While we typically write about personal finance, investing, and the economy, this week's blog post on the subject of alimony reform is different from our usual programming. Our reason for covering this subject is two-fold. First, Runnymede advises clients who are going through or have gone through divorce. In fact, our professionals' backgrounds in equity research help us review and evaluate investment portfolios that are being split. Second, we were surprised to learn that the effects of alimony reform are likely to be substantially greater to women because women are recipients of alimony 97% of the time. With changes to the law potentially favoring men over women, this felt worthy of including in our blog.
Since family law is not our area of expertise, I am pleased to introduce our very first guest contributor, Laurence Cutler. Larry's experience in practicing matrimonial law spans four decades. He has served as chairman of the Family Law Section of the New Jersey State Bar Association and the president of the New Jersey Chapter of the American Academy of Matrimonial Lawyers. I cannot think of a better qualified person to educate us on this subject. I hope that you find it interesting and appropriately forward it to a family member or friend who might benefit from this article.
THE EFFECT OF THE NEW ALIMONY REFORM STATUTE ON RECIPIENTS OF ALIMONY
By Laurence J. Cutler, Esq.
The new Alimony Reform Act was signed by Governor Christie on September 10, 2014, and immediately took effect on that day. The new Act has changed the landscape and implementation of alimony, particular with regard to a litigant’s requests for later modification of an initial alimony award or obligation by agreement. Practically, this is becomes a women’s issue, as statistically, women are the recipients of alimony most of the time. Prior to the enactment of this legislation, women were the beneficiaries of the law. Now, the new law constricts the prior liberal application of alimony which had been in favor of women such that men are now the beneficiaries of the change, and women suffer the consequences.
What follows is a discussion of the law prior to the Alimony Reform Act, and how the Act changed how the law is practiced and applied. It is to be noted that the characterization of the law are general, and do not necessarily apply in every case. Also, the discussion presupposes that the results are of judicial fiat as opposed to an agreement reached between the parties.
The Former Law
The law changed dramatically for a variety of reasons on September 13, 1971, with the coming of the effective day of the Divorce Reform Act. That change was hailed as a revolutionary change to what had been the law of alimony in the following major respects: (1) allowed alimony to be awarded to either party regardless of which party obtained the divorce; and (2) relegated “marital fault” to a much lower status, meaning that an errant spouse could still be awarded alimony.
The law before the Reform Act was two-fold: (1) the initial setting of the obligation; and (2) later modification thereof;
The Divorce Reform Act permitted men to be recipients of alimony (in other words, the law became blind to gender). At the same time, since the initial award of alimony was no longer conditioned on proving marital fault, recipients of alimony were no longer straddled with the obligation to prove a fault ground.
The duration of alimony was left to the sole discretion of the trial judge. Initially, courts had the power to either award alimony for an indefinite period (erroneously referred to as “permanent” alimony), or not at all. As time progressed, statutory amendments and case law decisions binding on trial judges allowed “term” alimony (for a limited period of time) or rehabilitative alimony (in order to allow the recipient to get back on her feet).
Two rules of thumb (among others) were advanced relative to duration, none of which were verbalized in decisions but obviously permeated those determinations: (1) ten to fifteen year marriages were deemed to be long enough to warrant an award of permanent alimony. A marriage of less than 10 years might have been the subject of a term or rehabilitative award; and (2) the duration of alimony would be reflective of the length of the marriage.
The amount of alimony was also left to the discretion of the court. In making a determination of the amount of an alimony award for a mid-length or long term marriage, a court might generally award one-third of the difference in the parties’ incomes. In shorter marriages, various factors came into play, and in many cases, alimony was not awarded in favor of giving an otherwise-recipient a slightly greater division of assets.
In the event of a material change of circumstances on the part of either the payor or the payee, he or she could apply to the court for a change in the duration or amount of alimony. The application of the law made it very difficult for payors to receive a reduction, particularly in the case of lost employment, significant reduction of income or retirement. The practical effect was that it became a very real hardship on payors who were often required to pay alimony out of their assets or from other sources notwithstanding the substantial change of their finances as suggested above.
Prior to the Alimony Reform Act, the law was blind to the social perceptions of a former spouse-recipient (usually the former wife) living with an adult person (usually of the opposite sex). It was strictly a matter of finances: characterizing the standard in the vernacular, if the former-spouse was “sponging” off the paramour, or the paramour were “sponging” off of the former-spouse, then a reduction might well be in order to the extent of the “sponging.” It was a difficult standard to prove and even a more difficult standard under which to obtain any meaningful reduction of the alimony obligation. Thus, this was a reasonably safe-haven for alimony recipients (women).
Loss of Employment or Significant Reduction of Income
The payor’s loss of employment was an even more difficult change of circumstances to prove. To be sure, one could easily prove the loss, but the quality of the loss was the factor upon which the courts focused: that is, was the loss a permanent loss such that the payor would be incapable of replicating the income? That was an intolerably difficult standard that was oblivious to actual losses of employment, especially in the down turn in the economy in the years of 2008 through 2012; the result being that payees would be entitled to the same level of alimony for which the payors either accumulated arrears or dipped into their asset to pay (while the payee did not need to resort to her assets to replace what would otherwise be lost alimony). Needling to show that the payor’s loss of income or reduction of income (if he were able to subsequently become employed at a lesser salary) was permanent, many courts would not even consider such an application until a payor had been unemployed for over a year. Chalk another one up for women.
Retirement of the Payor
Retirement of the payor was essentially the only voluntary change cognizable by the courts. Procedurally, a payor would have to make an application to the court to terminate or reduce the alimony due to the change of circumstances upon his voluntary retirement. The application could only be made after actual retirement had taken place. In other words, the payor had to retire taking the chance that the court would grant him relief from the alimony obligation. Substantively, the application was a difficult row to how for the applicant. Women keep winning on this score.
The Alimony Reform Act
The Alimony Reform Act, while not revolutionary, was, nonetheless, evolutionary.
The law relative to the amount of an initial award was left unchanged. However, over the years, as women sought and received greater equality and independence, they moved into the work force and increased their employment earning capacity. As a result, the amounts of alimony awards have decreased somewhat due to their increased earnings.
The law as to duration, however, changed somewhat. First, as to any marriage less than 20 years, the maximum duration of alimony (absent exceptional circumstances) is the number of years of the marriage. Second, as to any marriage in excess of the 20-year mark, the duration of alimony (again, absent exceptional circumstances) is for an indefinite length (essentially the same as the former “permanent” alimony), subject to a modification application by the payor.
It is in the area of modifications in which the recipients (women, for the most part) take a hit – for the real teeth of the 2014 Act effect the substantive as well as the procedural law in modification cases.
The tables have turned on women. What had been a difficult proof at best has now been liberalized in favor of the payors. In other words, the pendulum has dramatically swung the other way -- and not over time as a result of changes in social relationships, but all at once, based on legislative enactment. The new law provides as follows:
- Cohabitation involves a mutually supportive, intimate personal relationship in which a couple has undertaken the duties and privileges which are commonly associated with marriage or civil union;
- A finding of cohabitation is not limited to situations in which the parties reside together – in other words, cohabitation is not dependent upon the parties living together in a single common household;
- Circumstances showing cohabitation may involve the intertwining of financial accounts; sharing of living expenses and/or household chores; recognition of a certain social status; the frequency of contact and the duration of the relationship; and others.
Thus, the chances of payors being able to prove cohabitation on the part of the payee has improved immeasurably. Once proved, a court cannot even order a reduction in the alimony, rather the court must either suspend or terminate (which is thought to be permanent) the obligation.
Loss of Employment or Significant Reduction of Income
Under the Alimony Reform Act, loss of employment or reduction of employment is divided into two categories: (1) self-employed persons; and (2) non-self-employed persons.
When a non-self-employed payor seeks a downward modification in his alimony obligation (either suspension, termination or modification), he must prove a myriad of factors which range from the reasons for and circumstances surrounding the loss of employment income; efforts made to replace the income; the effect upon his finances; etc. The statute makes it clear that while the length of time since becoming unemployed is not the only factor for the court to consider after 90 days, a payor may make such an application as to which the court should fashion a temporary reduction pending a full hearing.
A self-employed payor seeking a downward modification of his alimony obligation has the additional burden of showing an analysis of both the economic and non-economic benefits that he receives from the business as well as a comparison of those factors which existed at the time of the initial determination of the obligation.
It will become apparent that the more structured and liberal circumstances under which a payor may make such an application benefits men, and not women.
Retirement of the Payor
A big change in the law as a result of the Alimony Reform Act is in the area of modification of an alimony obligation in the event of the payor’s retirement:
- Alimony may be modified upon a showing of actual or prospective retirement, which means that an application may be made in advance of retirement without having to first retire and then take a chance that the court will grant the requested relief;
- Retirement is defined as the time when the payor is entitled to full Social Security (usually around 67 years of age depending upon the current age of the payor);
- There is a presumption that the payor is entitled to (not just some form of relief but) termination of the obligation upon reaching retirement age;
- If the payee seeks to continue the alimony, the burden then shifts to her to overcome that presumption utilizing a myriad of factors set forth in the statute;
- If the recipient of alimony does overcome the presumption, the court must then determine whether a modification or termination is appropriate.
Interestingly, if such an application is made based on a pre-determined retirement age (pursuant to a court order or agreement between the parties), reaching legal retirement age under the statute does not create a presumption of termination of the alimony, but in effect creates a presumption that the payor’s age is a reasonable age to retire.
From this perspective, the new statutory rules has eased the existing law substantially. Thus, payees take it on the chin.
It is beyond debate that New Jersey is a support oriented state. Alimony is freely ordered; the law as to child support obligations (including parental obligations for post-secondary education) goes further than any other law in the country. Alimony reform first began in the New Jersey legislature upon agitation from men-groups seeking relief from the stringent alimony orders of courts of this State. Their focus was more on the initial award, and in particular, staged amounts depending upon length of marriage (not unlike other reforming states such as Massachusetts). Instead, lawyer groups focused more on modification where a good deal of the litigation in this field resides. Needless to say, the reformers came out with the short end of the stick on this one.
The obvious conclusion at first blush is that the Alimony Reform Act appears to limit alimony, and makes modification much easier under certain and statistically usual circumstances. In so doing, the Act favors payors (usually men) and essentially does not favor the economics of payees (usually women). It will probably take a good dozen years for cases seeking interpretation of the statute to find its way through the courts in order to establish precedence as to what this all means.
What are your thoughts on alimony reform in New Jersey? We appreciate your feedback. Please leave a comment.
 Note the difference in the nomenclature of the two acts: Divorce Reform Act of 1971, and the Alimony Reform Act of 2014.
 Prior to the Divorce Reform Act, generally, any assets in the husband’s name were his; any in the wife’s name were hers; any in joint names were divided equally. “Equitable Distribution” came into our lexicon as a result of the Act whereby any asset, regardless of title, could be considered for division, although not necessarily (but in most cases) divided equally (this is a very broad generalization, but sufficient for the purposes of this article).
 The law prior to the Divorce Reform Act had provided that only women could receive alimony; that (since there were only fault grounds for divorce before the Act (which contained no-fault grounds among the traditional fault grounds), an application for alimony could only be granted if the recipient could prove a fault ground (in other words, proving a fault ground was a threshold for an award), and on top of that, if both parties could prove fault grounds for divorce, incredibly enough, no one received the divorce – the husband and wife had to stay married. That all changed with the Divorce Reform Act.
 Generally, alimony is tax deductible to the payor and tax-includible to the payee. In this arrangement, the payor (husband) would receive a tax deduction for the one-third he would pay to his spouse, and about one-third would go toward taxes, leaving him with about one-third. The recipient (wife) would have to pay taxes on the alimony (on top of her earnings), so the result would be that she would receive as net alimony something less than one-third of the differences in their incomes.
 There are a wealth of cases dealing with what set of circumstances constitutes “cohabitation” running all the way to whether the paramour had a garage door clicker. For the purposes of this article, “cohabitation” is used in the common sense of the word.
 It is very important to note that the court has only two remedies upon a finding of cohabitation: (1) suspension of the alimony; or (2) termination of the alimony. A court is thus (so it is thought) deprived of the availability of modification as a remedy.
 The prior case law as to whether the court could order a temporary modification for reasons of the payee’s subsequent cohabitation was unclear, and the new statutory law is silent with respect thereto.
 If the application is made prior to the payor’s reaching the retirement age as defined in the statute, he retains the obligation of showing that the retirement is reasonable and is made in good faith.
 This is generally not only true of New Jersey but of most other densely populated states on both coasts which view individual rights as paramount as opposed to interior, less populated states in which property rights reign supreme.