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Recent Developments in Massachusetts Divorce and Family Law
Legal and Financial Aspects of Divorce and Family Law:
Summary This article provides an overview of recent cases in the context of the Massachusetts Equitable Distribution Statute enacted in 1975, including a summary of the statutory factors and the plain meaning of key legal terms such as conduct and contribution. Discussion will include current practices in the Probate and Family Court affecting due process, asset identification, valuation and allocation, finances, including child support in high income cases, collecting arrearages, alimony in long-term marriages, life insurance, health insurance, and the recent developments and challenges posed by the advent of same sex marriage in Massachusetts. The material includes the recent cases on prenuptial agreements and the legal and financial conundrum they create. The case review also covers the financial obligations of a father whose parental rights are being terminated, and the court’s reading of the term “adopted issue” in a probate case, and the outcome of an unmarried cohabitant’s suit demonstrate the scope of the courts’ decisions on the concept of family in various situations.
Outline 1. Introduction and overview. 2. Statutory foundation: Massachusetts General Laws Chapter 208. 3. Prenuptial agreements: Can alimony be waived? 4. Alimony. 5. Child support. 6. Life insurance: Drafting issues and compliance problems. 7. Health insurance: Out-of-state employers. 8. Same sex marriage: Financial challenges when marriage is not recognized in all jurisdictions and on the federal level. 9. Unmarried cohabitants: The need for a written agreement. 10. Termination of parental rights and responsibilities: A counterintuitive or child-centric result? 11. Rights of adopted children: Advising clients and reviewing documents in light of older definitions. 12. Conclusion: Equitable distribution focuses on finances and taxation, not heart balm. Tradition-bound and forward-looking decisions defining “family” for the 21st century. 13. Resources for Massachusetts family law: Favorite sources of information.
Introduction The following article provides an overview of recent developments in the legal and financial aspects of divorce and family law in Massachusetts. Recent case law for the most part simply refines and clarifies existing law. The major exception is the historic ruling in favor of same sex marriage in Goodridge v. Department of Public Health and Another, 440 Mass. 309 (2003). Massachusetts is now the only jurisdiction – state or federal – allowing same sex marriage. Goodridge creates new challenges for legal and financial advisors working with same sex couples whose marriages are not recognized in other parts of the country or the federal government and its agencies, including the Internal Revenue Service and the Social Security Administration. While Goodridge expands the court’s definition of “family,” the Watson case discussed under “Rights of Adopted Children” ratifies traditional notions from an earlier era, and the Northrup case outlined under “Same Sex Marriages and Rights of Unmarried Cohabitants” reminds us again of the legal ramifications of marriage and the perils of living together without benefit of marriage. A less dramatic, but problematic development involves conflicting views on prenuptial agreements expressed by the Supreme Judicial Court in DeMatteo v. DeMatteo, 436 Mass. 18 (2002) and by the Appeals Court in Austin v. Austin, __ Mass. App. Ct. __ (2004). The DeMatteo case upheld the limitation imposed on the wife’s claim for alimony whereas the Austin case did not. For a comparison of DeMatteo and Austin, see http://www.divorcenet.com/states/massachusetts/prenuptial_agreements_and_alimony_waivers.
1. Statutory Foundation: Massachusetts General Laws Chapter 208 The lynchpin of Massachusetts divorce law is Chapter 208 of the General Laws entitled “Divorce.” Section 34 of the divorce statute deals with alimony and an equitable, but not necessarily equal, assignment or distribution of assets upon divorce or at any time after divorce. For an interesting case involving distribution of assets after divorce, see Akinci-Unal v. Unal, __ Mass. App. Ct. __ (2005) affirming the right of the former wife to seek a distribution of assets in Massachusetts after the former husband was granted a divorce in Turkey and Saudi Arabia. B. Factors Affecting Outcome The factors enumerated in Section 34 affecting a financial order or settlement include length of marriage, the parties’ age, health, education, past, current, and future employment, contribution to the acquisition, preservation and appreciation of assets, station in life during marriage, conduct (good and bad), current and future income, current and future property interests, contribution as homemaker, and unmet future needs of children. No single factor is more important than any other. Assets are divided equitably – again, not necessarily equally, and alimony may or may not be awarded, depending primarily on the need of the party requesting alimony and the ability of the other party to pay. Need is determined partly according to the parties’ station in life during marriage. Grubert v. Grubert, 20 Mass. App. Ct. 811 (1985), but see also Johnston v. Johnston, 38 Mass. App. Ct. 531 (1995) where wife was not required to live modestly while husband lived more lavishly after divorce because of their frugality during marriage. Financial advisors, lawyers, and clients should pay careful attention to the preparation of the financial statements filed with the Probate and Family Court. Several versions of a weekly budget should be presented, although separate schedules will have to be attached to the court form. The official form provides space for only one version. The first version might present the parties’ weekly expenses prior to separation or before divorce was contemplated; a second might offer current expenses, often skewed from pre-divorce spending; and a third should include anticipated expenses such as legal fees, repairs, increases in medical insurance premiums, the cost of moving, security deposit on a new apartment, etc. The three versions should convey a sense of the historical spending, the new spending in light of the divorce, and what the client would like to spend in the future. Endnotes are another acceptable means of explaining and expanding on the individual line items under “Weekly Expenses.” The courts have upheld prenuptial agreements that exclude and protect some or all of a spouse’s assets from an equitable distribution. Over the years court decisions have added nuances to the definition of marital assets that hint at possible future exclusions of inherited and gifted property. See Williams v. Massa, 431 Mass 619 (2000). The Massa case allowed the husband to retain family-owned assets, and while some commentators believe the case stands for the proposition that family-owned assets stay within the bloodlines, others believe it is the result of the wife’s total lack of meaningful contribution to the family as homemaker, mother, and spouse. D. Equitable, Not Equal Division of Assets: Conduct as a Factor Courts tend to divide assets equally, but will carve out exceptions for short-term marriages where one or both parties had premarital assets, or where one party made little or no contribution, see Massa; or in cases involving one party whose outrageous behavior caused financial hardship to the family, Handrahan v. Handrahan, 29 Mass. App. Ct. 167 (1989). Conduct, except financial chicanery, has minimal impact, so adultery has little or no economic consequences unless the guilty party spent substantial sums on a paramour. The “marital enterprise” theory is the foundation of the equitable distribution statute. Marriage is likened to an enterprise in which both participants are entitled to an equitable share upon dissolution. Once the enterprise is ended, the participants are no longer entitled to share after-acquired assets, unless, like unvested stock options, the future value is based in part on the parties’ efforts during marriage. That same theory provides a rationale for dividing qualified pensions and retirement accounts that are not yet in pay status by a Qualified Domestic Relations Order (QDRO). See Dewan v. Dewan, 17 Mass. App. Ct. 97 (1983); 399 Mass. 754 (1987); and 30 Mass. App. Ct. 133 (1991), usually referred to as Dewan I, II, and III. The Contributory Retirement Board of Arlington v. Mangiacotte, 406 Mass. 184 (1989), permits the division of municipal and state pensions by Domestic Relations Order, sometimes called a DRO. G. Valuation Appraising a closely held business is also an art that can cause major post-divorce shockwaves as in the case of Sahin v. Sahin, 435 Mass. 396 (2001). The husband owned a telecommunications business. The parties disagreed over the value at trial, and ultimately the trial judge ruled that the business was worth $5 million. Three years after the divorce, Mr. Sahin sold his business to Verizon for $1.4 billion. The wife attempted unsuccessfully to reopen the case. Around the time of the post-divorce litigation the Boston Globe reported that Mr. Sahin made one of the largest donations ever to MIT, and a local suburban newspaper reported that the Sahins’ son dropped out of Boston College for lack of funds.
2. Prenuptial Agreements
3. Alimony Alimony usually terminates upon the death of a party to the divorce or upon the remarriage of the recipient. As the population ages, we are confronted with the paying spouse who wants to terminate or reduce alimony upon his or her retirement. In the absence of an agreement, the dissatisfied party would have to file a complaint for modification alleging a material change in circumstances. The critical element in these cases is whether the change was reasonably foreseeable and/or contemplated by the parties. If so, the courts may turn down the request to reduce or eliminate alimony. Compare Korff where the husband was required to pay only 21 percent of his gross income and the wife’s income had no bearing under their prenuptial agreement.
4. Child Support i. High Income Cases In so-called high income cases involving more than $135,000 in family income, courts tend to apply the guidelines to the first $100,000 of the paying parent’s income to determine child support, and then use a percentage of income in excess of $100,000 for alimony. Since there are no alimony guidelines, the percentage awarded as alimony may range from 25 to 33 percent of income over $100,000. Income may be defined to exclude unearned income or appreciation on marital assets divided between the parties. Note that the court rejected husband’s argument that he should not pay alimony to his wife because she received several million dollars in marital assets that could generate unearned income to meet her needs. Rosenberg v. Rosenberg, 33 Mass. App. Ct. 903 (1992). When divorce is mentioned in anger or despair, one or both spouses may begin a downward trend in earnings, intentionally or otherwise. If the court finds that a spouse is voluntarily underemployed or unemployed, the court may attribute income to the errant spouse. Support is based on what that spouse could be earning based on training, experience, and education. C. Enforcement and Due Process The Appeals Court decided the Naranjo cases in 2005, holding that the Department of Revenue (DOR) had to give Mr. Naranjo notice and an opportunity to be heard before suspending any of his licenses because of an alleged arrearage in child support, Naranjo v. Department of Revenue, __ Mass. App. Ct. __ (2005). The court also held in a second case that the Probate and Family Court could not collect on behalf of DOR unless it was a party to the probate court proceedings, Naranjo v. Naranjo, __ Mass. App. Ct. __ (2005). The court’s decisions are not surprising and resonate with strong constitutional notions of fair play. Notwithstanding the Naranjo cases the reality is that DOR can be a difficult party in child support cases. Attorneys for parents who pay and receive support frequently advise them to work out a private arrangement before using DOR to collect and pay out support. In some instances DOR collects and then fails to distribute funds.
5. Life Insurance: Funding Support Obligations after Death The court was not persuaded that the first husband had to sue Janice’s estate instead of asking the court to name him as equitable beneficiary, although the separation agreement stated: “If the policy or policies are not in full force and effect at the time of a party’s death, then notwithstanding anything to the contrary contained in this Agreement, the surviving party shall have a creditor’s claim against the deceased’s estate…” In a dissenting opinion, Greaney, J. wrote that there should be no distinction between the first and second policies and both should have been awarded to the first husband for the benefit of the unemancipated children. As a warning to practitioners, the dissent notes that: “The obligation to provide life insurance coverage in a separation agreement raises many complex issues that cannot be easily resolved by a standard provision. There are many issues for divorcing spouses to consider… the issue requires careful consideration…”
6. Health Insurance: Out-of-State Employee Spouse Divorcing parties generally make provisions for health insurance coverage through employment for the spouses and unemancipated children. A problem arises when a spouse is working out-of-state and the employer is not subject to Massachusetts laws. In a recent case of Foster v. Group Health Incorporated, __ Mass. __ (2005) the court held that a spouse working for an out-of-state employer was not obligated to obtain and maintain coverage for a Massachusetts spouse. While the result is not surprising, it does end speculation about what the court would do.
7. Same Sex Marriage and the Rights of Unmarried Cohabitants Same sex marriage arrived officially in Massachusetts in May of 2004 as a result of the Goodridge case, and opened up a new set of legal and financial challenges for same sex partners. Their marriages are recognized in the Commonwealth, but not by the federal government or other states. Financial planning is enormously useful for same sex couples. Same sex spouses do not receive the same treatment as their heterosexual counterparts for federal tax purposes, Social Security, or pension and retirement benefits controlled by federal law or the laws of other states, and thus creative approaches by financial advisors are warranted. Some advisors are advising married same sex couples to file as single taxpayers for federal income tax purposes, but to add a footnote on the returns, indicating that they are married under the laws of Massachusetts, and if, as, and when the federal government recognizes same sex marriage, the taxpayers reserve the right to amend the returns. Same sex couples need prenuptial agreements to cover contingencies not facing heterosexual couples who might come under the jurisdiction of another state at the time of divorce. Same sex couples who remain in Massachusetts might face other problems, such as determining the parties’ contribution to a long-term relationship but a short-term marriage. These couples were legally prohibited from marrying until 2004, but if they had long-term relationships, it may be unfair to treat their marriages as short-term if they divorce a few years later. B. Unmarried Cohabitants
8. Termination of Parental Rights and Responsibilities
9. Rights of Adopted Children
Conclusion With the enactment of equitable distribution statutes around the country, and in particular in Massachusetts, finances and tax issues have become increasingly important in divorce cases. Judges, lawyers, and parties rely upon the expert testimony of financial and tax experts to help craft equitable financial outcomes. While adultery may be emotionally devastating, the courts are not willing to award the aggrieved spouse a larger share of the assets or alimony as heart balm. Financial wrongdoing, however, may lead to a better financial outcome for the innocent spouse.
Resources There are many online resources. The following are consistently useful to the author: 1. www.socialaw.com: the website of the Social Law Library in Boston. The site offers a daily service publishing the cases decided by the Supreme Judicial Court and the Appeals Court. It also links to state statutes and other useful resources, including upcoming continuing legal education. 2. www.cse.state.ma.us: the website of the Child Support Enforcement Unit (CSE) of the Massachusetts Department of Revenue (DOR), the agency responsible for collecting child support in Massachusetts. 5. http://travel.state.gov/family/family_issues/divorce/divorce_592.html: a helpful source of information on foreign divorces, including links to the Social Security Administration, Veterans Administration, and the Internal Revenue Service regarding recognition of foreign divorces and eligibility for benefits.
Other resources 1. Family law materials from the Massachusetts Continuing Legal Education (MCLE), www.mcle.org/MCLE_Web/ScriptContent/Index.cfm, written by lawyers for lawyers, an excellent source of up-to-date information including the annual Massachusetts Family Law Citator, a compendium of family law cases (current edition covers 1975 through September 2004). The Citator provides short case summaries. MCLE also publishes the annual Family Law Sourcebook including relevant annotated statutes, regulations, and court rules in one volume. 2. Massachusetts Practice Series on Family Law and Practice by Charles Kindregan and Monroe Inker, a multi-volume treatise often used by lawyers and judges. The text may be too technical for non-lawyers, but it is a “must have” for lawyers and judges.
Last modified: Feb 22, 2006 11:50 AM
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