Guide to "Family Law" in New Jersey

Paul G. Kostro, Esq.

 

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Alimony

  1. In New Jersey, the award of alimony to a divorcing spouse is provided for by statute -- the applicable statute is N.J.S.A. 2A:34-23, which provides: "after judgment of divorce or maintenance ... the court may make such order as to the alimony or maintenance of the parties ... as the circumstances of the parties and the nature of the case shall render fit, reasonable and just."  See Cox v. Cox, 335 N.J. Super. 465 (App. Div. 2000).


  2. The prevailing principle in fixing an alimony award, as enunciated in Lepis v. Lepis, 83 N.J. 139 (1980), and reiterated in Crews v. Crews, 164 N.J. 11 (2000), is "to assist the supported spouse in achieving a lifestyle that is reasonably comparable to the one enjoyed while living with the supporting spouse during the marriage."  "The supporting spouse's obligation is set at a level that will maintain that standard."  See Innes v. Innes, 117 N.J. 496 (1990).


  3. Law Lessons on Alimony, from Cunningham v. Cunningham (Appellate Division, A-3176-03T3, October 11, 2005, not approved for publication):

    "Alimony is neither a punishment for the payor nor a reward for the payee . . . It is a right arising out of the marriage relationship to continue to live according to the economic standard established during the marriage . . . ." Aronson v. Aronson, 245 N.J. Super. 354, 364 (App. Div. 1991).

    Alimony exists to permit a spouse to share in the economic rewards occasioned by the other spouse’s income level (as opposed merely to the assets accumulated), reached as a result of their combined labors, inside and outside the home. Gugliotta v. Gugliotta, 160 N.J. Super. 160, 164 (Ch. Div.), aff'd, 164 N.J. Super. 139 (App. Div. 1978). A trial court may award such alimony "as the circumstances of the parties and the nature of the case shall render fit, reasonable and just." N.J.S.A. 2A:34-23.

    In doing so, the court must consider, among other things:
    (1) [t]he actual need and abilities of the parties to pay;
    (2) [t]he duration of the marriage; . . .
    (4) [t]he standard of living established in the marriage . . .;
    (5) [t]he earning capacities, educational levels, vocational skills, and employability of the parties;
    (6) [t]he length of the absence from the job market of the party seeking maintenance; . . .
    (10) [t]he equitable distribution of property ordered and any payouts on equitable distribution . . .; and
    (11) [t]he income available to either party through investment of any assets held by that party.
    [Ibid.]

    With regard to the latter two factors, "consideration must be given to the fact that support payments are intimately related to equitable distribution and the financial security and potential income available because of it." Lavene v. Lavene, 162 N.J. Super. 187, 203 (Ch. Div. 1978); see also Miller v. Miller, 160 N.J. 408, 421-26 (1999). Thus, before awarding alimony, the court should consider a supported spouse's ability to earn income by investing the assets obtained through equitable distribution. Lavene, 162 N.J. Super. at 203. In Miller, the Court further held a party may not "insulate his or her assets from the alimony calculus by investing those assets in a non-income producing manner." Id. at 422.

    In Miller, in determining the ability to pay alimony, the Court imputed additional income based on what the Court believed was a reasonable rate of return at the time, as indicated by the Moody's Composite Index on A-rated Corporate Bonds. Id. at 424-25.

    Miller, however, does not mandate that the Moody's Index always be used to calculate a reasonable rate of return, regardless of the circumstances. Overbay v. Overbay, 376 N.J. Super. 99, 110-13 (App. Div. 2005). Rather, the Miller Court specifically confined its decision to the facts there presented, stating that it did not "intend to deprive plaintiff of the opportunity to control his investment opportunities" but did require "the imputation of a more reasonable income from those investments . . . ." 160 N.J. at 424, 426.

    As the Court explained in Overbay: The lesson to be learned from Miller is that when a spouse with underearning investments has the ability to generate additional earnings - without risk of loss or depletion of principal - but fails to do so, it is fair for a court to impute a more reasonable rate of return to the underearning assets, comparable to a prudent use of investment capital. In Miller, the Court took note of the difference between legitimate investment strategies, specifically, between investing 'designed to produce [future] income through appreciation in stock values' and investing for present income. In imputing additional income to Mr. Miller, the Court recognized that it would be unfair to allow one spouse to maximize future income through anticipated asset appreciation for his or her own benefit, while limiting present income that would enter into the alimony calculation for the benefit of the other spouse . . . . [376 N.J. Super. at 111].

    In deciding Overbay, the Court noted that simply imputing interest income based on the Moody's Index "deprived Mrs. Overbay of the opportunity to control her investment options" since she had always sought safe investments that did not risk capital, and applying the formula used in Miller would force her to "pursue a more aggressive investment strategy that [would] subject her capital to greater risk." Id. at 108. Likewise, the Overbay Court acknowledged that the general trend in investment strategies had shifted away from high-risk, high reward investments since the Court decided Miller as a result of scandals involving companies like Enron and WorldCom. Id. at 109. Accordingly, the appellate court concluded that the trial court misapplied Miller when it simply imputed income based upon the Moody's Index instead of attempting to identify a reasonable rate of return. Id. at 110-11.

    Likewise, a trial court may decline to impute unearned income to a party in connection with that party’s share of the retirement accounts. See N.J.S.A. 2A:34-23 ("When a share of a retirement benefit is treated as an asset for purposes of equitable distribution, the court shall not consider income generated thereafter by that share for purposes of determining alimony."). A trial court may justifiably conclude, in light of the statutory factors of N.J.S.A. 2A:34-23(b), that any interest earned from retirement accounts should be preserved as a retirement fund, or saved for other future needs, rather than be invaded for daily support.

    A trial court may also refuse to charge a supported party with income that had not yet been received. See White v. White, 284 N.J. Super. 300, 307 (Ch. Div. 1995) (refusing to offset husband's obligation to his wife in an amount equal to wife's social security benefit, when wife was not yet eligible to receive social security), aff'd o.b., 309 N.J. Super. 139 (App. Div. 1996).

    Likewise, there is no mandate that a supported party invade the principal of that party’s assets in order to support herself or himself.


  4. Law Lessons from Hurley v. Hurley (App. Div., Docket Nos. A-2779-03T1 and A-3242-03T1, Decided November 17, 2005, not approved for publication):

    While a court may impute income to a party for support purposes when the party is, without just cause, voluntarily underemployed or unemployed, Caplan v. Caplan, 182 N.J. 250, 268 (2005); Pressler, Current N.J. Court Rules, Appendix IX-A(12) to R. 5:6A at 2310 (2006), the court must also consider the length of the marriage and the parties' lifestyle during the marriage. See Khalaf v. Khalaf, 58 N.J. 63, 70 (1971). After a court decides that income should be imputed, it must decide how much to impute. In so doing, a court should consider the guideline factors, "as well as any other evidence related to each party's ability to earn income. That evidence includes a party's responsibility for care of children." Caplan, supra, 182 N.J. at 270.

    The " New Jersey Department of Labor Occupational Employment Statistics Survey," identified in the court rules as an appropriate source to consider in imputing income. See Pressler, Current N.J. Court Rules, Appendix IXA( 12)(a) to R. 5:6A at 2310 (2006).


  5. Law Lessons from Husain v. Husain, (App. Div., Docket No. A-1003-04T3, Decided November 18, 2005, not approved for publication): The right to receive future alimony is a personal right which terminates at death. Sutphen v. Sutphen, 103 N.J. Eq. 203, 205 (Ch. 1928).


  6. Law Lessons from Edell v. Edell (App. Div., Docket Nos. A-1695-02T5 & A-5953-03T5, Decided November 28, 2005, Not For Publication):

    The statute directs trial judges to consider the parties' economic circumstances and abilities to pay, and does not restrict the inquiry to the parties' earned incomes. See N.J.S.A. 2A:34-23(b)(1),(5), (10),(11); N.J.S.A. 2A:34-23(a)(3),(4). Therefore, the trial judge should consider the economic circumstances as a whole, including, for example, money derived from capital gains and the invasion of assets. E.g., Steneken v. Steneken, supra, 183 N.J. at 299; Crews v. Crews, supra, 164 N.J. at 27; Miller v. Miller, 160 N.J. 408, 420 (1999); Innes v. Innes, supra, 117 N.J. at 503; Weishaus v. Weishaus, 360 N.J. Super. 281, 289, 291-92 (App. Div. 2003), aff'd in part and rev'd and modified in part on other grounds, 180 N.J. 131 (2004); Hughes v. Hughes, 311 N.J. Super. 15, 34 (App. Div. 1998).

    In making the marital decision to make a career change that might, temporarily, result in reduced marital income, the parties anticipate that that endeavor would ultimately provide equal or greater financial success. Simply put, the trial judge should view income with "an eye toward the future, since it is to this potential that both parties contribute during the marriage." Guglielmo v. Guglielmo, supra, 253 N.J. Super. at 544. Cf. Steneken v. Steneken, 367 N.J. Super. 427, 440 (App. Div. 2004), aff'd as modified by, supra, 183 N.J. 290 (2005).


  7. Law Lessons from Husain v. Husain (App. Div., A-1003-04T3, November 18, 2005, not approved for publication): The right to receive future alimony is a personal right which terminates at death. Sutphen v. Sutphen, 103 N.J. Eq. 203, 205 (Ch. 1928).


  8. Law Lessons from WOODRUFF v. FALCONE (App. Div., A-4541-03T1, January 12, 2006, not approved for publication): "Matrimonial agreements, . . . which are fair and just, fall within the category of contracts enforceable in equity," Petersen v. Petersen, 85 N.J. 638, 642 (1981) subject, however to "Rule 4:50-1 considerations as well as considerations of unconscionability, fraud or overreaching." Harrington v. Harrington, 281 N.J. Super. 39, 46 (App. Div. 1995) (citing Massar v. Massar, 279 N.J. Super. 89, 93 (App. Div. 1995)), certif. denied, 142 N.J. 455 (1995); and see Peskin v. Peskin, 271 N.J. Super. 261, 276 (App. Div.), certif. denied, 137 N.J. 165 (1994); Morris v. Morris, 263 N.J. Super. 237, 241- 44 (App. Div. 1993).


  9. Law Lessons from LARBIG v. LARBIG (App. Div., A-6030-03T3, approved for publication February 2, 2006): Alimony is taxable to the recipient. See, e.g., Hughes v. Hughes, 311 N.J. Super. 15, 35 (App. Div. 1998).


  10. Law Lessons from DE SARO v. DE SARO (App. Div., A-1649-04T5, March 23, 2006, not approved for publication): The primary purpose of alimony is to provide the dependent spouse with sufficient support to continue the parties' standard of living that existed prior to separation. Boardman v. Boardman, 314 N.J. Super. 340, 344 (App. Div. 1998); Wass v. Wass, 311 N.J. Super. 624, 629 (Ch. Div. 1998). Accordingly, the marital standard of living is the measure for assessing initial awards of alimony. Crews v. Crews, 164 N.J. 11, 25 (2000). The grant of alimony allows a dependent spouse "to share in the accumulated marital assets to which he or she contributed." Konzelman v. Konzelman, 158 N.J. 185, 195 (1999). The authority to award alimony is statutory in nature. N.J.S.A. 2A:34-23. Under the statute, the Legislature has established thirteen factors that a trial judge "shall consider, but not be limited to" in deciding whether to award permanent alimony and its amount.


  11. Law Lessons from SITLER v. HAYMAN (App. Div., A-6519-04T2, March 27, 2006, not approved for publication): When considered for tax purposes or calculating child support, alimony is ordinarily treated as gross income to the recipient and deducted from the payor's gross taxable income. See 26 U.S.C.A. § 71. See also Burns v. Edwards, 367 N.J. Super. 29, 48 (App. Div. 2004); Use of the Child Support Guidelines, Pressler, Current N.J. Court Rules, Appendix IX-B to R. 5:6A at 2325 (2006).


  12. Law Lessons from IBRAHIM v. IBRAHIM (App. Div., A-3710-04T3, April 17, 2006, not approved for publication): Income from a spouse's pension, which had not vested at the time of the divorce and was not the subject of equitable distribution, could be used to determine income for purposes of calculating ability to pay and the consequent alimony obligation. Compare Innes v. Innes, 117 N.J. 496, 506 (1989) (holding that income from pension benefits that have been treated as an asset for purposes of equitable distribution cannot be considered in determining alimony, because it would constitute double dipping).


  13. Statutory Factors
  14. Lifestyle Analysis
  15. Other Resources
  16. Return to the Topic of Alimony
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