The Massachusetts Alimony Reform Act of 2011 has been passed by both the House and the Senate and now awaits the Governor's signature. Once it is passed, which is almost assured at this point, there will be many questions about how it is implemented. The one I am receiving most often already is:

How will alimony be calculated in cases with child support?

The section of the Alimony Reform Act that addresses this question is Section 6(c):

"For purposes of setting an alimony order, the court shall exclude from its income calculation:

(1) Capital gain income and dividend and interest income which derives from assets equitably divided between the parties under Section 34; and

(2) Gross income which the court has already considered for setting a child support order whether pursuant to the Massachusetts Child Support Guidelines or otherwise; provided that nothing in this section shall limit the court’s discretion to cast a presumptive child support order under the Child Support Guidelines in terms of unallocated or undifferentiated alimony and child support."

As indicated, the Alimony Reform Act would exclude from any General Term Alimony calculation gross income which was already used to calculate child support. Since the Massachusetts Child Support Guidelines presumptively apply up to a total gross income of $250,000, many practitioners read this section to mean that any cases where the total gross income does not exceed $250,000 will not have alimony if they have child support. This is the most obvious reading of the section, and was the intention as described by one of the drafters on the Joint Task Force at a recent conference I attended (I won't call her out by name but she is a lawyer who clearly understood the implications).

There has been some outrage over this interpretation because it is one of the most significant changes this law makes to presumptive alimony in child support cases. However, there are exceptions, which I will detail below.

Before I tell you the exceptions, though, let's examine if this is truly unfair (or at least inconsistent with the rest of the Act):

Sample Case:

The Act contains a formula for calculating the maximum alimony award as follows: "the amount of alimony should generally not exceed the recipient’s need or 30 percent to 35 percent of the difference between the parties gross incomes established at the time of the order being issued."

This means that if the higher-earning spouse (let's use the name Chris) earns $125,000 and the lower-earning spouse (Pat) earns $25,000 in gross income, then alimony should not exceed $30,000 to $35,000 per year. This assumes no child support, that Pat has a need for support, and that the marriage is of sufficient length to warrant support. If we use the average of $32,500 then Chris' after payment income is $92,500 and Pat's is $57,500, and all of Pat's $57,500 will be taxable income. Assuming an effective tax rate of 15%, Pat ends up with $48,875 in net income.

Now let's add children. Chris still earns $125,000 and Pat earns $25,000. Chris is the non-custodial parent and Pat is the custodial parent. Child Support by the guidelines (assuming no other expenses for simplicity) is $510 per week, $26,520 per year. Since all of Chris' income was taken into account for child support guidelines, the Alimony Reform Act would indicate that none is left to consider for alimony. Chris' after payment income is $98,480 and Pat's is $51,520, but only $25,000 of this is taxable income to Pat. Again assuming an effective tax rate of 15%, Pat ends up with $47,770 in net income. In addition, Chris is still paying tax on $125,000 in income.

As you can see, although Pat is receiving almost $6,000 less in support, when you take into account the taxation of alimony vs. the tax-free nature of child support, the effective support that Pat is receiving from child support is only about $1,000 less. And this difference is not necessarily going to Chris, rather it is being taxed by Uncle Sam.

Given the tax-free nature of child support to the recipient, in cases where all of the income is considered in calculating child support, the Alimony Reform Act's exclusion of that income from calculating alimony is consistent with the caps that they have proposed on total support. Of course, these numbers won't work out the same at all income levels. The differences will be greater as the gap in incomes becomes greater. And while it may seem foolish to pay that extra money to the tax-man, the drafters did provide for an alternative by allowing the Judges to have discretion on assigning some of child support as unallocated support.

Exceptions:

Furthermore, there are exceptions which can also help crafty attorneys get around this child support limitation in the Alimony Reform Act. In setting any alimony order the Judges are not completely limited by this formula and can vary depending on numerous circumstances:

"Grounds for deviation may include:

(1) Advanced age; chronic illness; or unusual health circumstances of either party;

(2) Tax considerations applicable to the parties;

(3) Whether the payor spouse is providing health insurance and the cost of heath insurance for the recipient spouse;

(4) Whether the payor spouse has been ordered to secure life insurance for the benefit of the recipient spouse and the cost of such insurance;

(5) Sources and amounts of unearned income, including capital gains, interest and dividends, annuity and investment income from assets that were not allocated in the parties divorce;

(6) Significant premarital cohabitation that included economic partnership and/or marital separation of significant duration, each of which the court may consider in determining the length of the marriage;

(7) A party’s inability to provide for his or her own support by reason of physical or mental abuse by the payor;

(8) A party’s inability to provide for his or her own support by reason of a party’s deficiency’s of property, maintenance or employment opportunity; and

(9) Upon written findings, any other factor that the court deems relevant and material."

Aside from the fact that there is a broad catch-all in number 9, the most obvious and useful tool in arriving at a more fair balance of child support and alimony in any case is deviation factor number 2: Tax considerations applicable to the parties. In the example used above, even if Chris and Pat have children, restructuring the support paid by Chris to include some alimony and some child support could result in better tax treatment for the family overall, and greater net income for both.

The Alimony Reform Act simply puts the burden on parties to show these tax considerations to the Judge to assist them in deciding what cases are appropriate for variation. The Judge can then deviate from the guidelines completely, or choose to use a portion of Chris' income in calculating child support and a portion in calculating alimony, a result still consistent with the Section 6(c) limitation.

This ability to deviate, built into the Act, means that the child support limitation is not as limiting as some fear.

The Catch

Yes, there is always a catch. The problem in reaching agreements or judgments that split the total support payment between child support and alimony is that both of these types of payments have different duration. Under the Act, alimony duration is limited by a formula dependent on the length of the marriage, whereas child support duration is limited by the emancipation of the children. These dates may coincide but most likely will not, and the needs of either the children or the lower-earning spouse will need to be taken into account in creating such a deviation.

Finally, as with the rest of the Act, once it becomes effective we will have to see how the Courts of the Commonwealth implement it. Despite our opinion that the reading of this child support section is clear, we are  not on the Appeals or Supreme Court and until they rule there is certainly room for interpretation.

For more information about the Alimony Reform Act of 2011 check out MassAlimonyFormula.com

Click here for a Massachusetts Child Support Guidelines Worksheet.

Thank you to Julia Rueschemeyer for inspiring us to finally write this post.

In Massachusetts, the Massachusetts Child Support Guidelines are based upon the child(ren) having a primary residence with one parent and spending approximately one third of the time with the other parent.

According to the Guidelines, when two parents share equally, or approximately equally, the financial responsibility and parenting time for the child(ren), the child support shall be determined by calculating the child support guidelines twice, first with one parent as the Recipient, and second with the other parent as the Recipient. The difference in the calculations shall be paid to the parent with the lower weekly support amount.

To make this "cross-guidelines" calculation a little faster and easier, we have created a Joint Custody Child Support Worksheet (also available in a mobile version for use on smart phones).

UPDATE: There is pending legislation for major changes to the alimony statute in Massachusetts. The Alimony Reform Act of 2011 was filed on January 18, 2011 and you can learn more about the Act at MassAlimonyFormula.com or in our recent blog post highlighting the differences between the bill and the current law.

Dealing with a case that includes the potential for both child support and alimony can be quite complicated. For purposes of this discussion, I will assume that the person receiving alimony is also the custodial parent (i.e. the person receiving child support).

First let's get some definitions:

Child Support is the amount of money paid by the non-custodial parent to the custodial parent for the support of the children. Child Support is calculated using a formula called the Massachusetts Child Support Guidelines. The formula is presumptive, and Judges can only vary from the formula in specific circumstances. To view the formula and calculate Child Support click here.

Alimony, also called spousal support, is paid by the wage-earning spouse (the spouse who has traditionally earned the majority of the income during the marriage) to the non-wage-earning spouse to allow the non-wage-earning spouse to continue to live in the lifestyle to which he or she has become accustomed during the marriage assuming their is enough income to do so. There is not currently any formula enacted or endorsed by the Massachusetts Legislature or the Courts for the calculation of alimony. The amount of alimony is dependent on the consideration of all of the factors described in M.G.L. c. 208 Section 34.

Some states use formulas to calculate presumptive alimony. And notwithstanding Section 34, some Judges in Massachusetts have suggested doing the same in Massachusetts. A Joint Task Force of the Massachusetts Bar Association and the Boston Bar Association has prepared a draft report which also suggests a formula to calculate the maximum alimony award possible. Although the Court has no obligation to follow these formulas they can be a valuable resource in helping parties understand a reasonable potential range of spousal support orders. The Divorce Spousal Support Calculator which includes all of these formulas and can be accessed by clicking here.

What happens when a case warrants both alimony and child support?

Just as there is no formula for calculating alimony in Massachusetts, there is also no bright-line rule for breaking down how much an order should be alimony and how much should be child support when a case warrants both. The interplay of these two figures can be very complicated because the tax effect to both the payor and the recipient is very different depending on how a support order is broken down.

We have a few observations based on three possible ways of making this calculation.

Option 1: If one were to calculate child support (using The Massachusetts Child Support Guidelines) and alimony (using The Divorce Spousal Support Calculator) and simply add them together, the overall support figure would likely be too high for the payor. For example, suppose a couple where the payor/non-custodial parent, Chris Jones, earns $125,000 per year, and the recipient/custodial parent, Pat Jones, earns $25,000 per year. Assuming no health insurance cost, 1 child (and no other child support orders), and no day care costs, the child support order would be $759 per week. Assuming a 20 year marriage, the average of the first five alimony formulas is $644.60 per week. Simply adding these together results in a total support order of $1403.60 per week ($72,987.20 per year), which is 58% of Chris' gross income (resulting in Pat receiving 65% of the total family income). This would likely leave Chris with not enough funds to support Chris' household.

Option 2: Some Judges have indicated at recent conferences that they are inclined to figure out an appropriate alimony order first, and subtract child support from that figure. In our example above, the child support was greater than the alimony, so there would be no alimony order. Chris would pay only the $759 per week in child support resulting in an annual income to Chris of $85,532 (taxed as $125,000) and an annual income to Pat of $64,468 (taxed as $25,000). After taking into account taxes these incomes are relatively close together, though Chris ends up with more than 50% of the income.

Option 3: Another possibility, suggested by one Judge to the author, is to estimate alimony, and then run the child support guidelines on the post-alimony incomes. In this example, if Chris pays $644.60 per week in alimony, Chris' post-alimony income is $91,480.80 and Pat's post-alimony income is $58,519.20. The Child Support using these figures is $558 per week. The resulting income to Chris would therefore be $62,464.80 (taxed as $91,480.80) and to Pat would be $87,535.20 (taxes as $58,519.20). Although resulting in a lower figure than Option 1, this may still result in too high an order for may Judges (and payors).

These examples demonstrate the difficulty of trying to use these formulas together without reviewing some common-sense evaluation of the budgetary needs of each party. For the example case the likely fair figure is somewhere between Option 2 and Option 3. It makes sense to have some of the order be alimony in order to move some of the taxable income to the lower tax bracket. It may not be practical, though, for the total order to be as high as $1,202.60 per week.

Check out the Kelsey & Trask MOBILE web site at http://mobile.kelseytrask.com. You can see the link on our main page in the upper left-hand corner:


Our NEW on-the-go site is just the basics for when you need our address or phone number or want to use one of our handy calculators on a minute's notice, such as from the Courthouse when you don't have access to your computer.

Need help filling out the Child Support Guidelines Worksheet at the courthouse, or just want to get a figure quickly? Check out the mobile K&T Child Support Guidelines Calculator.

The mobile Stevenson-Kelsey Spousal Support Calculator and Chapter 7 Means Test Calculator are available as well for quick reference on your cellphone or PDA.

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If you're anything like me, and enjoy your social networking, then your homepage might look like this:


Oh and if there are any Blackberry users out there, let us know how it looks on your browsers.

After a nearly month of planning, programing, coding, compiling, and complaining (not to mention more than a few late nights), the new and improved website for Kelsey & Trask, P.C. is up and running. Our attorneys, Justin L. Kelsey and Matthew P. Trask, are proud of our new website and feel it represents the true face and personality of our firm.

We have purposefully posted a large amount of content at http://www.kelseytrask.com. We want our website to be a resource for you, not just a signpost or an advertisement for our firm. We encourage you to take a look around and learn more about us, the law, how we practice, and the ways we can help you or your business in these less-than-certain times.

All of the content in our page regarding divorce, paternity, child support, bankruptcy and civil practice are presented in a simple, intuitive question-and-answer format. We have resources for both attorneys and the public, including calculators for the Massachusetts Child Support Guidelines, the Stevenson-Kelsey Spousal Support Calculator (as seen in TurboLaw), and a Means Test Calculator for bankruptcy cases filed in the United States Bankruptcy Court, District of Massachusetts.

Finally, we hope that our site shows that despite the problems some of us might be facing, there is help out there...don't go alone.