Financial Statement Drafting Lessons from recent Massachusetts Appellate Decisions

We recently posted a lengthy review of the the Massachusetts SJC decision in Cavanagh v. Cavanagh (2002) and a similar overview of the subsequent SJC decision Openshaw v. Openshaw (2024).  Both of these cases had significant rulings that should be reviewed in child support and alimony cases in Massachusetts.  Here, though, we want to focus on just one area these decisions have affected: how best to complete the court form Financial Statement in divorce cases.

When completing the income section of the Financial Statement, people often struggle with how to deal with variable income and how to accurately address deductions from income.  

The Financial Statement includes spaces for many times of income but it assumes the number is static.  For bonus, commissions, or second job income (which was an issue in Cavanagh), the income is often variable over time.  This is where we encourage our clients to use endnotes to explain any variability or expected changes in income.  The Financial Statement is a disclosure document, but as a one-size-fits-all form if you want it to tell the whole picture sometimes you have to include an explanation.  If you're using the court form you can simply attach an additional sheet with endnotes.  If you're using the Gray Jay version of the form then you will find an endnote page is included for this purpose.

The Cavanagh decision also focused on the inclusion of interest, dividends and capital gains income.  This is also income that can be significantly variable year to year.  While the SJC ignored the complexity of their ruling on this issue, their failure to provide a standard for calculating this "income" leaves space for the trial court to interpret when this income should be included.  Again, endnotes explaining any expected variations could make the difference in whether the income is included in a support calculation or not.

One of the most unexpected portions of the Cavanagh decision related to income that is not reported on most people's paystubs, the contributions that an employer makes to retirement and HSAs.  While an employee's contribution is usually listed on a paystub, the employer match is often only disclosed in employment documents or the retirement deposit statements.  Similarly, the current court form Financial Statement does not include a line for this type of income.  This means that practically in cases without counsel, most people are not going to ask for or know about this additional income, creating a significant potential disparity between those who are represented and those who are not.  

The court should update the financial statement to include the disclosure of these contributions, otherwise the economic impact of this ruling will be very obviously inconsistent and discriminatory.  If you're using the Gray Jay version of the Financial Statement form then you will find the Additional Income page includes a pre-labelled space for "Employer Contributions to Retirement (See Cavanagh v. Cavanagh, 490 Mass. 398 - 2022)".

Finally, it's worth noting that upon remand the Cavanagh trial court rationale for the resulting support order heavily relied on the "need" demonstrated by the available income and expenses on the parties' financial statements.  Just like the income and deductions page, the weekly expenses section of the Financial Statement is outdated.  It is missing many items common in today's family budgets, like internet, streaming services, or cell phones.  The Gray Jay version of the Financial Statement form includes additional schedules for common areas where additional information is often necessary (for example in the Additional Weekly Expenses schedule there is a list of common additional expenses that aren't in the basis weekly expenses list).  Just because something isn't in the basic list doesn't mean you shouldn't include it. 

Here is a sample list of expenses that many of our clients have, but which is not in the regular list in the court's version of the form:

• Cell Phone
• Internet               
• Trash Removal & Recycling
• Streaming Services (Netflix, Hulu, Amazon Prime etc.)
• Dining Out
• Disability Insurance
• College Savings Contributions
• School Tuition, Books, & Fees
• School Transportation
• Extracurricular Activity Expenses
• Babysitters
• Before / After School Programs
• Camps                               
• Haircuts
• Gifts                              
• Pet Expenses (Pet care, food, vet, medicine)
• Landscaping
• Snow Removal
• Cleaning Services                                                                                
• Regular Contribution to Savings 

This last bullet relates specifically to the holding in the Openshaw decision.  In that case, the SJC held that savings can be part of a alimony recipient's need when that was a regular part of the couple's lifestyle during the marriage and there is an ability to meet that need after divorce.  To demonstrate that need, a potential recipient should include a potential expense item for "regular contribution to savings", even though that's not on the base form Financial Statement.  

Visit our last post, if you want a more comprehensive overview of best practices and instructions for complete the Massachusetts Family Court form Financial Statement.  

Gray Jay Endeavors, LLC provides Separation Agreement Templates and Massachusetts divorce forms as a resource for professionals and divorcing couples.  If you are a professional who wants to learn more about our forms subscriptions visit GrayJayEndeavors.com.  

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