What factors inflence a spouse’s eligibility for alimony after divorce under Pennsylvania law?

Under Pennsylvania law, post-divorce alimony “is a secondary remedy . . . available only where economic justice and the reasonable needs of a party cannot be achieved by way of an equitable distribution award and development of an appropriate employable skill.” These are the well-known words of the Superior Court of Pennsylvania in its Opinion in Nemoto v. Nemoto, 620 A.2d 1216 (Pa.Super.1993). Most of the important concepts in alimony jurisprudence are covered in this sentence. First, the trial courts must attempt to divide marital property in a way that avoids the need for post-divorce alimony. Why? Because the courts encourage a complete cessation of financial ties between divorcing spouses. If enough property (particuarly income-generating property) can be conveyed to a divorcing spouse, then that property can fulfill all of the spouse’s economic needs without the financial “umbilical cord” of alimony.

• The value of the assets and liabilities distributed to each of the parties must be considered before awarding alimony. 23 Pa.C.S. § 3701(b)(10), (16); Fee v. Fee, 496 A.2d 793 (Pa.Super. 1985).
• In its determination of alimony, the trial court must consider the income generated by a spouse’s marital and nonmarital assets. Ressler v. Ressler, 644 A.2d 753 (Pa.Super. 1994).

Second, our Courts encourage spouses to maximize their earning capacity and income potential through appropriate employment. In the first decade of the Divorce Code, enacted in 1980, the law provided that alimony could be awarded only for rehabilitative purposes, such as paying for college or vocational training. Alimony was not permitted in Pennsylvania prior to 1980, and the legislators who enacted the  Divorce Code worried that spouses would lose their incentive to become self-supporting if they could easily receive post-divorce alimony. The alimony law has been revised since 1980, allowing alimony for other reasons, such as meeting the budgetary shortfall of a spouse who is incapable of self-support. Still, the old law remains a strong influence among judges and lawyers in Pennsylvania. Several attempts to modernize the alimony law have failed, primarily because they might reduce a spouse’s incentive to go back to work. 23 Pa.C.S. § 3701(b)(1), (9), (17).

• The Court imputed an earning capacity to a dependent spouse who devoted her time to an unproductive start-up business instead of seeking gainful employment. Thomson v. Thomson, 519 A.2d 483 (Pa.Super.1986).
• An award of alimony for ten years was deemed excessive when a college education leading to a self-supporting job would require just four years. Barrett v. Barrett, 614 A.2d 299 (Pa.Super.1992).
• In cases where there is no evidence of an impediment that would prevent a spouse from becoming self-supporting, the court is authorized to limit an alimony award. Adelstein v. Adelstein, 553 A.2d 436 (Pa.Super.1989).
• In cases where a spouse’s earning capacity was limited by a medical disability or the disability of a custodial chid, Soncini v. Soncini, 612 A.2d 998 (Pa.Super.1992), the court may decline to impose a full time earning capacity upon a dependent spouse, justifying an award of alimony.

Finally, the law looks to the reasonable needs of a spouse. After a divorce, each spouse must have sufficient cash flow to meet his/her monthly household expenses. Yet, judges realize that two households cannot exist as cheaply as one combined household. The marital standard of living is just one of the seventeen statutory criteria for alimony awards, and in practice, it is one of the least influential. The expenses associated with custody of a child is more influential in an ex-spouse’s request for alimony. Just as important is the ability of a dependent spouse to become self-supporting through appropriate employment and the financial hardship that alimony may cause to the payor. When determining the amount and duration of an alimony award, the courts scrutinize the budget of a spouse seeking alimony carefully. 23 Pa.C.S. § 3701(b)(7), (8), (13).

• The Court will not allow an award of alimony that would divert twice as much income to the alimony recipient as the payor, which would allow her to enjoy a better standard of living than she had enjoyed during the marriage Ressler v. Ressler, 644 A.2d 753 (Pa.Super.1994).

Marital misconduct is just one of the seventeen factors in awarding alimony, and it has remained one of the least influential since the enactment of the Divorce Code. 23 Pa.C.S. § 3701(b)(14); Nuttal v. Nuttal, 562 A.2d 841 (Pa.Super.1989).

Parents who are paying or receiving child support under the Melzer formula for high-income cases (where the parents’ combined net incomes is over $20,000 per month) should contact their lawyers immediately. The new Pennsylvania child support guidelines (which eliminated the Melzer formula, effective May 1, 2010) will almost certainly result in a child support decrease for most of those high-income cases. Rather than considering the custodial parent’s household budget to determine the proper amount of child support, the new guidelines are income-based at all income levels. The child support guidelines chart has been extended upward to $30,000 per month combined net income. For cases where the parents’ combined income is greater than $30,000 per month, the new guidelines start with a base amount and adds a percentage of the parents’ combined income over $30,000 per month.

So, if nothing but the guidelines have changed, can a parent file a petition for modification? Yes, probably. A new Guideline amount resulting from new or revised support guidelines may constitute a material and substantial change in circumstances.  Pa.R.C.P. 1910.19(a).

Parents whose combined net income is less than $20,000 per month might have grounds for modification if the amount of child support under the new guidelines is materially different from the current support order. At some income levels, the amount of child support has increased. At other income levels, it has decreased. Parents are urged to contact their lawyers to find out whether they are entitled to modification.

The Guardian ran a news story today about a London department store where they’ve established a new kind of gift registry …. for divorcees. Perceptively, the Debenhams department store realized that newly-separated people need toasters, towels and china, just like fiancees. Apparently England was also the site of the recent “Starting Over” show, a divorce version of a bridal show. These phenomenon were cited by the article’s author as harbingers of a trend toward celebration of divorce, instead of commiseration.  Ironically, the author’s name was Lisa Bachelor.

A new application developed for iPhone – ironically called iTrust – records the keystrokes of an unwitting interloper when the application is activated. For the price of a mere 99 cents, iPhone users can discovery tampering by a spouse or loved one who is trying to snoop on the user’s call history, text messages or email.

Oh, if only Tiger Woods had known.

Full story on iTrust reported in the London Telegraph.

A recently-issued IRS ruling (Rev.Rul.2008-41) addressed the issue of whether a charitable remainder annuity trust (CRAT) or charitable remander unitrust (CRUT) can be divided into two equal trusts upon divorce. A charitable remainder annuity trust is a trust in which the grantor receives income in the form of an annuity payment until his or her death, after which the trust principal is donated to charity. The annuity may not be less than 5% nor more than 50% of the trust principal. A CRUT is the same thing, except that the income payments are a fixed percentage of the principal.

Rev.Rul. 2008-41 established that it is possible to divide a CRAT or CRUT into two equal trusts whose terms are identical to the original trust, except that each spouse is the income beneficiary of one of the two resulting trusts. The resulting trusts are qualified as CRATs or CRUTs under IRS regulations, and no excise tax is triggered by the division of the trusts.

A more detailed article on this subject is available from our friends at Strategic Valuation Group in Warren, Ohio.

This post is not intended as tax advice and should not be used to avoid tax penalties by our readers, who should seek tax advice that is specific to their individual circumstances.

This time each year, divorce lawyers everywhere face the same question from clients: are my legal fees are tax-deductible? For guidance on the subject, I turn to the definitive treatise: Divorce Taxation by Melvin B.  Frumkes. The main principal to keep in mind, when considering whether legal expenses are deductible, is whether they are paid or incurred for the production or collection of taxable income. IRC § 212. Legal fees incurred to collect alimony, for instance, are deductible, but legal fees related to child support are not. Legal fees related to marital dissolution are not tax-deductible, but fees for a spousal support modification proceeding are. The fees related to a divorce lawyer’s advice about tax issues – such as alimony issues, valuation and division of retirement plans, allocation of dependency exemptions, deductibility of mortgage interest, taxpayer filing status, and innocent spouse relief – are likely to qualify as deductible expenses.

Incidentally (and ironically), this post is not intended as tax advice and should not be used by any person to avoid any penalties under the Internal Revenue Code. Readers are urged to contact their divorce lawyers and qualified professionals for advice specifically suited to their factual circumstances.

A constellation of Rising Stars has ascended! My law firm, Pollock Begg Komar Glasser LLC, is proud to announce that four of our associates – Stephanie Jablon, Dana Levine, Ben Orsatti and Angel Revelant – were named as SuperLawyers Rising Stars. Congratulations to Stephanie, Dana, Ben and Angel for this recognition of their hard work and dedication to the practice of family law.