Spousal Support in Late Term Marriages

If pressed to do a quick take on marriage in America today, I might say something like this:  Marry late in life and if need be, marry often.

Americans nowadays, if they choose to marry at all, marry later in life than most of their parents did.  Statistics show that Americans now marry either after, or on the far side of, the heretofore ‘typical’ age range (from 20 to 35) for first-time marriage.   And make no mistake:  this phenomenon of late in life marriage does not simply describe those marrying for the first time.  A random sampling of weddings across America today would easily reveal many forty- or fifty-somethings walking down the aisle yet again for the second, or even the third time.

What underlies all this late in life marital activity (aka. “late life marriage”)?  Could it be improved longevity rates?  Americans, after all, now routinely live into their eighties and nineties, so perhaps there is no longer any hurry to marry at a young age.  Or, “is it the economy, stupid?”  Could it be that Americans now defer marriage as long as possible because they feel they cannot afford it during their twenties or early thirties?  Time Magazine’s 2011 cover story on the decline of marriage in America claims that young Americans nowadays are more concerned with career and making money than they are with marriage per se, which they regard not as a crucial first step of adult life, but rather as a “late in the game” reward for previously achieved financial or life success.

Or is there something else entirely to consider:  namely, the pervasive belief among many children of the ‘60s that they, unlike birds, will not “mate for life,” but instead will practice serial monogamy, replacing spouses acquired in youth with new ones once grey hair sets in and kids are out of the house?

No matter what the cause may be, all this late in life marital activity has definitely given rise to more late in life divorce activity.   My own practice alone bears this out:  in 2011, a noticeable portion of my work as a private neutral came from cases involving later life unions.  And dissolutions of late in life marriages do indeed present a number of legal challenges largely because these situations intersect only obliquely with the relevant statutory guidance, which, to all appearances, was forged in relation to the life needs of parties who married in their twenties and thirties.

Consider this, for example:  how will the law address the dissolution of a twelve-year marriage (hence, a long term marriage) in which one or both of the parties are 60 years or older at the time of dissolution?  And how, in particular, will the Court handle the matter of spousal support in this instance?

In the dissolution of any long term marriage, the law presumes that permanent spousal support will be ordered on a long term, or even a life-long basis.   But in this specific instance—a long term marriage with parties who either have retired or are soon to do so—this standard presumption about permanent spousal support hardly seems to apply.

Here’s why.

If the Payor of spousal support in a long term marriage is either soon to retire or already has retired at the time of dissolution,  he or she will certainly not possess sufficient—or any—funds from employment to pay for spousal support on a long term or a life-long basis.  Moreover, following Reynolds, the Court typically holds that a person cannot be compelled or required to work past the age of 65 (which, at the time of Reynolds, was the legally recognized age of full social security retirement) if the sole purpose of such post-retirement work is to generate income for the payment of spousal support.

Granted, American life has changed substantially since the time of the Reynolds case.  The official age of retirement is currently set at age 66 and seems to be ever creeping upward.  Economic realities of late, moreover, have left many Americans feeling that retirement is simply out of their reach, so now more than ever, many continue working well into their seventies and beyond.

But these particular realities of contemporary American life have not affected or altered the guidance that the Reynolds decision still provides in dissolutions of long-term marriages.  And even without formal knowledge of the fundamental principle of Reynolds, spouses in these marriages are usually quite vocal in expressing strong aversion to the notion of working beyond the official retirement age simply for the purpose of generating income for spousal support.

Nor is there any statutory basis for the Court to ask a party who has retired early to come out of retirement and work up to the officially recognized age of retirement.  To paraphrase the opinion on this matter of Judge Jim Stewart, a well respected veteran of the Santa Clara County Family Court:  “Well, I’m going to retire at age 62, so why should I make anyone else retire later than that?”

True enough:  parties who divorce late in life often have accumulated large sums of money in their various retirement accounts, which would lead one to imagine that these parties might have funds available, post-dissolution, for the payment of spousal support.  But even if one or both parties in a long term marriage do indeed have substantial retirement income from pension and/or 401 (k) funds, these funds alone would most likely NOT be sufficient for spousal support payments in a late-term marital dissolution.

In the first place, any retirement account funds earned during the marriage would be considered c/p and hence, would be divided by QDRO and distributed equally to both parties.  Whatever would then be left in these accounts after such fund division would surely not be sufficient BOTH to sustain the fund owner in her/his retirement AND provide for spousal support payments sufficient to bring the Recipient up to the marital standard of living (MSOL).

So we are back, once again, to the original question:  where do the funds for spousal support come from for parties in their late 50’s or 60’s at the time of dissolution?  And in addition to this, there are other important questions to consider.  For example, if child rearing responsibilities are no longer at issue in the dissolution of a late term marriage, is the party who previously deferred work and career in order to raise children now entitled to “retire” and receive spousal support, especially because this party now, at his/her advanced age, is likely to have few or no other sources of well compensated employment?

In any event, how many different “line item expenses” can retirement assets actually sustain?   If retirement assets in a late term marriage are barely sufficient for a single household, is it even possible that they be mobilized, in the event of a marital dissolution, to pay for the cost of a second household?  And what if individual retirement assets were unequally owned during the marriage?  How, then, would the Court handle the matter of permanent spousal support?

The short answer to all these questions is that there is no “one size fits all” approach.  Here, however, are some of the factors that the Court will surely consider in handling a dissolution that occurs late in life (NB: some of these may already be documented in the parties’ prenupt):

  1. How old were the parties when they married and what were their expectations for career and family life at the time of marriage?
  2. What kind of assets did each of the parties already have when they married?
  3. What was the picture of work life in the marriage?  Did one or both parties work?  Did one or both parties have traditional careers (e.g. law, medicine, Silicon Valley engineering), or perhaps, did the marriage involve one party giving up a career and hence, losing both asset accretion and employable skill development?
  4. Were childrearing obligations of import in the marriage?  If so, whose children were raised and for how long?
  5. Is this a late in life, long term 1st, 2nd or 3rd marriage?  If not a 1st marriage, how old were the parties when they entered into earlier marriages and how did the earlier marriages affect the parties’ accumulation of retirement assets, employment skills, and parenting obligations?  In other words, in a late term marriage of any length, who bears the responsibility for choices made in earlier marriages?

Also important to recognize is that in late term marital dissolutions, the Court tends to privilege each party’s “location in life” over the simple fact of marital length, and in this regard, the Court will look closely at several key indicators:

  1. the number of years each party has left until retirement age;
  2. the skill sets possessed by each party and the remuneration level that can reasonably be associated with such skill sets;
  3. the number of years in the marriage that was spent managing the twin issues of child bearing and child rearing;
  4. the economic consequences now, for each party, of delayed child rearing; and
  5. the economic consequences now, for each party, of a mid-to-high- paying career that was started early in life and then ended well before the official retirement age, due to the well-known age-bias in Silicon Valley.

Given the many different factors that the Court may consider in making a determination of spousal support in a late term marital dissolution, there is little to no predictability as to the outcome.  Each side will have the opportunity to argue a particular position in an attempt to influence the Court’s determination of how much, and for how long, any given retirement-aged Payor can reasonably be expected to provide in spousal support.

Because of the many factors involved in these instances, a strong case can be made either for the Court to retain jurisdiction over the on-going payment of spousal support, or for the parties themselves to resolve this matter once and for all through a binding agreement that clearly defines the responsibilities of both Payor and Recipient.  Any party in a late term marital dissolution would do well to consider this:   isn’t it better to settle now for what you need, rather than straining to get ‘what you really want’ through prolonged litigation?  Better to conserve retirement funds to pay for a satisfactory life in retirement, rather than consigning a sizeable portion of these funds to pay for current and on-going legal expenses.

As the entire foregoing discussion suggests, a late in life marital dissolution is just one more fact pattern that demonstrates a less-than-perfect fit between common legal expectations and the demographic of those divorcing today.

Posted in Divorce, Education About Dissolution, Family Law, late in life dissolutions, Spousal Support | Tagged , , , , , ,

Help for Families Undergoing High Conflict Divorces

As summer approaches and schools let out, many families anticipate having more time for family activities, the salutary effect of which is typically to promote interpersonal bonding and strengthen internal ties of connection and support.

But for families involved in high conflict divorces, “family” and “family activities” are at best concepts that have been set aside, supplanted not only by the divorce itself, but also by the family’s overall new-found need to balance daily life routines with the management of damaged relationships.  In wake of all this, children in these families are often left with feelings of alienation towards one parent or the other, and with no obvious guidance or support when it comes to processing these feelings as part of their psychological development.

Thankfully, however, an effective way to address these issues can be found right in our own midst.  Santa Clara County is home to a bi-costal organization specifically designed to help families who are undergoing these kinds of divorced-driven, relationship disruptions.

“Overcoming Barriers” (OCB) is a Santa Clara County-based non-profit organization that hosts intensive and unique psycho-educational training programs for families with children in danger of losing a relationship with one parent after divorce.  Staffed and directed by an expert group of legal and psychological professionals, OCB aims to help divorcing families move away from entrenched relationship patterns into a space of new beginning where both parents can recognize the value of the other parent in the lives of their children.

From June 29-July 3, 2012 in a location near San Francisco, OCB invites six families to participate in a program entitled “High Conflict Divorce Camp,” which, as the title suggests, is indeed a camping experience.  Specifically, it combines traditional camp activities such as yoga, arts and crafts, hiking and campfires, with specially designed Children and Adult Programs that take place each morning.  Over the course of 4 days, families will learn how to repair ruptured relationships in a safe and healthy environment and at the end of the experience, they will be given detailed, written, aftercare recommendations.

If you know of a divorcing family who might benefit from this kind of work, please do direct them to the OCB website (www.OvercomingBarriers.org).

 

Posted in Children and divorce, Divorce, Education About Dissolution, Healing from Divorce | Tagged , , , , , , ,

Spousal Support Duration in 10+ year Marriages

Spousal support is certainly a fertile topic of discussion.  For now, however, I would simply like to make some brief, follow-up remarks to those made in my last post, “Spousal Support:  Presumptions and Duration.”

In the context of discussing long term (10+ years) marriages,  I touched on the logical appropriateness of a ratio between the length of support and the length of marriage, very similar to the ratio of 50% given in the statutory presumption for short term marriages.  After all, as common sense tells us, the longer a marriage goes on, the more solidly parties expect to rely on the finances of a marital unit to provide for their future needs.

Now, if spousal support in a 10 year marriage lasts half the length of the marriage, and spousal support in a 20 year marriage goes on longer than 10 years—typically, it lasts until the Payor retires, or for the next 20 years, or forever, whichever comes first—we might accurately describe this situation as follows:   in 3-10 year marriages, the ratio of length of support to length of marriage is 50% (in marriages of less than 3 years, the entire presumptive ratio is mostly inapplicable), while in a 20 year marriage, this same ratio increases to at least 100% (i.e., 20+ years of support to 20+ years of marriage.)

What we see, then, is this:  the longer the marriage, the greater the ratio of length of support to length of marriage.  And if this ratio starts out at 50% in a 3-10 year marriage and increases to at least 100% over the space of 10 more years (i.e., in a 20+ year marriage), then it would be logical (and also mathematically precise) to designate a 5% increase of this ratio for every year of marriage greater than 10.

Thus, in marriages of 3 to 10 years, the ratio of support duration to marital length is set by statute at 50%, whereas in marriages of 10+ years, this ratio could appropriately be increased annually by 5%.  So, in an 11 year marriage, we would be looking at spousal support lasting for 55% of the marital length (i.e., 6.05 years); in a 12 year marriage, support could last for 60% of the marital length (i.e., 7.2 years); in a 13 year marriage, support could last for 65% of marital length (i.e., 8.45 years); and so on.  This gradual increase in the duration of support would also reflect the ongoing growth of the parties’ reliance on the community estate in long term marriages.

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Spousal Support: Presumptions and Duration

The word “permanent” in the expression “permanent spousal support” is something of a misnomer.  Yes, permanent spousal support might go on for a very long time, although no specific guidance requires that it does.  Definitely, permanent spousal support ends when either the Payor or the Recipient dies and typically, it also ends once the Recipient remarries.

Practically speaking, then, “permanent spousal support” does not mean “support in perpetuity,” but rather “support that lasts as long as the facts of a marriage warrant or until the Court determines that the Recipient has become (or should have become) self-supporting.”

In devising equitable arrangements for permanent spousal support, the Court begins with certain statutory presumptions.  In long-term marriages (i.e., marriages of 10 years or more), the presumption is that permanent spousal support will last until the Recipient becomes self-supporting, no matter how long that takes.  In short-term marriages (i.e., marriages of less than 10 years, [and in Marin county, sometimes marriages of less than 7.2 years]), the presumption is that permanent spousal support will last for about half the length of the marriage.  So, for example, in a marriage of four years, the presumption is that spousal support will terminate after two years post separation; in a marriage of seven years, the presumption is that spousal support will terminate after three and a half years post separation.

These presumptions, however, are just that:  presumptions, not laws or hard and fast rules.  Depending on the facts of the case, the Court may see fit to disregard these presumptions and order permanent spousal support in other ways.

For example, in a three-year marriage where both parties have continued to work and develop their careers, the Court may see fit to order permanent spousal support for only six months instead of the presumed one and a half years.  Similarly, in a six-month marriage where the parties have an infant who requires extensive care, the Court may see fit to order permanent spousal support for a full eighteen months instead of the presumed three months.  The Court, in other words, will always evaluate the facts at hand and exercise its own discretion when it comes to the final determination of permanent spousal support.

If these presumptions, then, are not legal absolutes, how exactly do they function in the eyes of the Court?

The answer here is easy:  they provide the Court with “good rules of thumb,” commonsensical perspectives on the entire issue of post-judgment spousal support.

The shorter the marriage, the more likely it is that each spouse has retained much of his/her pre-marital financial independence.   Hence, the less need there typically is, post-judgment, for one spouse to sustain the other financially.  Conversely, the longer the marriage, the more likely it is that spouses have been operating as a single financial unit and have come to expect a particular income level and standard of living.   Also, the more likely it is that one spouse will have lost marketable job skills due to time taken off from work.  So in long- term marriages, it simply makes good sense that permanent spousal support be ordered on a long-term, even life-long basis.

A corollary of this kind of thinking is that in very short marriages (e.g., 0-3 years), there may be little to no permanent spousal support—only ‘rehabilitative’ payments for a few months upon move out.  Of course, it would be a very different picture here if small children were involved, though the overall thinking about the relationship between permanent spousal support and marital length would still remain the same.

Also, let us not forget that in the majority of dissolution cases, permanent spousal support actually starts out as a payment situation that the parties arrange informally on their own, all in the course of undergoing “relationship alteration.”  Legal action per se, in other words, is not always the initiator of permanent spousal support and if we consider the way personal dynamics commonly evolve in dissolutions, it is easy to see why.

Spouses who split up often start out by handling their financial obligations in much the same way as they did during their marriage.  Inevitably, however, the usual money management practices of the marriage gradually disappear, giving way to a situation that resembles spousal support.  The spouse who was the low income earner starts to become the Recipient of funds from the high income earning spouse, who now takes on the role of Payor.  An informal support situation such as this might begin immediately after the parties separate, though in my experience, it often takes shape somewhere between three and six months post separation.

Once a dissolution case goes to trial, the Court will have discretion in deciding whether or not to regard the inception of this sort of informal support as part of the overall presumptive timeline for permanent spousal support.

Imagine, in this regard, the following hypothetical case.  Spouses ending a seven year marriage separate but continue managing their finances from the same bank account they used during the marriage.  Six months after their DOS, they commence an informal arrangement of spousal support, which later on, they formalize into a support order.  When the case finally goes to trial two years after the DOS, the Court recognizes that support has indeed been continuous from the DOS; i.e., two years of spousal support have already occurred.  So, according to presumption (i.e., support for half the length of the marriage), and with no other mitigating facts to consider, the Court could (and likely would) exercise its discretion and order only one and one half more years of permanent spousal support, not a full 3.5 years.

As we have already seen, the 10 year mark in a marriage is the statutory milestone for thinking about the duration of permanent spousal support.  But surely, we might ask:  is a 10.1 year marriage so very different from a 9.9 year marriage?  Certainly not, it would seem, especially if the only factual difference between these two marriages were merely that of length.  Yet because of their lengths, these two marriages lead to two different statutory presumptions about the duration of permanent spousal support.

Along these same lines, we might also reflect further on the statutory grouping of all marriages either above or below the 10 year mark.  Marriages of 10.1 years, of 15 years, of 20 years, and of 25.8 years or longer all qualify as long-term marriages.  But are all these marriages equally worthy of the same presumption when it comes to the determination of permanent spousal support?  Does it matter to the Court, for example, if a long-term marriage overshoots the 10 year presumptive divide by very little (as in a marriage of 10.1 years) or by quite a lot (as in the 40 year marriage of Albert and Tipper Gore)?

No matter what the length of a marriage is, the Court always applies equitable principles when it comes to limiting the duration of support.  From the Court’s perspective, the 10 year mark simply signals a different way of managing these principles:   the statutory presumption of a limitation proportional to marital length is replaced by a case rule requiring the Court to find as a matter of fact that the Recipient will be self supporting by the time of a designated support termination date.

And so, at the 10 year mark and beyond, the concept of support proportional to marital length can still play a role in the Court’s discretionary thinking.  In fact, California statutory law has codified a portion of the old Santa Clara County Rule of Thumb, indicating that absent other atypical factors as enumerated in FC 4320, it makes sense that the duration of payment of spousal support should be proportional to the length of the marriage.  This policy correlates well with the expectations of the parties themselves in a dissolution:  the longer the marriage, the greater the expectation of continued support, post-separation.

At the same time, however, the Court’s determination of the duration of support in 10+ year marriages will also necessarily be based upon a factual finding that the Recipient is, or should be, capable of self support at or above the MSOL either through individual earnings, through the Recipient’s gross estate, or through some combination of these two.

As it turns out, establishing the factual basis of the Recipient’s eventual self-support is not at all easy to do.  Looking ahead to the next 5 to 10 years of economic effort following a divorce (even from the vantage point of 2-3 years after the date of separation, which is typically when the parties are finally in trial), the Court is often unable to predict with solid, factual accuracy when the Recipient will become self-supporting at the MSOL. Given this lack of prescience on the part of the Court, there is nothing more for it to do than make a determination of spousal support at the time of trial and then reassess this spousal support order at some point in the future upon the request of one of the parties.

In truth, the Court can determine a termination date for permanent spousal support in any way it wants to, so long as it bases its determination upon the finding of the Recipient’s ability to be self supporting at the MSOL. Absent such a determination, however, the issue of spousal support does not simply go away.  On the contrary, the Court retains jurisdiction to modify both amount and duration of support unless its jurisdiction is explicitly terminated or somehow restricted by the parties themselves.

Post judgment, each party has the right to continue to investigate the financial affairs and earnings of the other, and either party can pull the case back to court to litigate for a change in support.  The Payor remains subject to suspicions surrounding her/his earnings and ability to pay, and once the Court issues a Gavron Warning (cf. In re Marriage of Gavron), the Recipient remains subject to the imputation of phantom income if the Recipient’s efforts to work do not square with what the Court reasonably expects.

©2012 James Frederic Cox

Posted in Divorce, Education About Dissolution, Family Law, Spousal Support | Tagged , , , , , , ,

Spousal Support and Atypical Marital Situations

In addressing the issue of spousal support in dissolution cases, the Court follows standard procedures.  The dominant guidance comes from Family Code (FC) Section 4320, which sets forth a mandatory schema of 14 factors–including “any other factor”—that the Court must apply to determine post-judgment support.  The application of these factors, moreover, has been interpreted and fleshed out by prior decisions, and so has the way in which the Court exercises its discretion with respect to amount and duration of support.

But as we all know, dissolution cases sometimes present atypical fact patterns where case law does not directly apply.   Similarly, the facts of any given marriage may represent a substantial variation on conventional arrangements, thereby confounding the relevance of a “one-size-fits-all” approach.  These variations complicate the determination of post judgment support, leaving the Court no other choice than to exercise discretionary judgment and make a reasonable determination of support based on the facts at hand and advocacy.

The following case that a colleague recently shared with me is an excellent example of this very point.

A couple seeking a divorce had been married for 21 months.  For the entirety of their marriage, the parties were unemployed and both living with and supported by the Husband’s parents.  Only after the DOS did the Wife land two jobs with a combined gross of $5K per month.  Husband remained unemployed after DOS and continued living with his parents.  Two weeks before the case went to trial, however, Husband found a part-time job with a gross pay of $135/week.

At trial, Wife’s lawyer argued that the couple had no marital standard of living (MSOL).   Throughout the marriage, both parties had been supported by Husband’s mother and Wife did not become employed until after separation.  Moreover, Husband was still living with his mother at the time of trial, which meant that Husband had the same standard of living post separation as he had during the marriage.  In the end, the judge agreed with Wife’s lawyer and voided claims from either party for post judgment support (i.e., judge did a mutual permanent termination of spousal support.)

As this case illustrates, the Wife’s attorney used an atypical marital fact pattern—namely, the spouses’ lack of employment during the length of the marriage—as the centerpiece of an argument against the awarding of post judgment support to either party.  Portraying this fact pattern as evidence of the couple’s lack of an MSOL, the Wife’s attorney succeeded in influencing the Court’s discretionary decision regarding permanent spousal support.

Though the determination of post judgment support relies on guidance from case law, it cannot do so in all situations.  Indeed, I believe that there are case law exceptions or modifications of standard support determination for all of the following atypical fact patterns:

  • depressed incomes and lifestyles during marriage due to educational endeavors necessary for career advancement.
  • extra effort or overwork during marriage to achieve early retirement or simply to “get ahead.”
  • disability of spouse:  when does the obligation for support pass from a former spouse back to society in general? (Wilson)  [Duration possibilities: Up to about 15 years of marriage, support lasts as long as the marriage.  After 15 years, support likely lasts forever.  These duration possibilities reflect reasonable expectations:  the longer the marriage, the greater one’s expectation for lasting support.]  [Amount possibilities:  Calculate economic resources of each parties—cash flows as well as balance sheet—including  marital standard metrics, then look to unique, direct costs of the disability, measured either by actual out-of-pocket costs or by comparable care costs—e.g., the cost of skilled nursing or convalescent care.  If disability costs are viewed as community obligation, they are paid by each party’s resources, either in proportion or pro-rata.]
  • development of employment related skill sets or lack thereof
  • opportunity to develop desired/desirable career for dependent spouse [the longer the marriage, the greater the obligation to provide retraining and education for career, not just job].
  • offset for separate residences comparable to Marital Residence (discounted for living apart).
  • non-cash savings, such as stock/options or defined benefit pension funds, that do not show on tax returns but still provide wealth and asset base. (Defined contribution pension deferral will show on tax returns.)
  • inflation over time for standard of living—e.g., cost of housing in Silicon Valley over the last five years: up, then down
  • COLA for standard of living in a specific geographic area  (the same number of dollars in Kansas City or Bakersfield go a lot further than they do in Cupertino.)
  • duration of support: length of marriage; coverture; natural phase points in life (career progression, majority of kids, social security); age of parties; Gavron notice and compliance with legal obligations under FC § 4330; plan or prior agreement of parties.

In any of these exceptional situations, advocacy and its potential to shape judicial understanding will play a crucial role in the determination of post judgment spousal support.

Whether the fact pattern at hand is typical or atypical, I always advise those advocating for or against the standard idea of spousal support to recognize and use—either as a touchstone or as a foil—the public policy assumptions implicit in our statutory schema. For though the law constantly adapts to changing social patterns, changes in society generally outpace those in law, which means that assumptions in the statutory schema about social patterns or formations—e.g “family” or “marriage”—may be out of step with the actual patterns and formations seen in dissolution cases.

Imagine, for example, a statute in which the term “family” implicitly refers to a unit consisting of an employed father and a non-income producing, stay-at-home mother.  Would this characterization of “family” be applicable in cutting edge, expensive Silicon Valley where 72% of all two-adult households consist of (and very often, rely on) two solid income earners?  The social reality of any given “family,” in other words, can be quite different from the social reality presumed in the statutes, and in these instances, advocates always do well to acknowledge and mine this disconnect when making a case-specific claim about spousal support.

Considerations of spousal support must always attend carefully to the actual circumstances of any given family.  At one time, young adults regularly “left the nest” at the age of emancipation; nowadays, most are economically mandated to reside with their parents well past the age of eighteen.  Does this mean, then, that the Payor of spousal support will also be supporting a resident and still dependent (i.e., unemployed) adult child?  Or that the Recipient of spousal support may also be doing the same?

And guess what: when retired Baby Boomers decide to divorce, spousal support issues become especially challenging.  By definition, retired Baby Boomers no longer have income cash flow out of which support is typically paid.  How, then, does one or the other retired party pay spousal support in a family unit where neither party is an income earner?

Recognizing the specificities of a family’s circumstances is thus an important beginning.  The next and equally important step is to locate these circumstances within a demonstrated pattern of family dynamics since such behavior patterns will also powerfully affect considerations of post judgment support.

Weeding out the short term marriages and the ‘forever’ relationships, we are left with a middle range of actual family-defining behaviors.  Are we dealing with two working professionals, or with a family made up of one income earner and one stay-at-home parent who occasionally works, but only when necessary and/or convenient?   Are both spouses actively engaged in their careers, or has one spouse put a career on hold until the children are able to drive and/or care for themselves?   Is this a child-less couple and a second marriage for each spouse?  And does this same couple also have part-time childcare responsibilities that play an important role in family dynamics?   Or is this a gender flip situation in which the wife is the primary income earner for her stay-at-home husband and their children?  (Where is gender chauvinism when you need it the most!)

The counter point to these observable patterns is the expectations of the parties themselves—i.e., their own understanding, explicit or implicit, of their roles and their future as a couple.  However unreliable such expectations might ultimately turn out to be, they should be considered when addressing the issue of spousal support.  Was it a case of taking turns:  “I’ll put you through school and then you will put me through school”?  Did both parties desire a ‘Leave it to Beaver’ situation in which economic success would lead to one spouse leaving the work force to become a homemaker (or worse yet, where the expectations were tragically opposite, with one party wanting a classical relationship, and the other spouse branding that situation as personally or economically unacceptable?)   Or were the parties’ expectations more in the direction of a “trophy spouse,” a situation in which one party was to be publicly recognized less as an equal marital partner and more as personal reward for the other party (i.e., a “trophy wife” or a “sugar daddy”)?

Both the family behavior patterns and the marital expectations of the parties themselves lead to a number of questions with no easy answers.  For example, how are we to consider behavior patterns and expectations in a family when the parties are on their second or third marriages, or when they are approaching the end of their economic careers?  And how do these concerns affect the application of the FC 4320 factors, since repeated trips to the altar surely affect the thinking of the parties, and a short working life for older spouses removes much economic latitude from the spousal support issue?

©2012 James Frederic Cox

Posted in Divorce, Education About Dissolution, Family Law, Spousal Support | Tagged , , , , , , ,

Spousal Support and Marital Standard of Living

In my recent discussions of post-judgment spousal support, I have mentioned the concept of “marital standard of living,” but have not yet explained the overall importance and functioning of this concept within dissolution proceedings.

Allow me, then, to do so now.

The California Family Law Code clearly and repeatedly designates “marital standard of living” as the benchmark to be used by the Court in determining a payment amount for post-judgment spousal support.  Appellate guidance echoes what is said in the statutory text and attempts further clarification, attaching words such as “high” or “moderate” to the phrase “marital standard of living.”

Questions, however, still remain.  What precisely is meant by “marital standard of living” (MSOL) and how exactly will the Court use the MSOL to determine both the amount and duration of spousal support?

Clearly, when making an order for spousal support, the Court cannot simply employ the non-quantitative, ‘soft’ language of case law:  “Pay the amount of support necessary to have a medium to high standard of living!”  Instead, both for clarity’s sake and for enforcement purposes, the Trial Court is required to convert statutory language into actual
dollar-and-cent amounts.  The Court, in other words, must introduce quantitative standards that are otherwise lacking and in so doing, must order spousal support in a manner that is both predictable and tailor-made to the facts of the case at hand.

The process of turning ideas about support into numbers is merely an effectuation of the statutory scheme and does not involve using a formula that processes inputs and spits out results.  The Courts, after all, have categorically rejected such formulaic calculation in favor of a mandated balancing of the 14 factors given in Family Code (FC) Section 4320.  But after engaging with these 14 factors and sorting out the exceptional situations, one is inevitably left with a handful of common, familial patterns (e.g., kids or no kids; kids still living at home or kids long gone; one income earner or two; comparable incomes or unequal incomes; etc.)

I maintain that by working with these patterns in a uniform manner, one can indeed develop a method, consistent with case guidance, to quantify the MSOL and thereby determine a dollar amount for spousal support.

Case law clearly states that MSOL is measured by the expenditures of the parties during a marriage, including any funds ‘expended’ for savings.  However, because of the likely dearth of accurate data, and the prohibitive cost of data reconstruction by an expert, it is often virtually impossible to obtain an exact understanding of marital expenditures.  Thus, the Court is frequently in the position of finding the MSOL based only on summary information or testimony.

Still, it is possible to estimate and interpolate significant economic conclusions from readily available sources.  From the over 14,000 settlement conferences I have conducted so far, I clearly see that marital expenditures are normally closely correlated with spouses’ reported taxable incomes [less closely with small businesses, but that can be corrected].   Furthermore, the use of spouses’ incomes as an indicator of marital expenditures is permitted in the case law.

Reported taxable incomes, though, are not the only data we can use in this analysis.  A substantial number of families have many other non-tax return cash flows that can affect MSOL.  Examples of non-tax return cash flows include familial support from parents; non-cash employment benefits such as option grants, ESPP opportunities, vehicles and pension fund contributions; repeatedly refinancing and borrowing against growing equity in the marital residence; and even, increasing marital consumer debt.  Also, it is logical to attribute economic value to non-spendable benefit additions such as growing retirement accounts, because such third-party savings reduce the necessity of familial savings for retirement and thereby, free up further funds for spending.  Thus, using tax-reported incomes and adjusting for non-tax return items gives a fair impression of annual expenditures for a family.

Now, though, we must ask another important question:  in this effort to discern economic data, which years of the marriage should we focus on?

Local rules indicate only the last year prior to date of separation (DoS), but such a short period is probably just as inaccurate of a yardstick as focusing on the entire period of marriage.  Common knowledge and economic fact both tell us that the MSOL typically increases with increased earnings of the family unit, since most families spend (including savings) what they earn.  So while any number of years could be used for our purposes, too many years would tend to dilute the rising tide of both parties’ expectations at the end of the marriage, while too few years would tend to promote inaccuracy by giving us a snapshot of only one possibly non-representative marital period (e.g., a non-representative, high-earning year.)

In my experience, this situation can best be managed by focusing on the last three to five years of marital economic data.  These years are usually enough to capture the typical MSOL of the marriage and reach an opinion on normal, representative expenditures.  With this time framework, we are spared the myopia of seeing too little information and we avoid the dilemma of seeing too much.  Also, by using variable weightings of the data, it easy to imbue the evidence from this period with determined and differentiated flavors.

In this or any marital segment, we are likely to encounter several potential confounding factors such as variable earnings, cost of living inflation, and even a family’s ability to adjust to sudden changes in funding.  Because of this normal volatility, I mechanically reduce the Adjusted Marital Family Incomes by subtracting (or adding) 25% of any annual variation from the average that exceeds a 10% difference.  Doing this simply ‘smoothes’ or dampens the picture of MSOL provided by the data by knocking off the peaks and valleys of cash flows, while still maintaining the essence of the MSOL as reflected in the numbers.

Once we have the Smoothed and Adjusted Marital Family Income, we need to parse the numbers to reflect the major fund allocations of a household, namely, funds used for the children and funds used for the adults.  Given that our state guideline child support calculations are based in part on three USDA studies of family economics, I simply extract the approximate child support percentages from the statute and use those as the basis for allocating a portion of the Smoothed Adjusted Marital Family Income to the children.

The portion that remains is that of the adults, which means, of course, that we will divide it in half to determine the sum allocable to each party during the marriage.  Now is also the time to note that for each parent, the cost of children does not automatically cease once they reach majority.  Rather, the cost of children remains a consideration so long as the parents are contributing to the children’s education or support (for example, for school, for religious pilgrimages or for simple economic necessity), no matter what the children’s ages or circumstances might be.

The next two steps are logical, if not common. The first is to adjust for inflation over time by using the CPI, especially if the date of judgment is more than two years post separation.  The second involves reckoning with the conventional wisdom that two people together live more cheaply than two persons living separately.  Supported by the SF Federal Reserve, this commonplace understanding warrants adding back, for each party, an inflator amount to reflect the additional costs of achieving the MSOL due to the parties now spending their dollars separately.  But do keep the following in mind: the strength of this inflator will be diminished if the Recipient of spousal support still has kids living in the household.

By using all of these adjustments, I am able to calculate a number for the MSOL that reflects its value for each adult party in today’s dollars.

Now that we have a quantified value for the MSOL, we still do not have all that we need to determine the final amount, if any, to be paid in spousal support.  By itself, the quantified MSOL simply represents the target amount of spousal support that is to be received.  We are left, now, with the task of figuring out exactly how much spousal support, if any, the Payor will ultimately be obliged to pay.  Addressing this issue begins with a careful look at the circumstances of the Recipient.

The legislature has levied, in FC §4320 and §4330, an independent, though discretionary, obligation on the Recipient spouse to ‘strive to be self supporting at the MSOL’.  The Recipient spouse, in other words, must do what he/she can to maximize (eventually) his/her own contribution to the MSOL.  So the next step here, as mandated by FC §4320(l), is to assess the Recipient’s own contributions to his/her support.

Items to be considered include all cash flows and incomes from any source, such as disability payments, social security, retirement payments, interest and investment incomes, and similar sources.  There is also good authority for the Court to consider imputing a reasonable rate of return on the Recipient’s non-performing or under-performing assets, should circumstances indicate an inappropriate economic utilization.   Similarly, all earning from the Recipient’s work should be applied to discharge his/her obligation to be self supporting at the MSOL.  If there is no direct evidence of earnings, the Court can also impute income from the reasonable work regimen that the Recipient is able to perform, as testified to by a vocational evaluator.

Once all of the Recipient’s cash flows have been used to fulfill the obligation for self support, the resulting sum is measured against the MSOL.  If the total of the Recipient’s own income and imputations is below the MSOL, the Payor will be required to make up the shortfall in the earnings of the Recipient, but only up to the level of the MSOL.

So while not absolute, the MSOL becomes a de facto ‘cap’ or limit on the amount the Payor can expect to pay, absent unusual or intervening facts.  Thus, every additional dollar Recipient earns is a dollar reduction in support up to the MSOL, which would mean that the spousal support payment would become zero.  And while it is possible for the Court to order spousal support to be paid at a level that is above the MSOL, this kind of payment situation rarely occurs.  The general rule is this:  if the Payor obtains or develops extensive wealth or income post separation, the Recipient will not share in such new money once he/she is at the MSOL.

Ideally, post judgment, both parties will continue their separate lives at or above the MSOL, though sometimes, this is not possible.  Often, the cost of maintaining two households exceeds the limited dollars available.  In this situation, the Payor’s contribution to the Recipient drives the Payor below the MSOL, which is contrary to the intent expressed in the statutory scheme whereby both parties are to be maintained at the MSOL.  Moreover, to my knowledge, there is no guidance that mandates unequal allocation of the available cash flows.  So when both parties will be below the MSOL, fairness dictates that each party share equally in the shortfall of funds. Therefore, to obtain parity below the MSOL, simply add together the parties’ incomes and cash flows and divide by two.

©2011 James Frederic Cox

Posted in Education About Dissolution, Family Law, Spousal Support | Tagged , , , , , , ,

Spousal Support Termination and Jurisdictional Limitation

Long term spousal support arrangements are often the result of much hard-fought bargaining, which is why I always advise parties to include in their MSA an explicit and direct statement limiting the Court’s authority, post-judgment, to modify a carefully-crafted support plan.  Unless its authority is explicitly and directly limited either in the judgment or in some prior order, the Court ALWAYS has jurisdiction, post-judgment, to modify the amount and duration of spousal support.

Easily enough, however, parties sometimes forget to include in their MSA specific protective provisions regarding the Court’s jurisdiction.  And even in instances where they do address this issue, parties may not understand which jurisdictional model would serve them best.

Fortunately, these models are easy to describe and they all follow well-known paradigms of jurisdictional limitation and support termination.

Here they are:

Model I:  Hard and Absolute Termination of Jurisdiction and Payment:

Parties designate a ‘date certain’ or an ‘event contingent date’ for termination of support.  This date for termination of support cannot be modified at any point between the date when the order (or the judgment) is entered and the termination date itself.

The meaning of ‘date certain’ is self-evident.  ‘Event contingent date’ refers to a future date on which a specific event will occur.  Examples include ‘upon remarriage of the support recipient’ or ‘three months after the youngest child reaches 18 years of age.

Model II: Extendable, or ‘Soft’ Termination of Jurisdiction
and Payment:

This model is quite common—all too common, some might say, since parties often employ this model unwittingly and not always to their benefit.

Parties specify support termination either for a date certain or an event contingent date, but they also fail to address directly and explicitly the issue of the Court’s post-judgment authority to modify their support arrangements.

So the Court retains its post-judgment authority in this regard and upon a proper showing of changed circumstances and supporting facts, the Court can exercise this authority, if it so chooses, thereby extending support payment beyond the original, negotiated expectations of the parties.

Thus, the termination date in this model is ‘soft,’ since it remains open to modification by the Court, post-judgment.

But do keep in mind:   Although the Court in this instance has jurisdiction to modify amount and duration of support, post judgment, whether or not the Court chooses to exercise its authority will always depend on both facts and advocacy.

Model III:  Limited Jurisdiction to Extend Termination of Support

Parties assign to the Court specific rights and parameters for being able to modify the spousal support order, but with an absolute, defined limit on the duration of support.  In other words, parties give the Court a hard and fast time limit:  the date for support termination can be extended, but never beyond the date of X.

An example would be this:  “the Court shall retain jurisdiction to modify support based upon the Recipient’s performance in college, such that if the agreed course of instruction should be delayed by factors beyond the control of the Recipient, the Court shall have authority to extend the duration of support up to one year past the current absolute termination date, but in no event will the Court be able to extend support past September 1, 2015.’

Model IV:  Limited Jurisdiction to Modify Support Amount

Parties establish specific directional limits for support modification, identifying clearly the conditions that would trigger an upward or a downward change in support amount.

For example, the parties might set out that support can only be modified downwards upon proof by Payor of a substantial reduction in earnings of not less than 10%.  Or, parties might state that support can be modified upwards upon proof that Recipient has further unmet needs and that Payor has the ability to pay the increased amount.

*   *   *   *   *   *   *   *  

No matter which of these models is chosen, I also recommend that parties establish specific criteria that the Court must use in the exercise of its judgment.  Examples are:

  • Safety valves for Payors in the event of a calamity, such as job loss
  • Safety valves for Recipients, such as the allocation of burden of proof, as in Richmond

By setting forth criteria that are straightforward, observable and enforceable (e.g., graduation from a program of study by such-and-such a date), the parties make post-judgment support modification into an objective consideration, while also obviating their need to interact with each other years later.  Both Payor and Recipient are spared the necessity in the future of delving into the private details of the Recipient’s life to discover the facts pertaining to the Recipient’s failure to perform as expected.

Indeed, the risk of performance failure, as well as the burden of proof, can be clearly and directly allocated in the parties’ MSA.  For example, the MSA might include a statement along these lines:  “Recipient agrees to accept the risk of not completing his/her program of study on the expected completion date, which is 8 months from the date of his/her entry into the program.  In light of this risk, the parties agree that Recipient’s support will be reduced by X dollars on X date—i.e., 18 months from the date of Recipient’s entry into the program–whether or not Recipient graduates from this program of study on this date.”

©2011 James Frederic Cox

Posted in Court Processes, Education About Dissolution, Family Law, Spousal Support | Tagged , , , , , ,