Alimony Based On Current Income Not Future Income

On September 25, 2017 the Massachusetts Supreme Judicial Court (SJC) issued a decision in Young vs. Young, 478 Mass. 1 (2017) and the court held that “the need for support of the recipient spouse (here, the wife) under general term alimony is the amount required to maintain the standard of living she had at the time of the separation leading to the divorce, not the amount required to enable her to maintain the standard of living she would have had in the future if the couple had not divorced.” In Young the Probate and Family Court divorce judge had issued a temporary order that the husband should pay $48,950.00 per month in temporary alimony. After contested trial, the trial judge modified the alimony order to instead require that the husband, who had very high annual earnings through a complex compensation program, instead pay 33 % of his annual gross income as alimony – so the amount would change each year (likely increase) as the husband’s income changed. After trial the husband appealed the judge’s percentage based alimony order as inappropriate.

The SJC did not strike down the use of percentage based alimony orders in all divorce cases but that court did find that a percentage based alimony order was inappropriate in Young because the unique circumstances which justify a percentage based alimony award were not present in that case. Traditionally, the three legs of an alimony order are ability to pay, need of the recipient, and a lengthy marriage. In Young the SJC noted that the historical baseline for measuring need is the “marital lifestyle the parties enjoyed during the marriage, as established by the judge…”. Note however that a recipient spouse does not “have an absolute right to live a lifestyle to which he or she has been accustomed in a marriage to the detriment of the provider spouse.” When there are insufficient resources to keep both parties at their marital lifestyle a “fair balance of sacrifice” is appropriate and that typically means “the supporting spouse generally should not be required to pay more than thirty-five percent of the difference between the parties gross incomes.”

Percentage based alimony orders are disfavored by the SJC for at least 4 reasons: (1) They don’t allow the parties to obtain a “clean break” from each other; (2) They present the potential for “continued strife and uncertainty”; (3) They make enforcement of the alimony award more difficult; and, (4) They “may encourage income manipulation” between the employee and their employer to minimize the alimony obligation. Notwithstanding that the SJC disfavors percentage based alimony orders there will still be multiple situations where such orders are completely appropriate and the percentage based order will receive judicial approval. These circumstances include paying alimony (or child support) on a percentage basis for bonus income or stock option income received post-divorce on an “if, as, and when received,” basis. Another legitimate use for a percentage based alimony order is to avoid the need to return to court when a foreseeable change of circumstances can be anticipated at the time of the alimony judgment or when the underlying payment amount includes “cost-of-living” adjustments due to a high inflation rate economic circumstance.

How does Young impact the divorce mediation process? Divorce mediation takes place in the “shadow” of applicable divorce statutes and caselaw. This decision clarifies how standard of living circumstances should be evaluated when mediating parties contemplate an alimony payment amount. It also clarifies when percentage alimony orders are both necessary and appropriate i.e. to address variable bonus or stock option income post-divorce, etc. The parties in Young likely spent six figures in legal fees before the SJC weighed-in on their alimony dispute – as our legal system allows them to do. In divorce mediation alimony disputes can be resolved easily in a low-cost process with a fair outcome for both parties. How does that sound?