Part IV: The Wealthy Retiree
Suppose in yet another divorce *, a wife is awarded permanent spousal maintenance in the amount of $4,000 per month. The husband, 68, has been retired for over two years but continues to pay spousal maintenance.
However the husband now seeks to terminate his maintenance obligation. The ex-wife argues that 1) she cannot meet her monthly living expenses without the spousal maintenance and 2) her ex-husband has accumulated over $1million in retirement assets since their divorce.
Can the husband prevail?
In the Kruschel case, a husband wanted to modify his spousal maintenance obligation at the time of his retirement. The Court of Appeals stated that the husband’s pension “should be viewed as property or income, not both.” Further that the husband could not be expected to “deplete his property award” in order to pay spousal maintenance. Only when the husband “received from the pension an amount equivalent in its value as determined in the original property distribution” could his pension benefits be considered income available to pay spousal maintenance.
The Lee case expanded this analysis of pension benefits in the context of a motion to modify spousal maintenance. There the Supreme Court divided the husband’s pension in to three categories: 1) pension benefits earned by the husband prior to the parties’ marriage (pre-marital benefits; 2) pension benefits earned by the husband after the parties’ divorce (post-marital benefits); and 3) pension benefits earned by husband during the parties’ marriage. (marital benefits). The Supreme Court also considered whether the benefits in question were previously awarded to the husband as property in the dissolution proceeding. With regard to pre-marital and post-marital pension benefits, the Supreme Court held that they should be included as income when determining ability to pay spousal maintenance. However, the Supreme Court also determined that benefits awarded to the husband during the divorce could not be considered income when determining his ability to pay spousal maintenance.
Courts should consider pre-marital and post-marital retirement assets when determining an obligor’s ability to pay spousal maintenance. They cannot, however, consider the portion of retirement assets awarded to an obligor as property when determining the obligor’s ability to pay maintenance.
*Click here to see the first part of this Spousal Maintenance: Starting Now until Retirement? series.