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

Will I Lose My Alimony If My Ex Voluntarily Retires Early?

If someone desires to reduce or terminate his or her alimony obligation here in the state of New Jersey, an experienced divorce lawyer understands that it is vital that he or she establish that the circumstances have changed significantly. An example of a changed circumstance to terminate or reduce alimony is retirement. If a party has no control over retiring from a job, it is typically easier to reduce the alimony obligation. However, if a party voluntarily chooses to retire, there is a higher burden of proving changed circumstances. The new case decided by New Jersey’s Appellate Division of Baker v. Baker illustrates that perfectly.  Here is this attorney’s analysis of this recent alimony case.

In the case the parties married in 1975 and divorced in December 1998. Upon the divorce, they executed a property settlement agreement in which the husband agreed to pay the wife $10,000 per month in permanent alimony. At the time the parties divorced, the husband was the managing director at Pershing Trading Company earning $790,000 per year; all but $120,000 resulting from an annual bonus. However, in May 2005 Pershing was acquired by another company. As a result, the husband was out of a job. At the time he lost his job, the husband was earning over $900,000 per year.

A few months later, the husband found a new job as the CEO of Olson Global Markets. He expected to earn $120,000 with the potential for bonuses proportionate to his earnings at Pershing. Yet, the husband never once received a paycheck or bonus while working at Olson. Instead, the husband claimed that the company was in such debt that he had to loan it $138,000 from his personal bank account.    

In March 2008, the husband filed a motion to reduce his alimony obligations. Although the motion was initially denied, the order was reversed and the husband was granted a plenary hearing. While the hearing was pending, the husband filed two more motions for interim relief, which were both denied. However, at some point the wife voluntarily agreed to temporarily accept $8,000 per month instead of $10,000.

A few years later in July 2010 the court conducted the hearing. At its conclusion, the court granted the husband a temporary reduction in his alimony obligation to $6,666 per month effective as of August 2010. However, that lesser amount was still not low enough for the husband and he appealed. On appeal, the court determined that the amount was fair; however the modification should have been retroactive to March 2008. As a result, the court determined that the husband was entitled to a $1000 credit per month for overpaying alimony.   

In 2012, the husband officially left Olson because it was allegedly closing its doors. In December 2012 he filed another motion, but this time to terminate his alimony obligation altogether. The husband argued that he had made countless attempts to find a new better paying job, yet he had difficulty trying to secure one because of his advanced age of 63. Furthermore, the husband testified that he was “forced to take out a home equity line of credit, reduce his brokerage account from $1,000,000 to less than $200,000 and liquidate his 401(k) in order to meet his alimony obligation.”

The wife testified as well, explaining that she tried to reduce her financial dependency on her ex-husband. She sold the marital home in New Jersey and moved to Wisconsin. Additionally, the wife explained that she suffered from CREST, a chronic, incurable disease that “prevented her from functioning in a normal manner.” She had always been a stay-at-home mom, never had a job while married, and had no skills to secure one at this point in his life.

After considering the testimony of both parties, the trial court denied the husband’s request to terminate his alimony obligation in October 2013. The trial court held that there was no substantial change in circumstances on the husband’s part, especially since he had chosen to retire. Moreover, the court stated that the husband worked at Olson for years without ever receiving a paycheck and not once did he protest. Also, the court stated that the husband made no attempt to reduce his living expenses, such as selling his motorcycles or making his new girlfriend contribute to the household.

Furthermore, the court held that the wife would suffer an extreme hardship without the monthly alimony payments. She hadn’t worked since the 1970s and suffered from CREST, which would prevent her from getting a job. However, the court did reduce the husband’s alimony obligation again, this time to $5166 per month because the wife would soon be 65 years old and eligible for Medicare, thus saving money on insurance. Yet, still dissatisfied with the result, the husband appealed.

On appeal, the husband argued that the trial court should have granted his motion to terminate his alimony obligation entirely because his circumstances had changed when he retired. The New Jersey Appellate Division started its analysis by stating that retirement may constitute a change in circumstances, warranting a modification or elimination of alimony. However, the court would then have to look to see if the party voluntarily quit his or her job or not. If retirement was involuntary, the parties’ financial circumstances would be the only thing a court would have to consider. Contrarily, if the retirement was voluntary, the court would have to consider several other factors including:

1.     The age and health of the retiring party

2.     Whether or not the retirement was made in good faith

3.     The retiring spouse’s ability to pay alimony after retiring

4.     The expectation of the parties at the time a property settlement agreement was executed (if any)

5.     The ability of the dependent spouse to provide for him or herself

After considering the testimony presented, the Appellate Division affirmed the findings of the lower court. It found that the trial court correctly determined that the husband voluntarily retired from his job. Additionally, he had voluntarily remained at a company for years without ever taking pay. Most importantly, the court considered the fact that the wife could not provide for herself and that she depended on receiving alimony to maintain a good quality of life.     

To learn more about applications to the Superior Court of New Jersey to reduce or end alimony payments please contact my office today.