Social Security and Reduction of Alimony
June 4, 2014 § 1 Comment
May a chancellor grant a downward modification of alimony based on the ex-wife’s post-divorce receipt of Social Security benefits that are derived from the ex-husband’s earnings record?
That was a key issue in the case of Cockrell v. Cockrell, handed down by the COA on May 25, 2014. In that case, the chancellor had found a material change in circumstances based on the husband’s serious deterioration in health, and reduced his alimony by $557 a month, which was the amount of the ex-wife’s Social Security benefits that she qualified for based on the ex-husband’s earnings record. The COA affirmed. Judge Fair’s opinion, for the majority, based its holding on the case of Spalding v. Spalding, 691 So.2d 435 (Miss. 1997).
In Spalding, the ex-wife had filed an action to enforce the alimony provisions of a foreign divorce judgment, and the trial judge allowed the ex-husband a credit for Social Security benefits received by the ex-wife based on the ex-husband’s earnings record. It’s not exactly the same scenario as that in Cockrell, but it’s close enough to decide the issue.
Here is how the Spalding court addressed the issue, beginning at page 438:
In ruling that the use of Social Security payments may be an alternative source of satisfying alimony obligations, the chancellor relied upon this Court’s earlier decisions of Mooneyham v. Mooneyham, 420 So.2d 1072 (Miss.1982), and Bradley v. Holmes, 561 So.2d 1034 (Miss.1990). In Mooneyham, this Court weighed decisions from a number of other jurisdictions and held that Social Security payments derivative from the child support payor should be credited against child support. The Court cited with approval the Georgia case of Horton v. Horton, 219 Ga. 177, 132 S.E.2d 200 (1963), which stated the basic policy:
Social Security disability payments represent money which an employee has earned during his employment and also that which his employer had paid for his benefit into a common trust fund under the Social Security Act. 42 U.S.C. § 301, et seq. These payments are for the purpose of replacing income lost because of the employee’s inability to work upon becoming disabled. Thus, these payments substitute for income. Since the amount of alimony required to be paid is determined largely by income, we see no reason why, in discharging the obligation to pay the alimony, Social Security disability benefits should not be credited.
Mooneyham, 420 So.2d at 1074. This Court stated that the decisions considered from other jurisdictions “appear to be unanimous in holding the social security payments to the minor … should be credited on the amount of support ordered by the court.” Id. at 1073.
Eight years later, this Court followed the logic and holding of Mooneyham in deciding Bradley. Bradley held that a retired father’s child support commitment would be credited for Social Security payments the minor child was eligible to receive premised upon the father’s income record, even though the child’s mother chose to receive Social Security benefits based on the income history of the child’s retired stepfather. Bradley, 561 So.2d at 1035–36. This Court stated that “[e]quity suggests that child support obligations are to be off-set, not only to the extent of payments actually received under the Social Security Act, but also for payments the child was entitled to receive, based on the parent’s retirement.” Bradley, 561 So.2d at 1036 (citation omitted).
This Court’s holdings in Mooneyham and Bradley aligned Mississippi with the majority of jurisdictions which have examined this issue. See Pontbriand v. Pontbriand, 622 A.2d 482, 484 (R.I.1993), which stated that the “overwhelming majority of states that have considered this issue allow a credit for Social Security benefits paid to dependent children.”
The issue raised here on appeal has not been previously presented to this Court. However, in the cases of Frazier v. Frazier, 455 So.2d 883 (Ala.Civ.App.1984), and Brewer v. Brewer, 613 So.2d 1292 (Ala.Civ.App.1992), Alabama has considered this issue and extended the principle of derivative Social Security benefits satisfying child support obligations to cases involving alimony claims. In Frazier, the Alabama Court of Civil Appeals held that the trial court erred in not allowing Social Security benefits which the wife received and which were derived from her husband’s Social Security account as credit against his alimony arrearage. Frazier, 455 So.2d at 885. In discussing whether or not to extend derivative Social Security benefits *439 to alimony claims, the court in Frazier remarked:
[w]e cannot fathom any valid reason or reasonable logic as to why the rule of law in the Binns [v. Maddox, 57 Ala.App. 230, 327 So.2d 726 (1976)] and Bowden [v. Bowden, 426 So.2d 448 (1983) ] cases, supra, should not apply to periodic alimony as well as to child support. One of the obvious purposes of Social Security benefits is to partially replace income which is lost because of the retirement of an employee because of age or disability. The payments substitute for income.
Frazier, 455 So.2d at 885.
Appellant contends that the instant case can be distinguished from the Mooneyham case because it deals with retirement benefits rather than disability benefits. This Court, in Bradley, applied the Mooneyham rule to a situation dealing with derivative Social Security retirement benefits, evidently finding no reason to distinguish between Social Security benefits premised on retirement as opposed to disability.
Appellant asserts that Congress did not intend to permit Social Security payments to be an alternate source of income for the satisfaction of an alimony obligation. No cases were cited by Appellant to sustain this conclusion. This Court has held that it will not consider an assertion of error for which there is no authority cited. Armstrong v. Armstrong, 618 So.2d 1278, 1282 (Miss.1993); Smith v. Dorsey, 599 So.2d 529, 532 (Miss.1992); R.C. Petroleum, Inc. v. Hernandez, 555 So.2d 1017, 1023 (Miss.1990).
Appellant insists that the decision of the chancellor to credit derivative Social Security benefits against alimony represented a downward modification of the alimony granted to Betty Spalding, asserting that William failed to meet his burden of proof regarding a material change in circumstances. This Court, in Mooneyham, applied derivative Social Security benefits as credit against child support obligations. Mooneyham, 420 So.2d at 1074–75. Here, we indicated that derivative Social Security payments credited against child support obligations are to be considered as substitute income. Mooneyham, 420 So.2d at 1074. The chancellor in the instant case applied that same logic to derivative Social Security benefits with respect to alimony, and treated the credit against alimony as an alternate source of income out of which alimony obligations are permitted be satisfied.
The chancellor arrived at the same conclusion as did the Alabama Court of Civil Appeals in Frazier, supra, i.e., no valid reason exists to treat derivative Social Security benefits differently with respect to alimony or child support. In the instant case, Betty Spalding’s Social Security benefits are derived in large part from William’s work history and income record. The monies paid into the Social Security fund by William and his employers for the duration of the marriage and the time following the divorce generated the source from which Betty Spalding’s benefits are paid.
The chancellor applied the holding in Mooneyham concerning derivative Social Security benefits as credit against child support obligations to analogous circumstances in an alimony claim. Ample evidence in support of his ruling is found in both Mississippi law and the law of our sister state of Alabama. The chancellor applied the correct legal standard, did not abuse his discretion, and did not commit manifest error. Accordingly, this assignment of error is without merit.
If this rule applies in modification and contempts, it should apply as well in original proceedings where an alimony obligation is being calculated. You might be able to come up with formulations based on the Social Security website calculators that a judge might find helpful in crafting an alimony provision.
Alimony is not Forever, but Almost
April 14, 2014 § Leave a comment
We’ve visited the issue of modification of alimony in a previous post dealing with the COA case of Peterson v. Peterson, decided last year.
Peterson highlighted how difficult it can be, once alimony is ordered by the court, to terminate or reduce it.
That’s because the competing equities on both sides can be pretty strong.
The latest case dealing with similar issues is Cook v. Cook, handed down by the COA on March 24, 2014.
Cook, as is true with all of these cases, is quite fact intensive. I’m not going to rehash all of those facts here, but when you read Judge Carlton’s opinion affirming the chancellor’s decision to grant a 25% reduction in alimony, note how the trial judge, and then Judge Carlton following the chancellor’s analysis, seesawed their way down the factors, first favoring modification, and then not favoring, and then back, and then forth. It’s fairly representive of the way the judge has to weigh these matters.
The best way to avoid having to modify alimony is to avoid it in the first place. That can be difficult when there is a great discrepancy in income and ability to establish a decent earning capacity. Don’t forget that as equitable distribution expands, the entitlement to alimony contracts. So, given significant resources, you can advise your client to give more — sometimes much more — in equitable distribution so as to eliminate the need for alimony. It’s a strategy I used successfully when I practiced, and had used against me, too.
Cook also highlights the boomerang effect your client can suffer in asking for modification. Based on the principle that the best defense is a good offense, your petition to modify can be met with a counterclaim for contempt and upward modification. If the alimony was rehabilitative, you might even stir up a counterclaim to convert it to permanent periodic alimony. Oster v. Oster, 876 So.2d 428, 430-431 (Miss. App. 2004).
How Much Life Insurance is Enough? Or Too Much?
February 20, 2014 § 6 Comments
The chancellor ordered Bill Coggins to pay his ex, Alicia, $540 a month in periodic alimony. He also ordered Bill to make Alicia the beneficiary of $175,000 in life insurance on Bill’s life ” … to insure the payment of alimony in order to compensate [Alicia] and allow her to to survive …” if Bill should predecease her.
Bill appealed, complaining that the life insurance requirement was “excessive considering its purpose,” as in Johnson v. Pogue, 716 So.2d 1123, 1134 (¶41) (Miss.App. 1998).
In Coggins v. Coggins, decided Febarary 11, 2014, the COA agreed and reversed the chancellor’s ruling. Judge Maxwell wrote for the majority:
¶35. An alimony payor “may be required to maintain life insurance in an amount sufficient to satisfy payment of alimony obligations that survive the payor’s death.” Bell, Mississippi Family Law § 9.08[4][c] (citing In re Estate of Hodges, 807 So. 2d 438, 442-44 (¶¶14-23) (Miss. 2002)). The key phrase is “alimony obligations that survive the payor’s death.” ¶36. Periodic alimony is an obligation that “terminates automatically” upon the payor’s death and cannot be imposed upon the payor’s estate, absent an express agreement. Armstrong, 618 So. 2d at 1281; see In re Hodges, 807 So. 2d at 443 (¶19). While lump-sum alimony fully vests at the time of the divorce judgment, periodic alimony only vests on the date each payment becomes due. In re Hodges, 807 So. 2d at 442 (¶17). So when the payor dies, the only alimony obligations that survive—and the only obligations that may be insured—are unpaid lump-sum alimony and unpaid periodic-alimony payments that have already vested.
¶37. Recognizing the possibility that an alimony payor may fall behind in periodic-alimony payments and then die leaving those vested payments unsatisfied, this court has acknowledged the chancellor’s authority to require the alimony payor to maintain a life insurance policy to protect the recipient spouse against such a contingency. Pogue, 716 So. 2d at 1134 (¶41); see also Beezley v. Beezley, 917 So. 2d 803, 808 (¶17) (Miss. Ct. App. 2005). But in Pogue, this court found that requiring the payor to maintain a $75,000 life insurance policy to protect against the potential failure to make $500-per-month alimony payments was “excessive.” Pogue, 716 So. 2d at 1134 (¶41).
¶38. How much more excessive then is the requirement that Bill designate Alicia as the beneficiary to $175,000 in life-insurance proceeds to protect against Bill defaulting on his $504-per-month alimony payments and then dying before curing the default. This amount of insurance—the equivalent of thirty years worth of alimony payments—assumes not only that Bill may fall behind for three decades but also that Alicia will experience no material change of circumstances altering or terminating her need for alimony. Such an amount is unreasonable. Even when we factor in the unpaid portion of the $25,000 hybrid property settlement/lump-sum alimony obligation that has vested to Alicia, we find requiring Bill designate Alicia receive seven times that amount upon his death is still excessive.
¶39. We remand for the chancellor to consider whether requiring Bill to designate Alicia as a beneficiary is necessary to protect against the alimony obligations that may survive Bill’s death. If the chancellor determines the designation is necessary, he should require Bill to designate Alicia as beneficiary to a portion commensurate to those potential obligations.
There must be proportionality between the amount of alimony reasonably expected to come due and the amount of life insurance to protect that amount. The only guide we have from the case law, however, is that for $500 monthly alimony $75,000 is too much, and $175,000 is ‘way too much.
Do you always include a prayer in your divorce pleadings for life insurance to secure child support, alimony, and other obligations? And do you have your client and possibly other witnesses testify about the need for it? If you don’t do either or both, you should start.
And don’t overlook marshalling some proof about what the cost of the life insurance will be. I have denied that prayer for relief because I had no idea from the evidence in the record what the premiums would cost the paying party.
Enforcing the Temporary Order
February 19, 2014 § Leave a comment
Does entry of a final judgment of divorce eliminate the possibility of an action to collect unpaid amounts due under a temporary order?
It’s not uncommon to be getting your waterfowl in a row for final hearing next week only to learn from your client for the first time that her husband owes her a couple of thou in child support or house payments or temporary alimony, and that news is followed by the query ” … and what are you going to do about it?”
So … what are you going to do about it?
In the COA case of O’Brien v. O’Brien, handed down February 11, 2014, Judge Griffis addressed the appellant’s argument that it was improper for the chancellor to find him in contempt of the temporary order after the final judgment of divorce was entered:
¶10. Mississippi Code Annotated section 93-5-17(2) (Rev. 2013) provides that a chancellor may “hear complaints for temporary alimony, temporary custody of children and temporary child support and make all proper orders and judgments thereon.” Further, this Court may allow retroactive awards of temporary support even after a divorce judgment is entered. Strong v. Strong, 981 So. 2d 1052, 1055 (¶15) (Miss. Ct. App. 2008). Temporary support ends when a final judgment is entered. Bond v. Bond, 355 So. 2d 672, 674-675 (Miss. 1991). However, a payor still has a duty to pay past-due temporary support, as a final decree of divorce does not preclude a chancellor from entering a judgment for arrearages of temporary support without having to express the right to enforce the judgment in the final divorce decree. Lewis v. Lewis, 586 So. 2d 740, 742 (Miss. 1991).
You have several ways to approach enforcement of temporary orders:
- You can wait until the final judgment is entered and file a contempt action. Fair warning: bring your authority (e.g., the above paragraph) with you to court because I have had chancellors question the viability of such actions when I practiced.
- With enough advance warning you can file a contempt action during the pendency of the divorce and ask that it be heard in advance of the final hearing.
- Many lawyers will agree to combine temporary contempt issues with the final hearing. That is often done in this district. You can do that by pleading, of course, or by stipulation or agreed order, or it can be listed as a contested issue in a consent.
The main thing to remember is that amounts that were ordered to be paid under a temporary order are vested when due, and the right to collect them does not terminate on entry of the final judgment, even though the final judgment does terminate the temporary order itself. And it is not necessary for the final judgment of divorce to recite or provide for a right of future enforcement of the temporary order.
Another Deference Decision with an Appellate Attorney’s Fees Point
February 5, 2014 § 2 Comments
The COA’s decision in Proctor v. Proctor, handed down January 28, 2014, is one of those cases where the appellate court deferred to the chancellor’s discretion, both on application of the Ferguson factors in equitable distribution, and on the Armstrong factors vis a vis alimony.
I talked about deference in a previous post. Proctor is an illustration of how stout the trial judge’s judgment can be when she invokes the applicable factors and her decision is supported by substantial evidence in the record. You might want to pay particular attention to Judge Barnes’ opinion at ¶ 19, where she points out that equitable division need only be equitable, not equal. That seems to be a concept that many lawyers and litigants do not grasp.
Another point that bears mention is at ¶ 36, where Judge Barnes addresses Ms. Proctor’s request for an award of attorney’s fees on appeal:
Donna makes a cursory request that this Court award her attorney’s fees on her appeal, in an amount equal to one-half of the amount that was awarded by the chancery court, according to Grant v. Grant, 765 So. 2d 1263, 1268 (¶19) (Miss. 2000), and Durr v. Durr, 912 So. 2d 1033, 1041 (¶30) (Miss. Ct. App. 2005). The distinguishing feature of these cases, however, is that the appellee was requesting attorney’s fees for defending the case on appeal, not the appellant prosecuting the appeal, unsuccessfully. Therefore, we deny Donna’s request.
A Common Sense Approach to Dividing Retirement Accounts
February 4, 2014 § Leave a comment
When it comes to dividing retirement accounts in divorce, the case law and arguments of counsel can be all over the ballpark. Do you divide the accounts as you would cash money, by percentages or assigned sums? Or do you order a division of the stream of income as you would alimony?
How and whether a military retirement account should be divided was the issue in the COA case of King v. King, decided January 14, 2014. I believe Judge Fair’s specially concurring opinion sets out the proper approach that chancellors should use in determining the nature of, and how to divide, retirement accounts. Here it is verbatim:
¶12. The issue dividing the majority and dissent is whether there was a Hemsley-Ferguson-Armstrong compliant treatment of military retirement benefits belonging to Joseph. Those benefits were being paid to him monthly, having matured from a dormant asset into a stream of income. For that reason I concur with the majority in recognizing that the treatment of such benefits by the chancellor was in accord with the intent of those three cases and their progeny.
¶13. The Supreme Court of Mississippi handed down Hemsley and Ferguson in July 1994, providing factors for consideration by chancellors in establishing and equitably dividing marital assets. In 1993, Armstrong had set out similar factor guidance for determining alimony. Later rulings have emphasized that these three cases govern financial relations – past, present, and future – of divorcing spouses, and should be considered together, with one receding in effect when another increases.
¶14. The first case recognizing the interdependency of those three “factor discussion” cases was handed down five months after Hemsley and Ferguson. In Johnson v. Johnson, 650 So.2d 1281 (Miss. 1994), the supreme court introduced the concept of remedying, through alimony, a “deficit” in income and lifestyles between parties after equitable division of their marital property and evaluation of their separate property, if any. A chancellor is required to first determine income from employment and from marital property and separate property. Then, if a deficit results, then the chancellor should award alimony in one or more of its three common forms (lump sum, rehabilitative, and periodic) to address the deficit. Overall fairness, equity, and especially finality undergird such treatment, with an emphasis in recent cases placed on avoidance, if at all possible, of continuing financial relationships between spouses (other than child support).
¶15. The Uniformed Services Former Spouses’ Protection Act (USFSPA), cited in both the majority and the dissent, has been compared on occasion by the supreme court to the 1986 COBRA provisions under which a chancellor may divide marital ERISA qualified retirement plans (Tamra’s 401(k), for instance) without tax consequence. However, Joseph’s military retirement, like Tamra’s PERS retirement, and all other government retirement programs, are exempt from the COBRA Act and its “Qualified Domestic Relations Orders” (QDRO). Military retirement has its own requirements for benefit distribution in divorce cases.
¶16. USFSPA allows only income streams from military retirement benefits to be awarded, prohibiting lump sum apportionment and limiting the total of all alimony and child support to 50% of the service member’s regular retirement income stream. Thus, the maximum benefit possible for Tamra under those restrictions is $267 monthly, which is half of Joseph’s $1,144 less $305 in agreed child support. Apportioning that amount to Tamra as payment, in installments, for her share of a property interest in Joseph’s retirement would raise her gross $4,100 per month to $4,367 and reduce Joseph’s to $1,330, further increasing the deficit that favors an award of alimony to Joseph.
¶17. We should formally recognize the difference between an ERISA plan and military retirement plans, and perhaps all retirement accounts actively paying monthly benefits which cannot be altered. For example, PERS contributions on early termination of employment, and 401(k) and IRA contributions at any time, may be withdrawn by a spouse at the time of divorce and are therefore still divisible, some through a QDRO without loss of tax-deferred status. On the other hand, a vested income stream that has commenced in a government plan is not, as the majority recognizes, divisible or payable in lump sum, and should be considered under the Armstrong alimony prong only.
¶18. Such treatment of an existing retirement income stream would be in accord with the view our supreme court takes of “good will” in business valuations, likewise not a divisible asset readily convertible to cash but rather a source of monthly income to be considered in alimony determination only.
In other words, when the retirement account is not divisible by law, and has been converted to a stream of income, it should be treated as income, and not as a divisible asset convertible to cash.
Annuities also come to mind when enumerating the types of assets that such an approach would cover.
I think Judge Fair is right on target with this.
The Valuation Date as a Moving Target
January 6, 2014 § 3 Comments
The valuation date for equitable distribution is important to establish, as we have discussed before, here and here, among others. Asset values can fluctuate, significantly affecting the landscape of equitable division.
We’ve also discussed the MSSC holding that the date of the temporary judgement does not necessarily impose a demarcation date for valuation. That date is left to the sound discretion of the chancellor based on the evidence in the record.
The two principles arose together in the COA case of Stout v. Stout, decided December 10, 2013. In that case, Henry and Tracey Stout were before the chancellor on a consent, leaving equitable distribution for the judge’s adjudication. A temporary order had been entered in 2009, and the divorce trial was not held until 2012. In 2009, the marital home’s value was around $30,000 more than its value at the time of the final hearing. The chancellor elected to use the 2012 value, which caused Tracey to receive a smaller share of assets, resulting in an award of alimony.
Henry appealed, complaining that it was error for the chancellor to use the trial-date value as opposed to the temporary-order-date value. He also argued that it was error for the chancellor to use different valuation dates for different assets. Judge Roberts wrote for the majority:
¶15. First, Henry claims that the chancellor improperly valued the marital home at its 2012 value as opposed to its value in 2009 when the temporary order was entered. He claims that due to the incorrect valuation, Tracey received a lower value of assets making it more likely that alimony would be necessary. Two appraisals were done on the home: the 2009 appraisal valued the home at $132,000; the 2012 appraisal valued the home at $105,000. The chancellor used the latter value when assessing the home’s value to Tracey. Henry admits that the chancellor had the discretion to set the dates for valuation of assets, and he cites to no other authority for his proposition that the chancellor is required to use the same date for valuation of all property. In using the 2012 value, the chancellor specifically noted that the house had significantly depreciated, that Tracey had been responsible for the mortgage payments since the separation, and that Henry had abandoned the house. The supreme court has stated that “the chancellor enjoys broad discretion to value property as of any date that, in the chancellor’s view, equity and justice may require.” In re Dissolution of Marriage of Wood, 35 So. 3d 507, 516 (¶20) (Miss. 2010). We can find no case law that a chancellor must use the same date when valuing all the property. Therefore, this issue is without merit.
A few observations:
- As important as the valuation date is in an equitable distribution case, I reiterate that I seldom hear any proof as to what date a party wants me to impose, and why. It can make all the difference in the world to your client, yet, if you do not put anything in the record to support a finding favorable to your client, you are leaving it up to the judge’s unfettered discretion. I am not saying that is what happened in this case; we don’t have enough information to tell.
- It was enlightening to read that the COA could find no authority for one, global valuation date. I have never been able to divine an answer from the case law on the point either. In most cases, I am presented with valuation dates all over the ballpark. An example might be: a real property appraisal of the marital residence from 2012; IRA statements from June, 2013; personal property appraisal 3 months before the November, 2013 trial; securities account statements dated December, 2012. In a case like that, it seems that the judge has no choice but to use the best information available for the dates provided, unless the judge orders the lawyers and parties to go back to the drawing board, so to speak, to gather some more current info as of a given date.
- The most grateful clients are the ones whom you save lots of money. The clients who come to hate you are the ones you cost a lot of money. Valuation of the assets, and making the case for a valuation date favorable to your client’s best interests, are sure-fire ways to save — or make — a lot of money.
The Cap on Division of Military Retirement — or not
December 17, 2013 § Leave a comment
Henry and Tracey Stout found themselves in a divorce proceeding after twenty-five years of marriage. After the entered into a consent, the chancellor divided the marital estate, awarding Tracey, among other things, 64.75% of Henry’s military retirement.
Henry appealed, arguing that Tracey was entitled to no more than 50% of his military retirement, based on the specific limitation of 10 USC § 1408(e), which states that: “The total amount of the disposable retired pay of a member payable under all court orders pursuant to section (c) may not exceed 50% of such disposable retired pay.”
The COA addressed Henry’s appeal in the case of Stout v. Stout, handed down December 10, 2013. Judge Roberts, for the majority, started his analysis by looking to other jurisdictions:
… This issue is a matter of first impression in Mississippi; therefore, it is prudent to consult the interpretations of this issue from other jurisdictions. In a slip opinion in Gonzalez v. Gonzalez, No. M2008-07143-COA-R3-CV, 2011 WL 221888, at *5 (Tenn. Ct. App. 2011), the Tennessee Court of Appeals stated:
It appears that the United States military does not view § 1408(e)(1) as a limit. The Defense Finance and Accounting Service observes that “the amount of a former spouse’s award is entirely a matter of state law.” DIVIDING MILITARY RETIRED PAY 6 (2006), http://www.dfas.mil/militarypay/garnishment/Speech5.pdf; see also UNIFORMED SERVICES FORMER SPOUSE’S PROTECTION ACT 2–3 (2010), http://www.redstone.army.mil/legal/data/1–usfspa.pdf (“If a state court awarded you 60% of your former spouse’s retired pay and you qualify under this statute to get direct pay, then you would collect 50% through the Finance Center and your former spouse would be responsible for providing the other 10% to you.”) DOMESTIC RELATIONS FROM A MILITARY PERSPECTIVE; FREQUENTLY ASKED QUESTIONS [http://www.cnic.navy.mil/navycni/groups/public/documents/document/cnicp_ a134503.pdf] (“The 50% maximum of DRP [disposable retired pay] is a limit on how much retired pay can be paid directly, but it is not a limit on how much a court can award.”).
Although not an exhaustive list, courts in Minnesota, Delaware, Texas, Alabama, Kansas, Washington, Maryland, and Iowa also take this view of the statute. [Footnote omitted] However, several states do consider there to be a 50% limit. [Footnote omitted] The majority view is that the statute is not an absolute cap, but rather a cap on what the government can pay directly to a spouse or former spouse. We find the majority view to be persuasive; therefore, the chancellor did not err in awarding Tracey more than 50% of Henry’s military retirement benefits. This issue is also without merit.
I find it interesting that the COA wound up dealing with this issue. If this is, as Judge Roberts found, an issue of first impression in Mississippi, aren’t those kinds of cases supposed to be the province of the MSSC?
Until the MSSC addresses it, then, we will be among the states holding that the 50% limit is a limit on what the government DFAS can be ordered to withhold, not a limit on what can be awarded by the court.
This is an important case for you to know and understand if you ever deal with military retirement, as do many of us in areas of Mississippi with military installations and military retirees.
Another aspect of this case bearing mention is the fact that the chancellor awarded a percentage of the military retirement as a part of equitable distribution, but did not place a value on the total of the benefit received. Henry charged that this was error. Judge Roberts addressed it this way:
¶17. Henry next argues that the chancellor erred in not determining a specific monetary value of his military retirement and assigning a percentage of that value to Tracey’s estate. Had the chancellor added in this value, Henry claims Tracey’s estate would have been much greater and alimony could have been avoided. Without that value, according to Henry, there is ambiguity in the equitable distribution of the marital estate. Military retirement benefits are considered personal property, and as such, are subject to equitable division in a divorce proceeding. Hemsley v. Hemsley, 639 So. 2d 909, 914 (Miss. 1994). The chancellor placed a monthly value of $1,770.53 per month, but did not determine a lump-sum value. Henry cites to no authority that a chancellor is required to determine a lump-sum value of military retirement benefits. Though not at issue in other cases, there is case law describing a chancellor solely determining the monthly value of the retirement benefits and not a lump sum. However, there is also case law that shows a chancellor actually put a lump monetary value on the retirement benefits. Neither line of cases instructs that one valuation is required or more appropriate than the other. We cannot find that the chancellor erred in not determining a lump-sum amount of the military retirement benefits awarded to Tracey. We also note that the chancellor did take into account the monthly amount Tracey would receive when she determined whether Tracey was entitled to alimony and if so, in what amount.
I wonder whether the discrepancy in case law cited by Judge Roberts is due to the fact that military retirement can be divided in equitable distribution or ordered to be paid as alimony, in the discretion of the chancellor. The cases referred to are not cited, so we do not know whether they are equitable division or alimony cases. Clearly, if paid as alimony its total valuation would be beside the point. As equitable distribution, I’m not so sure, because the value of the assets divided must be taken into account. In either case, however, as Judge Roberts pointed out, equitable division does not mean an equal division. The chancellor did an exemplary job limning out Tracey’s need for financial support post-equitable-division, so it is unlikely that placing a value on the benefits received in this case would have changed the outcome.
Seeking Relief from Alimony Can be a Travail
December 3, 2013 § 2 Comments
When their 33-year marriage ended in divorce in 2005, Richard Peterson was ordered to pay his ex-wife, Josephine, $2,500 a month in periodic alimony. At the time, Richard, who was then 58, intended to continue his employment with the US Army Corps of Engineers in Vicksburg until age 75.
But things began to fall apart for Richard, or, more accurately, Richard began to fall apart. Within five years of the divorce, he suffered a series of physical injuries that affected his ability to work. He fell and broke his patella, and had to have two knee surgeries. He also suffered multiple joint injuries, and developed degenerative arthritis in both hips, both knees, and his left shoulder. To add to his misery, he tore a bicep, developed spinal stenosis in his lower back, underwent a total hip replacement, and had rotator-cuff surgery. We don’t know what his job entailed, but there are NFL players who do not suffer that many physical catastrophes in an entire career. Richard was placed on disability retirement due to the combination of woes that caused him intense pain, forced him to use a cane to walk, and disabled him from further employment.
Richard filed a petition to modify the alimony in 2010, and after a trial, the chancellor ruled that he had proven a material change in circumstances justifying a downward modification, and she reduced the alimony from $2,500 to $1,800.
Richard appealed, complaining that the reduction was not enough, since it left him with a monthly deficit of nearly $1,000. Josephine cross-appealed, contending that the retirement was foreseeable.
The COA addressed both appeals in the case of Peterson v. Peterson, handed down November 19, 2013. On the issue of modification, Judge Maxwell’s opinion set out the law applicable to modification of alimony:
¶7. With respect to requests for modification of a previously ordered alimony award, chancellors are vested with general statutory authority to modify divorce decrees and make “new decrees as the case may require.” Miss. Code Ann. § 93-5-23 (Rev. 2013). Within this broad authority is the more specific power to increase, decrease, or terminate periodic alimony payments. Hubbard v. Hubbard, 656 So. 2d 124, 129 (Miss. 1995). When asked to modify periodic alimony awards, chancellors must first determine if an unforeseeable and material change in circumstances occurred since entry of the initial divorce decree. Holcombe v. Holcombe, 813 So. 2d 700, 703 (¶11) (Miss. 2002). If not, modification is not permitted.
¶8. However, if a substantial unanticipated change has in fact occurred, the chancellor should then consider the Armstrong [footnote omitted] factors to determine the appropriate amount of alimony. Holcombe, 813 So. 2d at 703 (¶12) (citing Armstrong, 618 So. 2d at 1280). In evaluating these factors when “deciding whether to modify periodic alimony,” chancellors should “compar[e] the relative positions of the parties at the time of the request for modification in relation to their positions at the time of the divorce decree.” Steiner v. Steiner, 788 So. 2d 771, 776 (¶16) (Miss. 2001) (citing Anderson v. Anderson, 692 So. 2d 65, 72 (Miss. 1997); Tilley v. Tilley, 610 So. 2d 348, 353-54 (Miss. 1992); Armstrong, 618 So. 2d at 1280). As with any alimony consideration, the chancellor must consider the wife’s accustomed standard of living, less her own resources, as well as the husband’s ability to pay. Gray, 562 So. 2d at 83.
The opinion goes on to evaluate the evidence, and concludes that Richard’s disability was, indeed, unforeseeable at the time of the divorce and the circumstances giving rise to it took place after the divorce. Josephine’s argument was that Richard had intended to retire at some point, so retirement was foreseeable and anticipated at the time of the divorce, and, therefore, modification should not lie. The COA pointed out that the case law did not support her argument:
¶12. We have previously held that a payor’s retirement due to unforeseeable health issues constituted a material change sufficient to modify an alimony award. See Broome v. Broome, 75 So. 3d 1132, 1140-41 (¶¶26-28) (Miss. Ct. App. 2011); Clower v. Clower, 988 So. 2d 441, 444-45 (¶9) (Miss. Ct. App. 2008) (holding that husband’s retirement due to health problems and loss of income constituted a material change in circumstance, justifying a reduction in alimony). Because there is record support that Richard’s later-arising injuries forced his retirement, the chancellor did not abuse her discretion in finding that a material, unanticipated change in Richard’s circumstances had occurred since the divorce.
As for the issue of alimony reduction, the opinion addressed it this way:
¶14. Permanent periodic alimony is “a substitute for the marital-support obligation.” Deborah H. Bell, Mississippi Family Law § 9.02[1] (2005). It arises from the duty of the husband to support his wife. McDonald v. McDonald, 683 So. 2d 929, 931 (Miss. 1996). “Consistent with Armstrong, a financially independent spouse may be required to support the financially dependent spouse in the manner in which the dependent spouse was supported during the marriage, subject to a material change in circumstances.” Rogillio v. Rogillio, 57 So. 3d 1246, 1250 (¶11) (Miss. 2011). But “alimony awards in excess [of] a spouse’s ability to pay are ‘per se unreasonable.’” Sheffield v. Sheffield, 55 So. 3d 1142, 1145 (¶9) (Miss. Ct. App. 2011) (quoting Yelverton v. Yelverton, 961 So. 2d 19, 28 (¶18) (Miss. 2007)).
¶15. Having found a material change, the chancellor correctly moved to the next step and considered the Armstrong factors, comparing the parties’ financial positions at the time of the modification request to their former positions when divorced. See Steiner, 788 So. 2d at 776 (¶16). But the chancellor did not make any findings about Richard’s ability to pay. And on appeal, Richard suggests that even after the $700 alimony reduction, he still endures a monthly deficit and is unable to pay the reduced award.
¶16. From our review, it is obvious the chancellor performed a detailed financial analysis of the parties’ incomes and expenses, health and earning capacities, needs, assets, and tax consequences, as required. However, considering these unchallenged figures, it is not apparent from the record that Richard was financially able to pay the reduced alimony obligation.
The court went on to do its own analysis of the financial proof, and found lacking any analysis of Richard’s ability to pay even the reduced sum. The opinion concluded:
¶26. Because “alimony awards in excess [of] a spouse’s ability to pay are ‘per se unreasonable,’” Sheffield, 55 So. 3d at 1145 (¶9), we remand for the chancellor to consider Richard’s ability to pay this amount, or any amount of alimony, while maintaining as normal a life as possible with a decent standard of living. See Brendel v. Brendel, 566 So. 2d 1269, 1272 (Miss. 1990).
So Richard turns once again to the trial court, slogging his way toward what he surely hopes will be a more satisfactory outcome.
Balancing the needs of one party against the resources of the other is a devilishly difficult task for a chancellor that requires deft juggling of many competing factors.
Where Do the Children’s Vehicles Go?
August 28, 2013 § 4 Comments
The parties have complied with the court’s order to produce at trial a consolidated list of all the marital assets. There, among all the end tables, pots, pans, what-nots, and nick-nacks, is the 1994 Honda auto — worth $15,275 — that was purchased for the daughter to transport herself to and from college. Husband says wife should get it in equitable distribution, and wife says husband should get it. Whoever winds up with it gets a $15,275 bump in the asset column.
Those were the essential facts in the COA case of Terrell v. Terrell, decided July 16, 2013.
In that case, Robert Terrell had purchased the car for his daughter, Catherine, titled it in her name, and transferred ownership to her. The chancellor nonetheless included the vehicle in wife Mary Terrell’s share of equitable distribution. Mary appealed, arguing that the asset value of the car erroneously inflated her allocation of the marital estate.
The COA agreed with Mary, reversing and rendering:
¶17. We agree that the vehicle should not have been deemed a part of the marital estate. While it was purchased during the course of the marriage, it is not marital property, nor is it separate property. Rather, it was a gift from Robert and Mary to Catherine, who was a third-party recipient. Catherine has retained physical custody of the vehicle and has been the legal title holder of the vehicle since it was purchased. It was not an asset of Robert or Mary either jointly or separately. Accordingly, we reverse and render this issue specifically for the elimination of Catherine’s automobile from the marital estate.
The outcome here is pretty clear, but there are all kinds of permutations of this fact scenario, in my experience. Robert could have kept the car titled in his name, for insurance purposes. Or the car could have been titled in Mary for the same reason. Some parents want the car titled in either or both names solely as a control mechanism. Sometimes the car is titled in one parent’s name until the child pays some consideration for it. The possibilities are limited only by one’s imagination.
I have put the child’s auto in the column of a parent who testified that he had the car titled in his name, and did not know whether he would continue to provide the child with a vehicle. It seems to me that where the car goes depends on the particular facts of the case. In general, however, I think it’s safe to say that if the car is clearly going to stay with the child, it should be kept out of equitable distribution, and if it is really only a chattel that a parent is going to exercise control over, it should go with that parent.
I do the same with the children’s furniture and moveables.
One final point. There is plenty of case law that says if one part of the determination of assets-equitable distribution-alimony triangle is disturbed, the chancellor must look at it again and redo the whole ball of wax. Here, the appeal result is to reduce Mary’s distribution by $15,275, a not inconsiderable chunk of change. I just wonder why this was rendered and not remanded.
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