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Wednesday, July 23, 2014

Can the Court order less than the 30-35% formula for Alimony in Massachusetts?

The Alimony Reform Act of 2011 added a formula to Massachusetts Alimony determinations:
"Except for reimbursement alimony or circumstances warranting deviation for other forms of alimony, the amount of alimony should generally not exceed the recipient’s need or 30 to 35 per cent of the difference between the parties’ gross incomes established at the time of the order being issued. Subject to subsection (c), income shall be defined as set forth in the Massachusetts child support guidelines."M.G.L. c. 208 s 53(b) (emphasis added)

Mathematical formulas are convenient and many practitioners and Judges are running the formula right away to see what the boundaries of alimony are (we've even encouraged this behavior with the creation of a website calculator and iPhone App).  But the recent decision in Hassey indicates that the formula should not be the first step in the alimony inquiry.

The formula should not be the first step in the alimony inquiry. 

When running the formula two numbers are generated: 30% of the difference in the parties' gross incomes, and 35% of the difference in the parties' gross incomes.  At this point it might be tempting to argue that a fair compromise is 32.5% of the difference in the parties' gross incomes.  This might be a fair and reasonable resolution in a case IF alimony is warranted by the facts of the case, but that is a big "IF".

Which leads us to the question: Can the Court order less than the 30-35% formula for Alimony in Massachusetts?

The answer based on close reading of the language of the statute is clearly YES!  There are three scenarios where the court can order less than 30% of the difference in gross incomes:

Scenario 1. No Need - In Hassey the Appeals Court pointed out that the "Act altered neither the fundamental purpose nor the basic definition of alimony: 'the payment of support from a spouse, who has the ability to pay, to a spouse in need of support.' G.L. c. 208, § 48."  Hassey.   The Appeals Court has clarified that the formula (despite its convenience) is not the first inquiry in a case. The first inquiry remains whether or not there is a need for alimony and an ability to pay.

In addition, the formula states that "the amount of alimony should generally not exceed the recipient's need..."  So the first inquiry should be "what is the recipient's need."  If the recipient does not have a need for alimony, or their need is less than the 30% figure then alimony should be less (anywhere in the purple range in the graph above).

Scenario 2. No Ability to Pay - As described above, the Appeals Court in Hassey clarified that the first inquiry is whether or not there is a need for alimony and an ability to pay.  If the potential payor of alimony does not have the ability to pay alimony, then it doesn't matter what the formula yields; the amount will have to be limited by the payor's ability (even if a need exists).

Scenario 3.  Marital Lifestyle is a limiting or an expanding factor depending on the circumstances.

WARNING: There is a trap in the language of the statute; many people define "need" as only the basic needs and would therefore suggest that a recipient's "need" may be well below what they are used to in the marital lifestyle.  The Appeals Court has also clarified (in Hassey and in a recent Rule 1:28 decision) that the court must consider the factors listed in M.G.L. c. 208, §53(a).  Included in these factors is the "ability of each party to maintain the marital lifestyle."   Therefore, "need" is not the amount a recipient requires for a basic level of subsistence, but rather the amount a recipient requires to "maintain the marital lifestyle."
"Need" is not the amount a recipient requires for a basic level of subsistence, but rather the amount a recipient requires to "maintain the marital lifestyle."
This means that the factual evaluation of the "marital lifestyle" could create a higher figure than basic need might imply.  However, this can also be a limiting factor.  If the parties lived a frugal marital lifestyle and the payor only recently experienced a great leap in income, then the "need" required to maintain the "marital lifestyle" might be well below the 30% figure.

Practice Tip:  If I was arguing a case where I felt that the 30-35% formula was not appropriate, then before looking at the formula, I would argue that the court must look at the definition of alimony (need and ability to pay) and the factual factors in section 53(a).

As with many of these evaluations this complicated factual inquiry required by the court to determine alimony leaves a lot of room for error.  Clients should be encouraged to try mediation, collaborative law, or other out of court settlement options before taking this issue to a Judge, because both sides risk an alimony order that doesn't reflect all of the details of their financial reality.


3 comments:

  1. When running the formula two numbers are generated: 30% of the difference in the parties' gross incomes, and 35% of the difference in the parties' gross incomes. At this point it might be tempting to argue that a fair compromise is 32.5% of the difference in the parties' gross incomes.
    The Investment Banking School

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    1. Great point. Not only is it tempting, I have noticed that many Judges and attorneys are regularly using 32.5% as a starting point for their negotiation. Given the language of the statute taking into account need, that simplistic compromise on the formula is understandable but not always appropriate to the circumstances of the case.

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