Part 2: Self-Executing Adjustments - Do you want to return to court for changes you can anticipate?
On March 18, 2015, Doris Tennant and Lisa Smith presented to the Massachusetts Council on Family Mediation on the issue of Self-Modifying agreements, also known as self-executing provisions. The program was an excellent overview of the recent case law relating to these types of provisions and the drafting challenges involved in crafting an effective provision.
While these provisions can be complicated to draft, one of the important take-away points of this presentation, was that the Appeals Court has not restricted parties from being able to craft self-executing provisions in their Agreements. However, the Appeals Court did rule in the Hassey v. Hassey case that a self-modifying order for alimony created by the lower court should be overturned.
The lower court in Hassey attempted to provide the Wife with further alimony via a self-modifying alimony provision requiring the Husband to pay 30% of Husband's gross income in excess of $250,000. The Appeals Court had two problems with the Self-Modifying Order. First, the self-modifying order "is not based on a judicial determination, supported by subsidiary findings of fact, of an increase in the wife's need accompanied by the husband's ability to provide for the same." This determination on a modification would put the burden on the Wife but by creating a self-modifying order the burden is improperly shifted to the Husband.
Second, the Appeals Court found that the self-modifying order is "inequitable because it requires only the husband to disclose quarterly income to the wife." If the Wife earned income, it would certainly affect her need and the calculation of any formula difference in the future.
While the second issue the Appeals Court raised could be dealt with by an order that accounts for the Wife's income in a formula, the issue the court raises regarding the shifted burden of proof seems like a hard one to overcome at the trial court level.
However, nothing in the decision precludes parties from reaching these types of Agreements themselves. Particularly when one party has variable income due to bonuses or self-employment, these types of self-modifying provisions on alimony and child support can help parties stay out of court in the long term. A lot of thought needs to be given to the proper drafting, but crafting thoughtful Agreements is certainly preferable to repeated court battles. This is yet again, another area where the opportunity to reach Agreements can lead to more common-sense solutions than the trial courts are allowed to provide for in their judgments.
Next up: Survived Agreements: Do you want to decide now that certain issues can never return to court?