in “durational limits” within the meaning of M.G.L. ch. 208, section 4(b) does not include an event such as remarriage, cohabitation, or reaching the age of retirement.

Rodman v Rodman, SJC-11726 (Jan. 30, 2015)

2008 divorce with merged alimony judgment predated the Alimony Reform Act. Ex-husband sought to terminate alimony as he had reached full retirement age as defined by M.G.L. ch. 208, section 48. Ex-husband argued that modification based on full retirement allowable in merged divorce judgment because a merged judgment is “prospective” in effect. Court held that section 49(f) is inapplicable, and does not apply retroactively to both merged and surviving pre-Act separation agreements. The Court further explained that the only subset of divorce cases that went to judgment before the act went into effect that are modifiable pursuant to the terms of the Alimony Reform Act are those where the alimony order (1) merged into the underlying judgment, and (2) exceed the durational limits for support provided under the act.

Holmes v Holmes, 467 Mass. 653 (2014)

At issue was whether the time period that alimony paid under a temporary support order during the pendency of a divorce is to be added to the total time alimony is to be paid under the durational limits under the Alimony Reform Act. The SJC held that the Alimony Reform Act treats temporary alimony as distinct and separate from general term alimony, and that the duration of temporary alimony should not be included in such calculations. Judge has discretion under ch. 208, section 49(b) of the Act to order termination of presumptive maximum duration in case recipient spouse has unfairly delayed final resolution or if the temporary support is paid for an unusually long period of time.

Lanchandani v Roddy, N0. 13-P-1988, Mass. App. Ct. (Jan. 5, 2015)

This case addressed whether a husband, who has reached full Social Security retirement age, can terminate his alimony obligation under a pre-Alimony Reform Act agreement with a survival clause that prohibited subsequent modification of its terms but which also contained a provision that allowed for mutually-agreed modification. Alimony had already been modified subsequent to the divorce (but pre-Act) by the parties’ agreement. The court looked at the modification agreement that the parties agreed to after divorce and saw that it contained a survival clause that prohibited any further reduction in alimony payments unless the husband became “totally disabled such that he is completely prevented from working.” Due to the fact that the husband did not meet the “totally disabled” standard, the court denied his request for termination of alimony payments because it was based solely on his age.

The husband argued that since the agreement could have been modifiable after the effective date of the Alimony Reform Act of 2011 by their post-divorce modification agreement, Section 49(f) of the Act applied, which presumptively ends alimony at full retirement age for social security. The court ruled that Section 4(c) of the Act, which bars modification of alimony provisions not merged into the judgment, applies here and notwithstanding the possibility of post-Act modification, because the agreement stated that the alimony provision survived. The court held that the Act did not change the established legal principle that surviving alimony obligations are not subject to modification.

In other words, you can agree to modify an agreement that survives, but that does not mean that the surviving agreement is now merged and subject to later modifications

Need for Support, Ability to Pay, Station in Life

Gottesegen v. Gottesegen, 397 Mass. 617 (1986). Purpose of alimony is to provide economic support to a dependent spouse. It is grounded on the recipient spouse’s need for support and the supporting spouse’s ability to pay.

Grubert v. Grubert, 20 Mass. App. Ct. 811 (1985). The spouse’s need for support and maintenance is determined in relationship to the respective financial circumstances of the parties. The standard of need is measured by the “station” of the parties — by what is required to maintain a standard of living comparable to the one enjoyed during the marriage. Equitable (equal) division of assets for fifty-nine year old dependent spouse did not adequately address wife’s needs for support measured by the parties’ “station”.

Rice v. Rice, 372 Mass. (1977). Because M.G.L. chapter 208, section 34 gives the courts such broad discretion, it is important that the record indicates clearly that a judge consider all of the mandatory statutory factors.

Rosenberg v. Rosenberg, 33 Mass. App. Ct. 903 (1992). The probate judge acted properly and within the bounds of his discretion when he awarded alimony when wife could have met her needs with income from the $4 million allocated to her in the divorce judgment. Alimony is not merely limited to the need of dependent spouse. The dissolution of long-term marriage (this was one of twenty-nine years) resembles the dissolution of a partnership. It is consistent with the partnership theory to order alimony which, if added to investment returns on assets, would give her an amount which exceeded what is needed. (The court quoted King Lear’s cry, “O, reason not the need!”, Shakespeare, King Lear, Act II, scene 2.)

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Britton v. Britton, 69 Mass. App. Ct. 23 (2007). Support of dependent spouse not necessarily limited to “need”. Subject to availability of resources, the more-dependent spouse should be maintained in an economic style close to which the spouse had become accustomed during the marriage.

Williams v. Massa, 431 Mass. 619 (2000). Even though the wife’s contribution to the marriage less than equal, the Court provided an income stream to her to maintain her station in life.

Buckley v. Buckley, 42 Mass. App. Ct. 716 (1997). The Trial Court had found that the wife relied upon payment of child support for her needs and that once it ceased, she became unable to maintain herself, and ordered alimony to be paid. The Appeals Court sustained the decision.

Goldman v. Goldman, 28 Mass. App. Ct. 603 (1990). The Trial Court limited alimony to eight years in a long-term (twenty-year) marriage. On appeal, however, the Appeals Court reversed and held that such alimony continue until there is a material change in circumstances. Absent good reason, in a long-term marriage there is no justification for the lifestyle of one spouse to go down while the other remains high. It is an affirmative duty for a recipient spouse to mitigate the burdens of support. Quoting Commonwealth v. Whiston, 306 65,66 (1940), the court opined “There is no law that assures every married woman the right of a life of idleness.”

Krokyn v. Krokyn, 378 Mass. 206. (1979). Capital assets may be used to evaluate a supporting spouse’s ability to pay alimony in a modification proceeding. The law does not require that an obligor be allowed to enjoy an asset such as a home or interest in a trust while he neglects to provide for those persons to whom he is legally required to support.

Smith v. Edelman, 68 Mass. App. Ct. 549 (2007). The husband’s income substantially increased post-divorce. And yet, the court did not substantially increase the child support payment, because the ex-husband did not increase his standard of living with the extra income. Since no substantial disparity existed in the standard of living in the respective parent’s households, the Appeals Court sustained the Trial Court’s denial of increased child support. An underlying issue in the Trial Court was alimony, because according to the parties’ separation agreement, alimony payments to the wife had ended after five years. Part of the wife’s motivation to seek modification may have been to replace some of this income. The court found that the wife was voluntarily underemployed. Note that standard of living in child support cases may adjust prior to emancipation. In an alimony case, standard of living during the marriage is the standard that is to be maintained, if possible.

Alimony Amount, as Percentage of Income, COLA increase

Wooters v. Wooters, 42 Mass. App. Ct. 929 (1997). Court ordered alimony as a percentage of payor spouse’s income. The argument that it would impermissibly create automatic modifications without the customary requirement of demonstrating a “material change of circumstances” is rejected, citing Stanton-Abbott v. Stanton-Abbott, 372 Mass. 814, 816 (1977), which upheld a percentage increase in alimony based on an increase in the retail price index.

Kirtz v. Kirtz, 12 Mass. App. Ct. 141 (1981). The trial judge in a modification action found that the wife suffered continual erosion of support through inflation and inserted a cost-of-living provision based on changes in the consumer price index and increases in the husband’s taxable income (whichever was the lesser). The court held that the automatic increase was reasonable and sensible, and likely to reduce abrasive and expensive further resorts to court on modification actions.

Rosenblatt v. Kazlow-Rosenblatt, 39 Mass. App. Ct. 297 (1995). There is no specific formula by which a probate judge determines whether to grant alimony and, if so, for how much and for what period of time. Instead the judge must consider the mandatory factors enumerated under M.G.L. chapter 208, section 34 and thereafter fashion a judgment appropriate to those factors. This court-made law within the statutory framework explains while alimony amounts vary so greatly.

Earnings versus Earning Capacity, Effect of New Spouse’s Income

Cooper v. Cooper, 43 Mass. App. Ct. 51 (1997). The Trial Court did not err in considering the husband’s potential earnings when his change was voluntary (leaving a salaried job for a new business venture), and there were funds available from other sources to pay alimony. His failure to pay was not due to his plight at the time of the divorce. A judge may consider the income or assets of a second spouse in determining alimony. Although the second spouse does not share in the duty to support, the income of the second spouse contributes to the support of the current household. Therefore, the payor spouse has more of his or her own money with which to satisfy the alimony obligation.

Flaherty v. Flaherty, 40 Mass. App. Ct. 289 (1996). (Child support case.) Earning capacity may be considered in setting alimony payments. Where husband lost his job involuntarily before divorcing wife and was making reasonable efforts to secure additional income, contempt order was reversed.

Rehabilitative Alimony

Drapek v. Drapek, 399 Mass. 240 (1987). Rehabilitative alimony (an award of support to enable a spouse to become economically self-sufficient) may be appropriate in a short-term marriage. In this case, the marriage was eight years long, and the Court found that within five years, the wife may be able to rehabilitate her career.

Bak v. Bak, 24 Mass. App. Ct. 608 (1987). Rehabilitative alimony is designed to protect, for a limited time, a spouse whose earning capacity has suffered (or become non-existent) while that spouse prepares to reenter the work force. Unless “rehabilitation” is proved probable, the husband’s support responsibilities may be of extended duration. Although rehabilitative alimony is viewed with some circumspection in Massachusetts, it may be awarded in appropriate circumstances. Before awarding rehabilitative alimony, the recipient spouses’ realistic prospects for self-sufficiency must be “considered with care”.

Zildjian v. Zildjian, 8 Mass. App. Ct. 1 (1979). Even though a short-term marriage, the disparity in income and earning potential was so great that rehabilitative alimony was inappropriate. Application of rehabilitative alimony would have left the ex-wife, at best, only marginally independent.

Gordon v. Gordon, 26 Mass. App. Ct. 973 (1988). Here the alimony order to be paid to the husband had duration of one year, because the Court found that the husband would be able to develop part-time work. If the future employment failed to materialize, the husband could seek a modification.

Rosenblatt v. Kazlow-Rosenblatt, 39 Mass. App. Ct. 297 (1995). Even in this ten-year marriage with no children, the Court applied the Grubert standard of need (measured by the “station” of the parties, i.e., by what is required to maintain a standard of living comparable to the one enjoyed during the marriage). The Court rejected the idea of transitional alimony — that the wife should be gradually restored to her status quo ante, and that she should return to being single and economically self-sufficient.

Ending Alimony, and Termination at Retirement Age or after Certain Time Period

Ross v. Ross, 50 Mass. App. Ct. 77 (2000). In this case, the Appeals Court found that the Trial Court had incorrectly ordered the wife’s alimony award to terminate when the husband reached the age of sixty-five, which was eleven years in the future. (There was a thirteen-year age different between the parties.) The Appeals Court presumed that alimony was ordered to terminate when the husband reached age sixty-five because it is a common retirement age. The Court held that such anticipation on speculative future events is improper, and that the wife’s needs were current and predicable. If, in the future, the husband’s ability to pay or the wife’s needs should change materially — when he attained the age of sixty-five or at any other time — either party may petition for a modification.

Gottesegen v. Gottesegen, 397 Mass. 617 (1986). A probate court judge may not order the termination of alimony on the occurrence of an event unrelated to the recipient spouse’s need for alimony or the supporting spouse’s ability to pay. (In this case, the circumstance was the wife’s cohabitation.)

Katz v. Katz, 55 Mass. App. Ct. 472 (2002) A former spouse with assets cannot avoid payment of alimony if, without impoverishing him, the absence of alimony would lead to poverty, if not destitution, on the part of the dependent spouse.

Sampson v. Sampson, 62 Mass. App. Ct. 366 (2004). In this case, a three-year durational limit on alimony was set aside where it was uncertain whether the wife, a sole proprietor of a small business, would be able to earn sufficient additional income so as to render alimony unnecessary after that time period.

O’Brien v. O’Brien, 416 Mass. 477 (1993). The Court may override a separation agreement providing for termination of alimony only to the extent necessary to prevent a former spouse from becoming a public charge. In this case, the former wife was receiving public assistance after her term of alimony in the separation agreement ended. The wife’s second (final) husband is required to pay, and not her first husband. The Court held that when a successor spouse is financially able to support the former recipient spouse, the first (former payor) spouse is not obliged to contribute support payments.

Greenberg v. Greenberg, 68 Mass App. Ct. 344 (2007). The husband could meet his alimony obligations from income generated by his retirement assets, which he had chosen not to draw on for the time being. But he could continue paying without affecting his own standard of living. The fact that he has retired is not a sufficient basis to reduce the alimony award. His actual retirement did not warrant termination but warranted a reduction.

Huddleston v. Huddleston, 51 Mass. App. Ct. 563 (2001). Even though ex-payee spouse did not increase her employment (eight-year marriage, three children), the ex-husband was required to continue paying alimony to her after age 65 because payments were not “unduly burdensome” to him. The payments were to be adjusted by COLA increases as provided in earlier modification judgment.

Alimony after Remarriage, Cohabitation or Death of Payor

Gottesegen v. Gottesegen, 397 Mass. 617 (1986). Alimony (if merged into the judgment) should not automatically end upon cohabitation. Modification of alimony on the basis of moral judgments of the recipient’s living arrangements is beyond the scope of a divorce court’s discretion. Citing Mitchell v. Mitchell, 418 A.2d 1140, 1143 (Me. 1980). A judge in formulating a divorce judgment may not assume that cohabitation would have any effect on the recipient spouse’s economic circumstances and the need for alimony. The extent of actual economic dependency, not one’s conduct as a cohabitant, must determine the duration of support as well as its amount. Citing Gayet v. Gayet, 92 N.J. 149 (1983).

Keeler v. O’Brien, 425 Mass. 774 (1997) (Keller II). Here, the wife had remarried. The divorce judgment was silent on whether alimony would terminate in the event of remarriage. In Keller v. O’Brien, 420 Mass. 820 (1995) (Keller I), the SJC held that absent a surviving agreement, remarriage is a prima facie change of circumstances and, absent proof of some extraordinary circumstances warranting continuation established by the recipient spouse, alimony would end at remarriage. However, the Court declined to issue a per se rule that remarriage ended alimony. The Court in Keller I said that only in those “rare situations which involve an on-going and legitimate need” for continuation, would alimony continue. In Keller II, the Court reiterated that the burden of proof would fall on the recipient spouse, and that the burden of proof was higher than usual, requiring the recipient spouse to prove “extraordinary” circumstances that would warrant the continuation of alimony.

Cohan v. Feuer, 442 Mass. 151 (2004). Here the husband-payor had died, and the ex-wife was seeking enforcement from the estate of the ex-husband pursuant to a N.J. divorce stipulation that had required him to pay her alimony until her death or remarriage. An order for payment of alimony ceases with the death of the party obligated to pay it unless the decree or judgment provides otherwise. Citing Barron v. Puzo, 415 Mass. 54, 56 (1993). The SJC held that the language of the stipulation and the circumstances surrounding its negotiation did not make it clear that the parties intended that the obligation to continue the alimony payments after the husband’s death. As part of the holding, the SJC adopted section 5.07 of the ALI Principles of Family Dissolution (2002) declaring that obligation to pay alimony ends automatically at remarriage of obligee or at death of either party, unless the original decree or agreement provides otherwise, or, in the case of a death, the court makes written findings establishing that terminating at death would work a substantial injustice because of facts not present in most cases.

Alimony and Inheritance

D.L. v. G.L., 61 Mass. App. Ct. 488 (2004). This was a ten-year marriage with one child. Both parties were from families of substantial wealth and with large trusts for each of their benefits. Future expected interest in trusts are “too speculative”, but present discretionary interest in income can be properly treated as a stream of income for the payment of alimony and child support. Also remainder interests, even if susceptible to complete divestment under power of appointment to others, can be considered in determining a party’s opportunity for future acquisition of capital assets and income. The Court struck down the ten-year limitation on the alimony payments to the wife saying that it was “simply uncertain at this juncture whether the wife’s future income from employment will render alimony unnecessary”.

Frederick v. Frederick, 29 Mass. App. Ct. 329 (1990). The husband and wife were separated for many years, and the husband had few assets for retirement. The wife was taking care of elderly relatives, from whom she would likely inherit a substantial sum. The three-year term on her alimony as upheld, as she was underemployed and could have worked if necessary. Moreover, if the inheritance failed to materialize, she could file for a modification as the circumstances would be different from those anticipated