Alimony & Retirement Pay
Problems can arise when a party with an alimony obligation to a former spouse decides to retire. Frequently, the payor's retirement income is insufficient to cover both the alimony award and the payor's living expenses. The mere fact that the payor has retired, however, does not mean that the alimony obligation automatically ends. In considering a petition to reduce or eliminate a prior alimony award, family courts will consider a variety of factors.
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How the Obligation Was Set
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Whether or not a party can receive a reduction in his alimony obligation depends in part upon whether the obligation was set by a court or by separation agreement. Following the common law doctrine that prohibits courts from modifying a valid agreement among parties, family courts cannot modify an alimony amount set by a separation agreement unless the agreement itself expressly permits modification. Alimony set by court order, however, is generally modifiable upon a showing of a substantial and material change of circumstances affecting a party's financial condition. In some states, reaching full retirement age constitutes such a change.
Good Faith or Bad
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Within the context of a changed circumstances analysis or a for-cause modification based on the terms of a separation agreement, the key issue becomes whether the change in circumstances occurred due to the bad faith behavior of a party. A party who retires solely to avoid a prior alimony obligation will probably see his application for a reduction denied. Even if avoidance of the obligation is not the sole motivation behind the decision to retire, a payor seeking a reduction may not prevail if a court decides the decision to retire was not reasonable under the circumstances.
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Needs of the Other Party
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Where a modification in alimony is possible, family courts will generally hear evidence on the needs of the recipient at the time of the hearing. One important issue to consider is whether the recipient will be receiving retirement benefits upon the payor's retirement. Often, a payor's pension plan (if he has one) will be subject to a Domestic Relations Order (DRO) that was entered pursuant to the original case. The DRO, generally based upon each party's share of the marital portion of the payor's retirement, may deduct a portion of the payor's pension and send it to the other party. In addition, current Social Security rules allow a party married to her spouse for 10 years or more to receive Social Security benefits equal to those of the spouse.
Ability to Pay
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If a payor's retirement was done in good faith and the recipient spouse is still in need of alimony, family courts will generally consider the payor's reduced ability to pay in deciding whether and how much to reduce alimony. Although the payor's income may have been reduced, he may still receive more than enough money to comfortably fulfill the original obligation. Additionally, his reduced income may coincide with reduced expenses such as paying off a house, receiving Medicare benefits and the termination of child support.
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