Securing Her Future: A Widow’s Fight for Financial Security in Retirement

A Narrative Story of In re the Matter of Lee, 775 N.W.2d 631 (Minn. 2009)

The day Elaine Irene Lee* received the court of appeals decision in 2008, her heart sank. After twenty-five years of marriage and decades of supporting Raymond Michael Lee’s* career as an electrician while she devoted herself to homemaking, the court had eliminated her spousal maintenance entirely. At her age, the thought of having no financial security beyond her modest Social Security payments felt overwhelming.

Elaine and Raymond had built their life together from 1968 to 1993, with her managing their household while he worked steadily, earning pension benefits that would later become substantial. When their marriage dissolved in 1993, the court had recognized her contributions by awarding her $650 monthly in spousal maintenance and a fair share of Raymond’s pension benefits earned during their marriage. But life had a way of creating new challenges.

The stress began mounting in 2005 when Raymond retired and immediately sought to reduce his maintenance obligation. Despite receiving over $4,000 monthly from various sources including Social Security and substantial pension payments, Raymond argued he couldn’t afford to continue supporting Elaine. Meanwhile, Elaine struggled to make ends meet on just $1,674 monthly from her Social Security and her share of the marital pension benefits, while her reasonable expenses totaled nearly $2,000.

The court of appeals decision felt like a betrayal of everything she had sacrificed during their marriage. The ruling suggested that Raymond’s pre-marital and post-marital pension benefits couldn’t be considered when calculating his ability to pay maintenance, effectively leaving him with no obligation to support her despite his comfortable retirement income.

But Elaine refused to give up. She knew that justice required a deeper understanding of how pension benefits should be treated in maintenance calculations. The anxiety of potentially losing her financial security motivated her to take her case to the Minnesota Supreme Court, even though the legal battle felt daunting at her age.

When the Supreme Court announced its decision in December 2009, Elaine felt a profound sense of validation and relief. The state’s highest court had seen through the technical arguments to understand the fundamental fairness at stake. They ruled that Raymond’s pension payments – whether earned before, during, or after their marriage – could indeed be considered income for maintenance purposes, as long as they weren’t already awarded as marital property.

The Court’s reasoning brought Elaine tremendous peace of mind. They recognized that pension payments received after divorce represent “future income” regardless of when the benefits were originally earned. This meant Raymond’s substantial monthly pension income of over $2,400 could be properly considered when determining his ability to support her.

Most importantly, the Supreme Court remanded her case back to the district court with clear guidance that would protect her financial future. The Court emphasized that maintenance should reflect the standard of living established during marriage, not just bare necessities. For Elaine, this meant the possibility of receiving adequate support to live with dignity in her retirement years.

Standing in her modest home after receiving news of the Supreme Court’s decision, Elaine felt something she hadn’t experienced since the court of appeals ruling: genuine hope for her future. The state’s highest court had affirmed that her decades of contribution to their marriage mattered, and that Raymond’s comfortable retirement income could indeed be a source of fair support for her remaining years.

*This story is based on the true facts of the appellate court’s decision, but the personal experiences and emotions described are a fictional representation to bring the case to life.

Question: What happens to spousal maintenance if the person paying retires?

Answer: Retirement is one of the most troublesome aspects of spousal maintenance modification. The first inquiry is whether retirement constitutes a change in circumstances. In most instances, an employed spouse’s retirement is a major economic event. Whether it constitutes a change of circumstances that warrants a modification of spousal maintenance is another matter.

The major difficulty that has confronted practitioners and courts is how to handle Minnesota law which provides that retirement assets awarded to a spouse in a dissolution cannot be considered for paying spousal maintenance. Kruschel v. Kruschel, 419 N.W.2d 119 (Minn. Ct. App. 1988). The basic rule does not address the complexities of retirement accounts that are mixed with marital and post-marital contributions or income from marital retirement, and how to factor the obligee’s income from similar accounts.

Question: Can my pension subject to divorce division and to pay spousal maintenance?

Answer: The Lee case said that pension money not already given to a spouse in the divorce can be used to pay spousal maintenance because it counts as income when received.

The Minnesota Supreme Court considered the complex intersection of spousal maintenance and retirement in Lee v. Lee, 775 N.W.2d 631 (Minn. 2009). The decision held that the obligor’s nonmarital pension benefits can be considered in the payment of spousal maintenance after the obligor’s retirement. The obligor in Lee retired and received monthly pension benefits that were partially earned before the marriage, partially earned during the marriage, and partially earned after the divorce. The marital portion was divided equally between the parties in the judgment and decree of dissolution.

The supreme court held that the nonmarital portions were available to pay spousal maintenance because pension benefits not awarded as property are income when received and can be considered for payment of spousal maintenance. The Lee decision overturns the prior rule of Kruschel v. Kruschel, 419 N.W.2d 119 (Minn. Ct. App. 1988) requiring the obligor to receive the full value of the marital property award before the pension benefit could be considered as income. The Lee court held that each pension benefit payment should be apportioned between marital and nonmarital assets from the start of the payments.

For practitioners, this decision requires careful findings about the value and amount of the marital benefit at the time of the divorce. The Lee decision also requires evidence of what portion of the pension benefit is the prior marital property award and what portion is nonmarital property accrued either before or after the marriage.

Several issues are not resolved by the decision, as noted by both the majority decision and the concurrence in Lee. The obligee in Lee did not argue that her income from her marital property award should be excluded. The decision leaves this issue open.

Question: What should be included in divorce agreements about pensions?

Answer: Divorce agreements should clearly state what happens to non-marital pension portions and how retirement assets will be used for support to avoid future legal battles.

Also, the concurrence raises questions that should be considered in structuring property and spousal maintenance awards. For example, what if a nonmarital portion of the pension is specifically awarded as property? Would this then exclude the payments as income that is available for the payment of spousal maintenance? It will be important to specify in a decree what is to happen to any nonmarital portions of the pension. Honke v. Honke, 960 N.W.2d 261 (Minn. 2021) starts to consider these issues but provides no specific direction as to how to treat post-dissolution assets of the obligor and provides no specific direction on how to actually apportion any post-decree assets of the obligee.

Question: How are 401(k) plans treated differently from pensions?

Answer: The Lee case didn’t address 401(k) plans, so it’s unclear how withdrawals that include both contributions and investment returns would be handled.

The opinion also does not deal with defined contribution plans. In Lee, the parties did not argue that any portion of the payments were a return on principal. The opinion leaves open how this might be treated. Again, parties may consider negotiating how this will be handled upon retirement. Specifying what resources will be used for support will avoid or reduce future litigation.

Question: Do I have to use my retirement savings to pay my own expenses instead of getting spousal maintenance?

Answer: No, a person receiving spousal maintenance shouldn’t be forced to spend their retirement savings because they might outlive their money and be left with only Social Security.

In Winer v. Winer, No. A15-0339, 2016 WL 456818 (Minn. Ct. App. Feb. 8, 2016), the obligee did not dispute that income earned on a marital asset post-decree should be used to meet her needs. The pivotal question was whether an obligee who reaches retirement age should be required to invade marital retirement assets to meet their needs. The court of appeals said no, observing that if an obligee is forced to utilize principal of a retirement account and outlives their life expectancy, that obligee will be forced to live on Social Security alone.

Question: What if someone retires early to avoid paying spousal maintenance?

Answer: Courts look at whether the retirement was done in good faith by considering the person’s health, work history, and whether early retirement was expected when they got divorced.

Another factor in modification of maintenance upon retirement is whether the paying spouse has retired in good faith. This is particularly the case where the spouse takes early retirement. Richards v. Richards, 472 N.W.2d 162 (Minn. Ct. App. 1991). There is no presumptive age for good-faith retirement. Factors to consider in determining good faith include the obligor’s health and employment history, the availability of and expectations regarding early retirement at the time of the divorce, and the prevailing managerial policies and economic conditions and the obligor’s employer such as a mandatory retirement age, at the time of retirement, together with whatever subjective reasons the obligor may offer.

Question: How can we avoid problems with retirement and spousal maintenance?

Answer: Couples can agree in their divorce papers that retirement will trigger a review of spousal maintenance and specify exactly how retirement assets will be considered.

One way to avoid some of the uncertainties of how retirement assets will be treated is to stipulate in the judgment and decree that retirement will trigger a review of spousal maintenance and agree as to how the court will consider the assets. For example, the parties may stipulate that only the income from retirement assets will be considered. They may agree on an imputed rate of return. They may also agree to a long-term use of income and principal on all assets or only retirement assets.

Question: How long does spousal maintenance last after retirement?

Answer: Spousal maintenance can last longer than the marriage itself and may continue even after the paying spouse retires, depending on the specific circumstances.

The duration of spousal maintenance is also subject to modification, but under limited circumstances. Unlike modification of the amount of maintenance—where the moving party has the burden of proof—the burden for modifying duration depends on whether transitional or indefinite maintenance has been granted. However, a stipulation to transitional spousal maintenance is not dispositive as to whether a transitional award should be modified to a indefinite award. See Boldon v. Hendrix, No. A19-1636, 2020 WL 7018339 (Minn. Ct. App. Nov. 30, 2020).

Question: Will my spousal maintenance automatically end when I retire?

Answer: No, many people think spousal maintenance ends at retirement or after paying for as long as they were married, but it can actually continue much longer.

Many clients believe that even indefinite spousal maintenance will end upon their retirement or at the time they have paid as long they were married. The reality is that for many obligors, the duration of their spousal maintenance may exceed the duration of their marriage or continue beyond their retirement.

Question: How do courts decide whether to change how long spousal maintenance lasts?

Answer: Courts look at all the facts and may hold hearings to determine if circumstances have changed enough to modify the duration of spousal maintenance.

Modifying the duration of spousal maintenance is fact-driven. Consider the advisability of seeking an evidentiary hearing on the motion, to fully develop the facts and allow the court to judge credibility. This will be particularly helpful if a spouse’s claimed finances or employment are suspect.

Question: Who has to prove that permanent spousal maintenance should end?

Answer: The person paying permanent spousal maintenance has to prove that circumstances have changed enough to justify ending the payments.

If indefinite maintenance has been granted, the burden of proof is on the paying spouse to show a change in circumstances that would terminate spousal maintenance. Generally, the paying spouse’s circumstances must change to justify modification of the duration, as would be the case with retirement. However, the receiving spouse’s changed circumstances may be the basis for modification of duration, where the receiving spouse becomes self-supporting through employment, inheritance, or other circumstances. Evans v. Evans, 672 N.W.2d 232 (Minn. Ct. App. 2003). If the circumstances that supported the original award have changed, there is nothing to prohibit modification of a indefinite award of spousal maintenance. Kemp v. Kemp, 608 N.W.2d 916 (Minn. Ct. App. 2000); Honke v. Honke, 960 N.W.2d 261 (Minn. 2021).

Question: Who has to prove that transitional spousal maintenance should continue?

Answer: The person receiving transitional spousal maintenance has to prove that circumstances have changed to justify extending the payments beyond the original end date.

If transitional spousal maintenance has been granted, it is the receiving spouse’s burden to prove a change that justifies extending the payments’ duration. Changes can include illness, failure to rehabilitate, increased need, failure to be fully self-supporting, and other unforeseen circumstances.

Question: What happens if someone doesn’t try to become self-supporting?

Answer: If someone receiving transitional spousal maintenance makes no effort to become self-supporting, the court might estimate their earning ability but could also make the support permanent.

There are instances where a spouse receiving transitional spousal maintenance not only fails to rehabilitate, but also makes no effort to do so. In these cases, the court may impute income based on the spouse’s earning capacity but may also convert a transitional award to a indefinite award. See Hecker v. Hecker, 568 N.W.2d 705 (Minn. 1997). Even with imputed income, a spouse may not have any prospect of being self-supporting.

Question: What if the person receiving spousal maintenance gets a large inheritance or wins the lottery?

Answer: Receiving a substantial inheritance, lottery winnings, or other windfall may justify reducing or terminating spousal maintenance because it can eliminate the recipient’s need. However, modification is not automatic, and it may not be possible if there was an enforceable waiver. See answers below.

Question: Can couples agree that spousal maintenance will never change?

Answer: Yes, couples can agree to waive the right to modify spousal maintenance, but this agreement must meet strict legal requirements and be approved by the court.

The uncertainties of ongoing spousal maintenance are frequently intolerable for one or both parties. In those instances, parties may agree to waive the right to modify the amount or duration of spousal maintenance under Minnesota Statutes section 518.552, subdivision 5. This section is a codification of Karon v. Karon, 435 N.W.2d 501 (Minn. 1989), which held that parties may make private agreements to limit the modification of the amount or duration of spousal maintenance. Most importantly, these limitations can only be achieved by an agreement between the parties that is adopted by the court and incorporated into the judgment and decree of dissolution. Just saying something is a Karon waiver does not make it so. In order to be enforceable, the waiver must: (1) be fair and equitable; (2) be supported by consideration; (3) be reached after full disclosure of each party’s financial circumstances; (4) contain an express and immediate contractual waiver of the right to modify spousal maintenance; (5) be a voluntary and intentional waiver; and (6) immediately divest the court of jurisdiction.

Question: What happens if the court doesn’t make proper findings about the agreement to waive spousal maintenance?

Answer: Without specific court findings about each requirement, agreements to waive modification rights are usually not upheld by courts.

It is critical to include specific findings on each of these factors in the stipulated judgment and decree. Without these specific findings, these agreements are typically not upheld. Santillan v. Martine, 560 N.W.2d 749 (Minn. Ct. App. 1997). If the appropriate findings are included, these agreements are honored by the courts, unless there is some basis for reopening the judgment under Minnesota Statutes section 518.145; or the parties agree to modify the waiver according to Minnesota Statutes section 518.552, subdivision 5 which provides: “The parties may restore the court’s authority or jurisdiction to award or modify maintenance through a binding stipulation.”

Question: What are the risks of agreeing to never change spousal maintenance?

Answer: Once you agree to waive modification rights, both people are stuck with the agreement even if circumstances change dramatically, and there may be little recourse if payments can’t be made.

While Karon waivers (as they are known) can be very attractive to spouses, they have shortcomings that should be considered. Once the waiver is given, it is enforceable for both parties. If a paying spouse’s circumstances change, the obligation remains. The agreements deprive the court of jurisdiction to ever address the subject. While there is no room for the paying spouse to modify their obligation, there is the harsh reality that if the payment is not made because of economic inability to pay, little viable recourse may exist for the financially dependent spouse. The appearance of security may be elusive in these changing economic times. As finances and employment become less certain, these waivers have declined in practice.