Alimony can be one of the thorniest issues in a New Jersey Divorce. In cases where the parties have no children, it is often the most difficult issue to negotiate. Over the past several years, the New Jersey Alimony Reform Statute and recent changes to the Federal Tax Code have made alimony even more difficult to calculate.
Alimony Defined
Alimony (also referred to as spousal support) involves payment due from one spouse to the other post-divorce in order to equitably preserve the marital lifestyle between the party’s post-marriage.
The standard type of alimony case initially considered by the court was the situation where one spouse put everything into their career and earned a large salary whereas the other stayed home to raise the children and now has a deflated earning potential. Alimony has now grown to be more prevalent than perhaps initially intended but was recently scaled back some by alimony reform.
Before we delve deeper into defining alimony, let’s imagine a couple of alimony scenarios. This will help us see New Jersey alimony through a number of prisms and to better understand how it may impact individuals in the real world.
People tend to have strong opinions about alimony, but the below examples should point out that alimony is a difficult matter not only from a legal perspective, but from a moralistic one as well.
History of Alimony
According to Wikipedia (so it must be true!), alimony and child support are discussed in writing as far back as the Code of Hammurabi and “the modern concept of alimony is derived from English Ecclesiastical courts that awarded alimony in cases of separation and divorce. Alimony pendente lite was given until the divorce decree, based on the husband’s duty to support the wife during a marriage that still continued. Post-divorce or permanent alimony was also based on the notion that the marriage continued, as ecclesiastical courts could only award a divorce a mensa et thoro, similar to a legal separation today. As divorce did not end the marriage, the husband’s duty to support his wife remained intact.”
So, for anyone that complains alimony is a modern construct, that is not entirely accurate. That said, alimony did become increasingly popular in the 1970’s, particularly as the divorce rate itself peaked.
Alimony Examples
Example #1 (the Classic Example of alimony): In what we’ll call the “classic alimony scenario”, let’s imagine a woman named Sarah and her husband Sam. Sarah has a master’s degree in teaching and spent eight years working in the schools as a second-grade teacher.
When Sarah and Sam’s first child was born they both decided she should give up work outside the home. Sam had recently moved up in his company and they were able to comfortably live off of his income. Moreover, by the time their second child was born daycare costs would have been greater than Sarah’s income.
Fifteen years went by and Sam became a Vice-President of his company earning $200,000.00 every year. Sarah raised the children and eventually worked as a preschool teacher earning $20,000 per year. Unfortunately their relationship deteriorated and Sarah filed for divorce. Had Sarah remained working at the school she would now be earning $100,000.00 per year with a nice pension (that they would both share in a divorce).
Is it appropriate that Sarah expects alimony? Is it appropriate that Sarah expects to continue to live close to the marital lifestyle enjoyed? Could one argue that perhaps the middle-ground is appropriate, giving Sarah alimony for a certain number of years with the expectation that she can find gainful employment again? How do you feel when you review this scenario about what is just? If you’re in the middle of a separation or contemplating divorce, can you relate to either Sarah or to Sam? Let’s move on to one more example:
Example #2 (A More Modern Example): We’ll call this the “modern alimony scenario,” Jill and Jim have been married for twenty-two years. Jim has worked in construction his entire career and earns $125,000 per year. Jill built up an interior design company that now employs five people and she nets approximately $125,000 per year as well. Jim has ongoing back issues but never complains—they are likely caused by his job but he does not seek workers’ compensation.
One day Jim gets called into the office by management and is advised that he is being let go. He is advised they are unhappy with his work performance but he suspects they want to hire two younger people to replace his one salary. Jim is given a few months pension and attempts to find a job through his unemployment period.
Eventually unemployment benefits run out and Jim is unsuccessful. Jim begins drinking heavily and becomes depressed. Jill tries to make it work and even increases her income to $150,000, but eventually the relationship deteriorates and divorce is filed.
In this example should Jill have an alimony obligation to Jim? How much should she be required to pay and for how many years? How much income, if any, should be imputed to each of them? Should Jim be imputed income based upon his prior income, his current situation, or somewhere in-between? For that matter, should Jill be imputed income based upon an average of her business income, her recent higher salary, or $125,000.00 per year?
Differences between Alimony and Child Support
Unlike child support, there is no definitive alimony calculation or calculator under New Jersey law. The child support guidelines utilize an algorithm with many inputs such as number of overnights with the children, age of the children, income and taxes paid by each party, alimony paid or received, and many other inputs ranging in importance to the ultimate calculation. Many divorce attorneys and judges utilize computer software programs for calculating the amount due.
Conversely, alimony has no such specific calculation. Moreover, child support generally has a firm end-date (when the last child from the relationship is emancipated). Alimony, on the other hand, must be defined not only regarding the amount paid, but also the duration of the alimony. For these reasons, one could say that calculating alimony (both its amount and its length) is more an art than a science.
In addition, unlike child support alimony can be waived by either party. Alimony can also be “bought-out” in the parties agree.
And so, unlike alimony child support cannot be waived by a parent. This is because the law considers child support as a right belonging to the child. Even though child support payments are made directly to the recipient spouse, as a matter of law they are intended to be utilized for room and board and other appropriate expenses for the child.
Accordingly, it is important to remember that child support cannot be waived if validly due to a child (unless proper consideration for the child is otherwise undertaken). Thus if you enter into an agreement waiving child support it could later come back to haunt you in the form of retroactive payment obligations.
Duration of Alimony
Although the alimony statute itself and other relevant statutes and published cases speak to a more global view, in a practical sense generally only the last year to five years will really be considered in most if not all instances of determining alimony length.
That means that the timing of filing for divorce is very important for calculating alimony and length of alimony. If you are filing for divorce when your spouse’s income is at an all-time low, then alimony may be impacted—in some instances greatly so. The Jim and Jill example above demonstrates this issue. In addition, overtime and bonuses may be considered in New Jersey divorce actions. As with Jill in our hypothetical scenario above, an individual’s recent success can end up harming the outcome of their case.
If Jill filed for divorce at the time she and Jim were both earning $125,000 per year then neither party would have likely had an alimony obligation. Because she waited to file until a few years later when Jim was completely unemployed and she was earning $175,000 from her business, it is likely that she would now have an alimony obligation.
Jim’s attorney will likely argue that she has a large alimony obligation and then Jill’s attorney will have to argue that the most recent history is inapposite to the general history and marital lifestyle enjoyed by the parties.
Duration of Alimony: Jim & Jill Example
My basic question is this: is this a fair result? If the recent status quo for a hypothetical couple was for one party to work 80 hours a week and the other to work part-time (even though they were healthy and free to work full-time), is it fair that alimony will often be based upon their recent earnings and W-2’s?
What if the party working part-time simply has no desire to work, or knows they can later rely upon a huge inheritance? What if the party working part-time has a higher level of education and a greater ability to earn income than the party working 80 hours a week? To use another example, what if one party’s salary is on an upwards trajectory—-how can that be factored in to create a fair starting point for alimony and child support?
Conversely, is it too nebulous a proposition for courts to focus more on all of the alimony factors? Or is it understood that focusing on merely the last year (or two? or three?) may be somewhat flawed, but that there is no better way to cleanly resolve such issues?
Now, the point is certainly not to infer that people should try and “game the system,” neglect maintaining the status quo, or start turning down all overtime work if they feel separation or divorce is imminent—because such “divorce planning” can not only be detrimental to a case, but in some instances, (particularly involving the hiding of assets) may even be illegal.
Rather, I wish to illuminate how the timing of a relationship’s ending can be just as important a factor as the ending achieved by divorce and a marital settlement agreement. This is because the facts associated with a relationship’s ending (particularly when a formal divorce pleading is filed), may affect, more than any other single factor, the ultimate disposition of a case.
Open Durational Alimony
A good rule of thumb is that a party is responsible for one year of alimony to the other for every two years of marriage. You won’t find this anywhere “on the books” but as a matter of custom this has been utilized by most New Jersey divorce lawyers as a sort of shorthand for alimony. In addition, under the Alimony Reform Statute of 2014, the statute states that alimony is “open durational” once the parties are married for twenty years.
Alimony & Good Faith Retirement
Open durational alimony is very similar to what was previously called “permanent alimony.” The alimony statute also states that there is a rebuttable presumption that alimony will end when the party responsible for alimony reaches “good faith retirement,” which is generally defined as: a person reaching the age where they can claim full social security retirement benefits. Accordingly, this will depend upon what year you were born in as the younger you are the older you will have to be to qualify.
The Court will then review factors to determine if “good faith retirement” has been met. The law states as follows:
(1)There shall be a rebuttable presumption that alimony shall terminate upon the obligor spouse or partner attaining full retirement age, except that any arrearages that have accrued prior to the termination date shall not be vacated or annulled. The court may set a different alimony termination date for good cause shown based on specific written findings of fact and conclusions of law.
The rebuttable presumption may be overcome if, upon consideration of the following factors and for good cause shown, the court determines that alimony should continue:
(a)The ages of the parties at the time of the application for retirement;
(b)The ages of the parties at the time of the marriage or civil union and their ages at the time of entry of the alimony award;
(c)The degree and duration of the economic dependency of the recipient upon the payor during the marriage or civil union;
(d)Whether the recipient has foregone or relinquished or otherwise sacrificed claims, rights or property in exchange for a more substantial or longer alimony award;
(e)The duration or amount of alimony already paid;
(f)The health of the parties at the time of the retirement application;
(g)Assets of the parties at the time of the retirement application;
(h)Whether the recipient has reached full retirement age as defined in this section;
(i)Sources of income, both earned and unearned, of the parties;
(j)The ability of the recipient to have saved adequately for retirement; and
(k)Any other factors that the court may deem relevant.
Can You Waive Alimony?
It is common for a party to be entitled to some form of alimony at the time of divorce even now post-alimony reform. Alimony in New Jersey is viewed as gender-neutral, meaning that if the Wife is the “breadwinner” she may be required to pay alimony to the Husband.
Some of the types of standard alimony factors considered include: the income levels of the parties, whether additional income may be imputed based upon prior education or experience, the age and health of the parties, the marital standard of living, and the length of the marriage.
But what if a case presents a clear-cut alimony case but the other party is not interested in alimony? Can alimony be waived even if one of the parties is clearly entitled to it under the law? The answer is yes, provided that the Marital Settlement Agreement (“Divorce Agreement”) is freely and fairly entered into and contains certain language (known as Anti-Lepis language) stating that alimony will be waived permanently and no future change in circumstance can alter such waiver.
Alimony Waiver
There are many valid reasons why a spouse may not wish to pursue alimony. For some, it is a point of pride or for other moralistic reasons. For others, perhaps a reflection of some inward guilt. It may be difficult to seek alimony if you believe the divorce is your fault, such as if you had an affair.
Others still may merely desire a quick divorce and are willing to leave money on the table in order to speed up closure of the marriage and minimize divorce counsel fees. Some people come from a history of domestic violence and are simply afraid to ask for alimony.
Regardless of the reason, the courts are expected to bind consenting adults to contractual determinations. It is recommended that anyone agreeing to pay alimony, receive alimony, buy-out alimony, be bought out for alimony, or waive alimony do so after careful review of all of the finances and a view to their future and the impact such decisions will make upon their future.
To that end, assuming there is no duress, you or your spouse may waive a right to future alimony payments. As noted above, in order to effectuate a permanent waiver it is advisable to include “Crews” language noting the marital lifestyle during the marriage and the impact the divorce will have on the parties’ lifestyle post-divorce (this should be standard in every MSA). More pertinently, the MSA should also include what is known as “Anti-Lepis” language.
Lepis is a case that allows changes in child support or alimony based upon “permanent and substantial” changes in circumstances. Your MSA will essentially state that you waive the right for future modification under Lepis and is thus known as “Anti-Lepis” language.
What if I want to Waive Alimony?
Although every case is fact-sensitive, you should be very careful about waiving your right to alimony. If the Divorce Agreement properly addresses the issue then it will be difficult or impossible to later petition the Court for alimony if you waive it.
The future is unknown to all of us and it’s possible that circumstances could change (including how you feel about things) in the future but at that point in time not have a recourse. You should consult with a lawyer to understand your alimony obligations or rights before entering into any such divorce agreement.
This is particularly true if the marriage has been emotionally or otherwise draining. In such an instance you may be considering waiving alimony merely to move forward, but you will likely come to regret that decision (or see it as another element of control) in the future when options are no longer available. Alimony waiver is a serious step for either party to take: having a divorce lawyer to guide you can help level the playing field.
New Jersey Alimony Reform Act
On September 10, 2014 the Legislature enacted the Alimony Reform Act.
The basic factors judges will consider when determining an alimony award may now include:
1) The actual need and ability of the parties to pay;
2) The duration of the marriage;
3) The age, physical and emotional health of the parties;
4) The standard of living established in the marriage and the likelihood that each party can maintain a reasonably comparable standard of living;
5) The earning capacities, educational levels, vocational skills, and employability of the parties;
6) The length of absence from the job market and custodial responsibilities for children of the party seeking maintenance;
7) Parental responsibilities for children;
8) The time and expense necessary to acquire sufficient education or training to enable the party seeking maintenance to find appropriate employment, the availability of the training and employment, and the opportunity for future acquisitions of capital assets and income;
9) The history of the financial or non-financial contributions to the marriage by each party, including contributions to the care and education of the children and interruption of personal careers or educational opportunities;
10) The equitable distribution of property ordered and any payout of equitable distribution, directly or indirectly, from current income, to the extent that this consideration is reasonable, just and fair;
11) The income available to either party through investments of all assets held by the party;
12) The tax treatment and consequences to both parties of any alimony awards, including the destination of all or a portion of the payment as a nontaxable payment;
13) The nature, amount, and length of pendente lite support paid, if any; and
14) Any other factors the court may deem relevant.
Ok. But what does the above really mean? How will these factors coalesce into an alimony award—assuming an alimony award is appropriate at all?
When I explain alimony reform to new clients, I generally do not focus on the above factors. The truth is, those factors do not form the heart of real-life alimony negotiations. Instead, I believe those new to the concept of alimony should focus on the following:
- Alimony is, legally speaking, now “gender neutral.” Although in application we may not have reached 100% gender neutrality, we are getting closer. Accordingly, if the Wife is the breadwinner in a long-term marriage then she may expect to pay alimony.
- The length of the marriage is extremely important. There are different types of alimony that may be awarded in New Jersey, including open durational alimony (analogous to what was previously referred to as permanent alimony). (there is also rehabilitative alimony, limited duration alimony, and reimbursement alimony, discussed in greater length below). Also, permanent alimony for those divorced prior to the reform continues prospectively).
For obvious reasons, most breadwinners want to avoid paying long-standing or open durational alimony. The longer the parties are married, however, the greater the chances are that they will be faced with such a burden.
This is particularly true of marriages that exceed twenty years in length, although there is no hard and fast rule to determine whether alimony is “open durational” or not. The alimony reform statute does state, however, that “For any marriage or civil union less than twenty years in duration, the total duration of alimony shall not, except in exceptional circumstances, exceed the length of the marriage or civil union.”
The factors for “exceptional circumstances” for an award to last longer than the marriage include: (1) the age of the parties at the time of the marriage or civil union and at the time of the alimony award; (b) the degree and duration of the dependency of one party on the other; (3) Whether a spouse or partner has a chronic illness or unusual health circumstances; (4) Whether a spouse or partner has given up a career; (5) Whether a spouse or partner has received a disproportionate share of equitable distribution; (6) The impact of the marriage or civil union on either party’s ability to become self-supporting; (7) Tax considerations; or (8) any other relevant factors.
3) Alimony Was Historically Taxable to the Recipient and Deductible to the Payer –But not anymore following the Tax Code Changes.
4) “Lump Sum Alimony/Alimony Buy-Out”. This can be bargained for if both parties are interested in pursuing this over payments made over time. Such buy-outs are generally “tax affected” which leaves this option somewhat up in the air given the pending tax reform.
5) Life Insurance Obligation. There may be an obligation to provide life insurance “security” for the alimony due.
6) Good faith retirement, cohabitation, or remarriage. These additional factors may provide sufficient reasons to terminate, suspend, and/or modify alimony. Assuming there is no language to the contrary, “permanent and substantial” changes in circumstances may also provide reasons to amend and—in some instances—to even terminate an existing alimony obligation. The Alimony Reform Law made substantial changes to cohabitation and particularly to good faith retirement, including the creation of a “rebuttable presumption” that alimony should be terminated upon the obligor reaching a good faith full retirement age.
However, this rebuttable presumption could be overcome based upon other factors including the age of the parties at the time they applied for retirement, the ages at the time of the entry into the alimony award, the degree and duration of economic dependency, the duration or alimony or amount already paid, the assets, sources of income both earned and unearned, and other factors as deemed relevant by the court.
Like most of family law, alimony law is extremely fact-sensitive, but the above will provide you with a quick summary of how it may ultimately be calculated or whether there is a valid alimony claim in your case or not.
Use of Experts in Contested Alimony Cases
Unfortunately, as you can probably now see not every family law matter is simple. Alimony issues can be very emotional, facts may be in dispute, and determining an appropriate payment can be very divisive.
Particularly in contested divorces or other contested family law matters, a need may therefore arise for one or more “experts.” This post will briefly review some of the more common types of experts.
These experts will often times review materials/meet with parties and/or their children, write reports, and sometimes testify in Court. Some experts are ordered by the Court and others are retained by the parties. In addition, each party may retain their own expert or, in the alternative, can agree upon a “joint” expert.
Business Appraisal for Alimony
Valuation of a business can, at times, be the most important issue to resolve in a divorce. Although one cannot technically “double dip”, which we can define as having a portion of a business value be given in equitable distribution but also being imputed that same portion of the business value as income for alimony, businesses can be difficult to value.
In addition, in small businesses—and particularly closely held businesses, it is easy for parties to manipulate income. A party gearing up for a divorce may re-invest in the business to a greater extent that normal in an attempt to deflate the profitability or any income that may be imputed to them for purposes of calculating alimony. Accordingly, a business appraiser or other accounting experts may need to be utilized to go through the business “books” to determine if everything adds up.
In the “Jill and Jim” example above, Jim’s attorney may retain certain experts to value Jill’s business, whether she is claiming an appropriate amount of income, and perform other analysis’ impacting not only the value of the business but also the appropriate alimony amount. Forensic accountants may also be used to assist with this type of work and analysis.
Employment/Employability Experts
If an individual is alleged to be underemployed or if there is an issue as to income imputation, then an employment expert might be retained to review the individuals work history and degrees and draft a report as to his or her income potential. Accordingly, in the “Sarah and Sam” example, either party may hire an employment expert to determine if she could now earn more than $20,000 per year with a master’s degree but being out of the job market for an extended period of time.
Protecting Alimony
Life insurance will also often play a role in protecting alimony. For instance, if the Marital Settlement Agreement grants the Husband alimony in the amount of $1,000 per month, and it is expected that this alimony will continue to ten (10) years, then the Agreement should require the Wife to maintain life insurance naming the Husband as beneficiary in an amount sufficient to protect that alimony interest. In this case, about $120,000.00.
The amount may be reduced each year in proportion to the decreased amount expected to be owed.
How the Tax Cut and Jobs Act of 2018 Impacted Alimony
The “Trump” Tax Reform Act of 2018 made several changes to New Jersey Divorce law, including making alimony a tax-neural event. the Federal Tax and Jobs Act therefore modified alimony so that it will no longer be a taxable event effective January 1, 2019.
That means that moving forward alimony will not be taxable to the recipient and that the person paying alimony following a divorce will no longer be able to claim alimony as a tax deduction.
The prior status quo was for alimony to be a taxable event to the person receiving alimony and that the person paying could deduct alimony.
As the person paying alimony is generally in the higher tax bracket this change was made at the federal level to support some of the tax deductions as part of the Tax Act.
Moving forward there is now some confusion as divorce attorneys and judges will have to learn how to tax-effect future divorce agreements to not provide an unfair advantage to either party and to ensure consistency with the current status quo.
That will likely mean that individuals will pay less (in terms of the actual number) for alimony but will effectively pay the same as they would have been required to prior to the tax code changes. A prior rule of thumb and custom utilized by New Jersey divorce lawyers was that a party would be imputed 30%-33% of the difference between their income (or the income imputed for purposes of calculating alimony) and the income of their spouse (or again, the amount imputed).
It should be noted that most pendente lite alimony awards are unallocated and/or mixed with child support payments and have therefore generally been a tax-neutral event.
Prenups and Alimony
As you can now see, alimony is generally available to many parties to a divorce in New Jersey. In general terms, the greater the disparity in income between the parties coupled with the longer the duration of the marriage, the more a party may have alimony exposure to the other.
A prenuptial agreement may call for a permanent waiver of alimony. In such a situation it’s important to recognize what your expected exposure (or benefit) from alimony may be.
It may prove difficult or impossible to fully understand (as you are negotiating in the present an unknown future), but it’s important that you view the more realistic potentialities and have an understanding of what you will be giving up (or gaining) by that specific language contained in the prenuptial agreement.
You should therefore review the entire contract through that prism and then view it globally to determine if it is reasonable and fair.
To be enforceable, there is no requirement that the agreement be fair, just that it not be so unfair as to be “unconscionable” at the time the agreement is entered into. Accordingly, for those not yet married they should consider whether a prenuptial agreement makes sense. For those getting divorced they should determine whether or not the agreement is enforceable and to what extent it impacts alimony.
Alimony Standard
The general burden of proof is on the party seeking alimony or seeking to modify the alimony amount. Thus the legal standard for both initial alimony awards and any subsequent motions to modify alimony is whether the supported spouse will be able to maintain a lifestyle reasonably comparable to that enjoyed during the marriage itself. An important case on this subject is Crews v. Crews, 164 N.J. 11, 16 (2000).
Pendente Lite Alimony
What are My Responsibilities while the Divorce is Pending?
Essentially both parties are required, while the divorce is pending (known as the pendente lite phase of litigation) to maintain the “marital status quo.” This means maintaining insurance, not encumbering or dissipating marital assets or incurring inappropriate marital debt, paying certain regular expenses, and the like.
Parenting time and access to children should also maintain the status quo of the marriage. Pendente Lite is fancy legal-speak for “during the pendency of the divorce, i.e. what will happen after divorce is filed but before it is finalized.” Unlike other areas of the law that involve singular incidents divorce law is a “moving picture” rather than a “single camera snap” and people must continue to live their lives even as the divorce is ongoing. Temporary parenting time, custody, child support, and yes, alimony, may be ordered pendente lite or agreed to between the parties by consent.
So, essentially both parties are required to maintain the “marital lifestyle.” If the Husband normally pays the mortgage and the Wife pays the car notes then that practice should continue. Occasionally circumstances will change such as one party leaving the marital residence. In such circumstances the court will view the available money for each party and attempt to equalize that amount. The court may order a temporary “pendente lite” alimony amount, which is tax-neutral. Such an amount would be extinguished at the time the actual divorce is finalized.
It is important to also note that pendente lite support may be combined with child support and that it is generally made “without prejudice,” meaning that an overpayment of pendente lite support may later be reimbursed at the time the actual divorce is finalized.
Note: The courts take the marital lifestyle quite literally. There is case law that states even if the parties have been living beyond their means and are going increasingly into debt that during the pendente lite phase of the litigation that they should continue to do so. So, in the example above involving Jim and Jill, the Court would likely require Jill to continue making all marital payments or to forward a sum of money to Jim every month if he moved out of the martial residence in an attempt to continue the status quo of the marital lifestyle.
Note 2: Using military parlance one often hears about winning the battle but not the war. One of the most important parts of a contested New Jersey divorce is making sure your client is minimizing or maximizing (depending upon whether you have the payor or payee spouse) the pendente lite support amount.
This will take away the other side’s ability to maneuver during the actual divorce negotiations. For instance, if Jim’s attorney (using the example of Jim & Jill above) does not file an appropriate pendente lite motion or does not broker a deal and Jim is left in an apartment with minimal income then he will likely be quick to settle for a lesser sum than he is truly due so as to not effectively starve. Sometimes winning the battles can lead to winning the war. For this reason you will often see a great deal of gamesmanship with parties filling out their Case Information Statements, which set forth the “Schedules A, B & C” of the marital lifestyle.
Alimony Considerations at Trial
In New Jersey each County has a Superior Court. If you get a minor traffic ticket you will go to what’s called a “municipal court,” which may be broken down by town. There is a County Court (“State Superior Courts”) for each County in New Jersey, although some combine to form a “vicinage.” If your divorce is venued in Hunterdon County, New Jersey, for example, then your alimony claim will be heard at the Hunterdon County Superior Court.
Alimony can be negotiated at any time between the parties. However, if the parties cannot negotiate an amount then the Superior Court judge (“Trial Court Judge”) will have to make a call for the parties regarding alimony amount and duration, as applicable. The trial court may rely upon experts (as discussed above), testimony, and a review of evidentiary records to determine the appropriate alimony award. Consistent with cases such as Crews v. Crews, and Lepis v. Lepis, 83 N.J. 139 (1980), the marital lifestyle will be determined, income will be found or imputed, and a baseline for future alimony motions will be created.
If a pendente lite alimony amount was previously ordered or consented to, then it will cease at the time the parties finalize their divorce (or a trial court decision is made if the parties cannot agree). Cases such as Weishaus v. Weishaus, 360 N.J. Super. 281 (App. Div. 2003) state that the trial court’s decision should be based upon the actual lifestyle rather than what the parties’ lifestyle should have been based upon their income, assets, and marital debts. The parties can also agree to a buy-out or the court could, in certain circumstances, order a buy-out or the liquidation of certain marital assets inuring to one party over the other to satisfy an alimony obligation.
Property Exempt from Alimony
Certain types of property are generally exempt (unless commingled) during a New Jersey Divorce, such as inherited property, gifted property, pre-marital property, and a portion of personal injury or worker’s compensation award attributed to injury.
Although somewhat beyond the scope of this course, the interplay between equitable distribution and alimony cannot be underestimated. As noted elsewhere in this course, there cannot be a “double dip” whereby a party has to divide an asset and then pay out as alimony a portion of their share of that asset to the other party for support.
Things get more interesting when there is an exempt property. For instance, in the Jim and Jill example, if Jim had instead gone of worker’s compensation and received approximately 70% of his income and the parties then divorced during the same time-frame, how would this be treated for purposes of alimony?
If Jim’s salary was now effectively $87,500.00 versus $125,000 for Jill (she never increased her production at work in this timeline), then would he be imputed income at $87,500.00 or a lesser amount as by law the portion of a workers; compensation award for pain and suffering is not subject to division as part of a divorce. Conversely, the portion attributable to lost wages (likely the majority of the award) would be— and the same is true for personal injury awards.
As you can see, there are a lot of interesting arguments that can be made regarding the appropriate alimony award when issues of exempt property or exempt earnings (and any income, debt, or interest inuring therefrom) enter the picture.
Types of Alimony
Open Durational Alimony, Rehabilitative Alimony, Limited Durational Alimony.
In most instances the question of alimony will be whether or not a party receives open duration alimony or limited duration alimony. The major difference is whether alimony has an open-ended payout time-frame or a specific end-date. In either instance alimony may be terminated by certain events (even if open duration alimony).
The types of alimony available are by statute and were impacted by the New Jersey Tax Reform Act of 2014. It should be noted that another form of alimony is pendente lite, alimony, which is paid during the pendency of the divorce (this type of alimony is addressed earlier in the course, above).
Superseding Alimony Termination Events
Most divorce decrees state that alimony will terminate upon the end date of alimony as negotiated between the parties, or when:
- *The Payee of alimony dies;
- *The Payor of alimony dies;
- *The remarriage of the payee;
- *Alimony may be renegotiated (but generally not terminated) upon the cohabitation of the payee with another adult in a romantic partnership that provides economic support or advantage to the payee (see cases such as to the payee (see cases such as Gayet v. Gayet).
So, rest assured, you will generally not be required to continue paying alimony after your death—so at least that’s a relief! But don’t worry, the life insurance provision in the Divorce Agreement will likely kick in making your spouse whole. So when it comes to alimony, in a sense not even your death is enough to stop your spouse from benefiting from your labor.
It should also be noted that once alimony is terminated it generally cannot be reinstated. In other words, if alimony is terminated by your spouse’s remarriage and they then later divorce they cannot come back after you for divorce. However, there has yet to be a case heard at the Appellate level with interesting facts such as: a short remarriage annulled after a week. I’m not sure how an appellate court would come down on a case with those types of facts and I could certainly see the arguments both ways.
Limited Durational Alimony
For New Jersey marriages that last less than twenty-years the parties will generally negotiate limited durational alimony. This is alimony with a set end-date. For instance, in a sixteen-year marriage the parties may agree to limited duration alimony of eight years. As noted above, alimony may end sooner if one of the superseding termination events occur such as the death of a party or remarriage of the alimony recipient.
Open Durational Alimony
This is the type of alimony that replaced what was previously called “permanent alimony” prior to the New Jersey Alimony Reform Act of 2014. It is somewhat softer than “permanent alimony” in that it allows for a rebuttable presumption of alimony termination along with a good-faith retirement. This issue was addressed earlier in the course, above.
Rehabilitative Alimony
Rehabilitative alimony is less common than open durational alimony or limited durational alimony. This type of alimony is meant to provide a period of time for an individual to obtain education, to update his or her credentials, or to otherwise take the steps necessary to be able to become self-supporting or more self-supporting. This type of alimony may be ordered in lieu of the other types of alimony or it may work in tandem with open durational or limited durational alimony. There have been court cases where open durational alimony has been ordered after rehabilitative alimony ended.
For example, in the Sarah and Sam example above the parties may negotiate (or the court may order) that Sarah be imputed $20,000 for a period of two years and given rehabilitative alimony to pay for additional coursework or credentials to become a fully licensed teacher again so that she may then increase her income. After the passage of two years if Sarah is then gainfully employed as a teacher earning $50,000 per year then the court may order additional alimony to reflect the difference between her income and that of Sam’s.
“Fault” and Alimony
It should also be noted that New Jersey is a “No-Fault” divorce state. That means that if one party is adulterous and abusive and the other is a saint it should make no operative difference regarding the final alimony award. So, in the example above of “Sarah and Sam”, if Sarah was having an affair and was emotionally abusive, that would not make any difference in calculating alimony as New Jersey is a no-fault divorce state. That’s not to say it may not make a difference in custody or parenting time arguments, but courts are not allowed under the case law (see cases such as Mani v. Mani, 183 N.J. 70), to impute alimony, decrease alimony, or otherwise impact alimony based upon the behavior of one spouse towards the other.
That said, courts can make a determination of “fault” should one party’s actions or inactions intentionally impact alimony. For instance, a party may not get out of their alimony and/or child support obligation if they quit their job, if they go to jail for a crime, or if they take steps to reduce or hide their income.
For instance, in the example of “Jill and Jim,” utilized at the outset of this alimony course, there would be a different analysis if Jim lost his job because he was, for example, caught drinking while operating a forklift. Or if Jim quit his job with an intent to later file for divorce when his income was at an all-time low. The subject of “fault” therefore does have its place in an alimony calculation, but in a much more specific manner. Courts will impute income if they believe a party is intentionally unemployed or underemployed.
If you are out of a job during a divorce or post-divorce then you should document all of your attempts to procure new employment. Save copies of your job applications and log the hours you spend on job boards, networking, increasing your skills, interviewing, or applying for jobs. This will all help assist you should the other party seek to convince the court that you are intentionally unemployed, underemployed, or otherwise attempting to game the alimony system.
In addition, if the other party physically harmed you then you may have a “marital tort” claim under cases such as Tevis v. Tevis, which is similar to any other type of personal injury action and would involve “fault” but is not truly a form of alimony.
A marital tort is meant to pay out for actual harm whereas alimony is meant to replace income or to otherwise ensure that both parties can continue to enjoy a lifestyle reasonably similar to that enjoyed during their marriage.
In sum, the concept of fault in a divorce will generally only impact alimony when that fault as impacted the finances such as causing your spouse to lose your job, intentionally losing your job, or otherwise attempting to “game” the system to pay out or receive more alimony than would normally be due under the law and facts of your case.
Modifying Alimony
Above we briefly reviewed the subject of terminating alimony, but to what extent may alimony be modified after the fact? Obviously in a lump-sum buyout one of the advantages to the party receiving the money is less risk should either party pass away or should that spouse decide to remarry or cohabitate. Also, there is an economic principal called the “time-value of money” which essentially states that money is worth more today than in the future (due to factors such as ability to invest now, future money being reduced by inflation, etc.). As the proverb goes, “a bird in hand beats two in the bush.”
Parties can also negotiate whether or not alimony will be non-modifiable or whether alimony may later be increased, decreased, suspended, terminated, or otherwise modified based upon a “permanent and substantial change in circumstances.”
The case of Lepis v. Lepis states that in general alimony may be modified based upon such a “permanent and substantial” change in circumstances. However, if the parties add a clause to their divorce agreement stating they agree to never modify regardless of what the future brings then the courts will generally honor that clause. This clause is referred to, appropriately enough, as the “Anti-Lepis” clause. Under addendum 1, below is an example of an Anti-Lepis clause for anyone interested.
Limited Durational Alimony Modification
So what happens if your ex gets a great job a year after your divorce or even more distressingly wins the Power Ball a day after your divorce is finalized? Can you go back and seek a greater alimony amount? The answer is “perhaps.” What about changing limited durational alimony to open durational alimony, would that be allowed?
In the Appellate case of Gordon v. Rozenwald, 380 N.J. Super 55 (App. Div. 2005), the Appellate Court held that a subsequent increase in earnings and career improvement by the alimony payor should generally not lead to open durational alimony (then permanent alimony) because alimony is based more upon the marital lifestyle and the amount awarded was consistent with that marital lifestyle. In other words, your spouse may be required to maintain you in the lifestyle you are used to but not an amount of an inflated lifestyle greater than that of the marriage and subsequently obtained. Thus as a matter of law the main consideration (noted under cases such as Crews v. Crews) is to what extent the ever-important “marital-lifestyle” is maintained.
Permanent and Substantial Change in Circumstances
As noted above, a court may modify certain types of alimony (such as open-durational with no “Anti-Lepis” language contained in the Divorce Agreement) if a permanent and substantial change in circumstances is found. Back to the subject of fault, it must be shown that the loss of income is not through the fault (or is intentional) on the part of the party now seeking to suspend, terminate, or reduce alimony. A similar standard is utilized for the modification of child support.
Sometimes, clients will come to me wanting to change their alimony obligation a few weeks after losing their job. Unfortunately that duration will not generally meet the “permanent” requirement of Lepis and its progeny.
New Jersey courts historically required a change of eighteen months or two plus (2+) years before they would require the “permanent” requirement met for a reduction, termination, or suspension of alimony. During the Great Recession (a period of time I was clerking for a New Jersey Family Law Judge) I was able to see first-hand that the courts began to soften on that stand and now six months or a year may be enough (depending upon the other factors involved in the case) to successfully seek a modification.
Regarding substantial, there is no clear-cut definition of “substantial” but is treated on more of a case-by-case basis. Obviously more than a minor change is required for a court to feel it warrants a modification of an alimony award (in either direction).
Payment of Alimony
Alimony can either be paid directly (between the parties) or through the Probation Department/Family Support Services. The parties’ agreement will generally state how alimony will be paid along with the frequency, amount, and what would happen if alimony is not paid in a timely fashion. A party seeking payment through probation is by law allowed to receive money in that manner. Most alimony payors do not want to pay through probation but it’s not an area you can much negotiate if the other side does not agree.
Alimony Collection Issues
If the alimony payor stops paying alimony then you will generally petition the court that direct-pay alimony now be through probation/family support services. If the party stops paying and they are already paying through probation then the probation department will likely take certain steps such as suspending the payor’s driver’s license all the way up through temporary incarceration.
Most payment is through wage garnishment and it is the payor’s responsibility to advise the probation department of any employment changes or changes to his or her physical address or work address. Alimony and child support are also treated—as a matter of law—as a temporary lien on any property owned by the payor.
Accordingly, if there are alimony arrears the other party may pursue (through the family division, not the civil division) enforcement actions seeking payment of arrears, having the other party turnover their passport until they pay, interest, counsel fees liquidating property via the lien, and any other appropriate enforcement actions somewhat similar to the collection of any other type of debt.
Impact of Bankruptcy on Alimony
Under bankruptcy laws, most types of debts are discharged if a successful “chapter 7” bankruptcy is completed. There are certain types of debts, however, such as student loans that are generally non-dischargeable. With a consumer debt, there is certain leverage that a debtor or his attorney may have in a lawsuit as they can threaten to file for bankruptcy upon the completion of the matter of actually file for bankruptcy to wipe away most debts. Can such an action be taken in a divorce proceeding? The short answer is “no.”
The Bankruptcy code generally considers “domestic support obligations” as non-dischargeable debts. However, it is possible that in certain filings, such as a “Chapter 13,” that you may be granted additional time to pay back alimony and/or child support due. It should be noted that even equitable distribution debts are considered “domestic support obligations,” meaning that the bankruptcy code gives a broad interpretation to “domestic support obligations.”
Another issue that has a less clear answer is whether or not legal fees agreed to or awarded as part of a New Jersey divorce are dischargeable, with some conflicting information and opinions on this matter generally revolving around the intent of the counsel fee order.
New Jersey bankruptcy attorneys can assist you or your divorce attorney in planning appropriate strategy regarding bankruptcy issues impacting a pending divorce. In some instances it may make sense to file jointly prior to the divorce and in others to file separately. This is sometimes complicated and requires a bankruptcy attorney to represent or at least consult on the appropriate course of action.
Although the economy is in a better state that it was during the “Great Recession,” debt remains an important consideration for those contemplating divorce. Alimony and child support obligations can feel overwhelming or conversely, you may wish to know that the support payments will continue even if bankruptcy is contemplated. The above brief overview is merely that, as like most instances in new jersey family law courts, there are fact-sensitive considerations to entertain.
Conclusion
Now that you have a better understanding of the relevant law that may impact your divorce, let’s turn now to more specific advice and tips that can assist you on your journey towards divorce and a fresh start.
Partner with Carl Taylor, Esq.
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