Retirement and Alimony

1. What is retirement’s effect on alimony obligations?

Retirement is a time in life that many men look forward to. Unfortunately, if a divorced husband has a hefty alimony obligation, a “monkey wrench” may be thrown into his retirement plans. The issue of retirement often comes up in the context of alimony.

Many former husbands hate paying alimony with a passion. Many would rather live in a rooming house than continue to work and see a significant portion of their paycheck garnished and sent to their ex-wife. Some former husbands believe that retirement is their way out of the alimony trap. In New Jersey, if a person retires, it can certainly constitute a “change in circumstances” so as to justify the reduction or even the termination of alimony. The New Jersey courts analyze each alimony reduction application based on retirement on a case-by-case basis. The courts will review the parties’ case information statements, their medical records, the reasons for the retirement, and the ability of the parties to continue to work. Every case is different, and the court tries to zero in on the facts of each case. There is no magic case that says that alimony automatically ends once a person retires. Life in the world of matrimonial practice is not that simple.

In my experience, litigating an alimony reduction case is often as difficult as and more acrimonious than the original divorce case was. People hold grudges, and time does not always heal emotional wounds. An alimony reduction case is in many instances a “round two” or a rematch of the original divorce case. Many times former wives feel that they were cheated in the original divorce, and this time around they are determined not to be taken advantage of.

In summary, there are several keys to obtaining a successful outcome in an alimony reduction case. First, the applicant must be able to provide adequate documentation proving that the retirement is made in good faith. The applicant must be able to provide “paper proof” that the retirement is not contrived or designed solely to reduce the alimony obligation. The applicant must also submit legal papers to the court that are of excellent quality. If the legal paperwork is sloppy and if it is not thoroughly prepared, the court will in most instances not even grant a Lepis hearing. Third, an applicant must be reasonable. In many alimony reduction cases based on retirement, the court will only reduce alimony and not eliminate it entirely. I always advise my clients to be reasonable. A court will often pre-try an alimony reduction case, and then indicate to the parties how it views the merits of the case. The courts are flooded with Lepis cases, and their goal is to resolve them as fair and expeditiously as possible. The Family Courts always encourage the parties to reach an amicable settlement. The Family Court’s ruling may be influenced if one party is not reasonable in the settlement negotiations. Therefore, be forewarned to always negotiate in good faith.

2. If a spouse retires, is this considered a “change of circumstances” to justify a termination of alimony?

If a husband/payor has a good faith retirement at the age of 65, the event may constitute a “change of circumstances” to justify a modification of alimony. The court will also consider several other factors such as: the age of the parties; how the pensions and retirement assets were divided during the marriage; whether the retirement was reasonable; and whether the retirement was motivated to reduce alimony. Our New Jersey courts have held that when a person retires at the age of 65, he is entitled to a plenary hearing to reduce alimony based on a “change of circumstances.”

If a payor spouse retires before the age of 65, then he is subjected to a more stringent standard to have alimony terminated. The court will then balance the benefits to the payor spouse against the disadvantage to the payee spouse. Only if the advantage to the retiring spouse substantially outweighs the disadvantage to the payee spouse will the court view the retirement as a legitimate change of circumstances which would justify a modification of alimony.

Some other factors that a court considers when it rules on a Lepis application to terminate alimony on the grounds of retirement are: the age and health of the party; his or her motives in retiring; his or her ability to pay support; and the ability of the other spouse to provide for himself or herself.
 

3. I have just retired and my income has been cut in half. Can I now make an application to reduce my alimony obligations?

The retirement of the payor/husband may be sufficient grounds to constitute a “change in circumstances” to reduce or terminate alimony. However, it must be emphasized that retirement alone is not an automatic grounds to terminate alimony. The key issue is whether the retirement is mandatory or voluntary, and whether the retirement is being taken at the ordinary retirement age, at an eligible early retirement age, or at some other time for some reason. Some basic questions, once answered, will shed some light on the voluntary nature of the retirement. Each alimony case is determined on a case-by-case basis. Unfortunately, there is no quick and easy answer to legal questions that concern the interplay between retirement and alimony.

4. What is the key case that analyzes whether a husband’s retirement constitutes a “change in circumstances"?

The key case that analyzes whether a husband’s retirement constitutes a “change in circumstances” is Deegan v. Deegan, 254 N.J. Super. 350 (App. Div. 1992). In the Deegan case, the husband elected an early retirement and then sought to modify his alimony obligations based on a change of circumstances. Mr. Deegan was 60 years old and did physical labor with the steamfitter’s union. He stated that the physical labor required by his job was becoming more difficult because of his age. At the time of the divorce, his ex-wife was given part of the pension and so, under Innes and the statute, N.J.S.A. 2A:23(b), his pension was not a source of income for the purposes of alimony.

What caused Mr. Deegan’s petition for a reduction was the fact that the union had offered him an attractive lump sum buy-out option of his pension. This frequently happens in the industry as companies want to reduce staff and cut expenses. Mr. Deegan advised the court that he had taken the $189,000 lump sum pension payment and invested it in an IRA where he got a return of $13,100 per year. Mrs. Deegan argued that her ex-husband did not retire in good faith and that her alimony should therefore not be reduced.

The court held that in determining whether to modify alimony based upon retirement as a changed circumstance under Lepis, the pivotal issue was whether the advantage to the retiring spouse substantially outweighed the disadvantage to the recipient spouse. The court concluded that only if the answer was in the affirmative should the retirement be viewed as a legitimate change of circumstances to justify a reduction of alimony.

The Deegan court did not reflexively hold that alimony should be reduced because the ex-husband’s income was reduced by his retirement. Rather the court analyzed a variety of factors and circumstances to analyze the alimony reduction claim. The Deegan court held that it must look at the motive of the payor in retiring early, the timing of the retirement, and the payor’s ability to make the alimony payment even after the retirement.

In any alimony reduction case based on a retirement, the court must assess whether the husband’s retirement was made in good faith and otherwise reasonable. The court will also have to assess whether, under all of the circumstances, it was reasonable for the supporting spouse to retire. The court considers the age, health of the party, the motives in retiring, the timing of the retirement, the ability to pay maintenance even after retirement, and the ability of the other spouse to provide for himself or herself.
 

5. What is the legal test that the court uses to assess whether an early retirement constitutes a “change of circumstances” to reduce alimony?

Another key case is Dilger v. Dilger, 242 N.J. 380 (Ch. Div. 1990). In the Dilger case, a former husband, who had a pre-existing alimony obligation to his former wife of 30 years, voluntarily retired at the age of 62½ years. The husband sought to reduce his alimony based on this changed circumstance. The court found that the former spouse’s voluntary retirement at the age of 62½ was not made in good faith, and that it was unreasonable under all of the circumstances presented. The court noted that a reasonable retirement age would, in most cases, be 65.

In denying his application the court considered the following criteria:

a. Whether the retirement was made in good faith.

b. Whether, in light of all of the surrounding circumstances, it was reasonable for the supporting former spouse to elect an early retirement.

c. The reasonable expectations of the parties at the time of the agreement.

d. Whether the supporting spouse was planning retirement at a particular age.

e. The opportunity given to the dependent spouse to prepare to live on the reduced support.

6. I have just turned 65 years of age and I am retiring next month from my job at the plant. Once I retire can I stop paying alimony to my former wife?

In contrast with the more controversial early retirement cases, the courts have consistently held that a good faith retirement at the age of 65 may constitute a change in circumstances for purposes of reducing alimony. See, Silvan v. Silvan, 267 N.J. Super. 578 (App. Div. 1993). In virtually all cases where an applicant is over 65 years of age and files an alimony reduction motion, at the very least he is given a Lepis hearing.

In this type of scenario, the court will schedule the case for a Lepis hearing. A person will usually receive a hearing around three to four months after the Lepis application is filed. Depending on the complexities of the case, and the number of witnesses, the case will be heard over a course of several months. It is very rare for a court to devote an entire day for a Lepis case. Unfortunately, this factor increases the costs of litigation. Lawyers have to charge their clients if they have to wait in court for the case to be called.