Edward R. Weinstein, Esq.Edward R. Weinstein, Esq.

Are Savings Accounts Taken Into Consideration When Determining Alimony?

Yes, as an experienced New Jersey divorce attorney, I know that saving for the future should be a consideration in any alimony determination, where saving was a habit of the marital lifestyle. In Lombardi v. Lombardi, the New Jersey Appellate Division confirmed for lawyers that savings should be considered in alimony determinations, even when there is no actual need for savings to protect future alimony payments. Here, because the parties only relied on only a small fraction of their household monthly income when they were married, the appellate panel found that the New Jersey Family Part court was wrong not to include the accumulations of these savings in the amount of alimony awarded.

At trial, the Family Part court found that Lisa and Anthony Lombardi’s monthly savings during the marriage were a part of their marital lifestyle, yet still chose not to include this amount in the calculation of alimony, because the savings were not needed to ensure the future payment of alimony. The New Jersey Appellate Division did not agree and held that regular savings should be considered in any alimony determination.

Both Lisa and Anthony Lombardi appealed from various sections of their final judgment of divorce, which happened to be entered after a lengthy twenty-eight-day trail.  Lisa challenged the alimony award because it rejected the savings factor. The couple established a habit of saving that was the biggest component of their marital lifestyle. She also argued that the current child support obligation did not allow the children to share in their father’s good financial fortune. On the other hand, Anthony argued that the final judgment of divorce should be affirmed in every aspect, but that in the event of any future reverse or remand by the court, if the court fails to give him a credit for the “active appreciation” of funds from any one of the two accounts disputed by Lisa would warrant reversal.

Lisa and Anthony started dating in college, and got married in May of 1990, about three years after they graduated. They had three children together, who at the time of appeal were twenty, eighteen, and fifteen. On August 2, 2010, Lisa filed a complaint for divorce, and on March 7, 2014, the court entered a final judgment of divorce.

When the final judgment of divorce was entered, both Lisa and Anthony were forty-eight years old, and healthy. While Lisa had a bachelor’s degree in marketing, and earned $ 80,000 a year when she worked at Bear Stearns in the past, after the birth of their first child, the couple agreed that she would leave her job to be a full-time stay at home mother. With time, the children got older, and Lisa acquired a certification to be a fitness instructor. She then began teaching classes at fitness clubs, part-time, for a gross annual income of $ 10,000 a year. After the divorce, she was designated as the parent of primary residence, and still lives in the marital home.

Anthony had a bachelor’s degree in finance, a master’s degree for business administration, and worked as a chartered financial analyst. During the marriage, he worked as an analyst or portfolio manager for several investment firms. At the time of appeal, he was a vice president, senior portfolio manager,s and earned a base salary of $ 250,000 with a guaranteed bonus of $ 1,125,000 for two years. For the five years before the complaint was filed he was paid an amount between $ 1,087,000 to $ 2,275,000.

While they were married, the couple routinely saved most of his income. The portion they did use for family expenses, allowed the family to enjoy a comfortable, but not extravagant lifestyle. Even though they could have easily enjoyed a lavish lifestyle, the couple wanted to save and budget most of their income, so that they had enough money saved for when they grew older, and to pay for their children’s college expense. According to Anthony, the family saved so that he could retire at forty-five, when the family would have $ 5 million saved in assets.

The couple spent $ 22,900 a month to maintain their standard of living, and saved about $ 67,000 per month. At the time of the final judgment of divorce the family’s savings totaled about $ 4.18 million. They started college savings accounts for all three of their children, and their only debt consisted of the mortgage on the house, a lease for one car, and a loan on another car.

The New Jersey Appellate Division started its opinion by stating that an appellate courts review of a Family Part decision is limited. The determinations of the Family Part are afforded deference because of the Family Part’s special expertise in family matters. As long as the decision is supported by substantial credible evidence, and is consistent with the applicable laws, it will not be disturbed by the New Jersey Appellate Division. That said, appellate courts do not owe any special deference to the Family Part’s legal conclusions.

Lisa contended that she needed $ 16,291 a month in alimony to support herself and the three children at the standard of living they enjoyed during the marriage. She also wanted an additional $ 30,000 a month for savings. Lisa further requested a child support award of $ 5,000 a month. The Family Part reviewed the evidence and granted Lisa an alimony award of $ 7,600 a month that did not include an amount for savings, even though the court did find that is was a component of the marital lifestyle. The court categorized the former couple’s marital lifestyle as “modest middle-class lifestyle,” and found that Lisa needed an alimony award to meet it. The court approved a total monthly budget of $ 14,516. After deducting the $ 5,000 child support award, and the $ 3,610 of monthly after-tax income that could be generated by investing Lisa’s equitable distribution share, and the $ 583 monthly income from her part-time job, the court found she would need $ 5,323 more to meet her budget. The Family Part determined that the $ 7,600 a month award of alimony would be enough to cover this shortfall.

Regarding the savings issue, the Family Part found that the couple earned on average $ 87,000 a month more than they consumed. The court noted that these savings could be considered a component of the marital lifestyle, because Lisa and Anthony had habitually saved most of their income while married. Still the court determined that savings as a part of alimony was only warranted so far as it was necessary to make sure the dependent spouse’s financial security in light of a future modification or termination of support, which was not the case here.

Lisa argued that the Family Part committed error by not including a savings portion in the alimony award because it allowed Anthony to still enjoy the marital lifestyle, but deprived her of the same. The New Jersey Appellate Division stated that an appropriate award of alimony is supposed to help the supported spouse achieve a standard of living reasonably comparable to the one enjoyed when he or she was living with the supporting spouse during the marriage. Furthermore, a Family Part judge must consider all the evidence at hand to ensure that the award is “fit, reasonable and just” to both sides, and appropriately balances each side’s needs, and the marital resources. The final determination has to be based, not just on the amounts spent during the marriage, but also what is fair and equitable.

The New Jersey Appellate Division held that a Family Part court may take the marital lifestyle into account, and allow for the supported spouse to save for the future. This is especially relevant when the supporting spouse has the power to afford any amount given to the supported spouse. Moreover, a fair amount of savings should be considered as a living expense when determining alimony, in the event of a natural disaster, for future expenditures like appliances or cars, or for retirement.

The situation most deserving of an inclusion of a savings component is when the former married couple’s lifestyle included the habit of saving regularly. This is because the manner in which the married couple used their money is determinative in the establishment of a marital lifestyle. Therefore, the New Jersey Appellate Division vacated the judgment of the Family Part, and ordered a new trial consistent with their opinion.

Please call or email my office if you are confronting an alimony issue in your potential divorce.