The New Jersey courts have recognized that a savings component may be part of alimony. New Jersey is among a minority of states where savings habits during a marriage may be considered in determining alimony payments. While courts recognize and take into account marital savings when it comes to alimony, the problem still arises in many high-net-worth divorces.
Savings as part of the marital lifestyle for alimony payments
In Lombardi v. Lombardi, 447 NJ Super. 26 (App. Div. 2016), the New Jersey Supreme Court, Appellate Division held that regular savings as part of a couple’s marital lifestyle should be included as a component in determining alimony. The court found that this is true even if it is not necessary to protect the recipient’s ability to receive child support payments.
In the Lombardi case, the spouses had made monthly savings a regular part of their marital lifestyle throughout their 20-year marriage. The woman had a bachelor’s degree in marketing and originally worked as a vice president for Bear Stearns, earning $80,000 a year. The husband had a bachelor’s degree in finance, an MBA and was a chartered financial analyst. He started working for his last employer in 2004 and earned an annual salary of $250,000 with a guaranteed bonus of $1,125,000 for two years. In the five years prior to filing for divorce, he had risen to the rank of senior portfolio manager and vice president at the company, with total annual compensation ranging from $1,087,000 to $2,275,000.
The couple had three children. After the birth of their first child, the couple agreed that the woman would quit her job and stay at home as a housewife and raise her children, which she had done throughout their marriage. She recently earned her fitness instructor certification and worked part-time, earning $10,000 a year.
During the marriage, the couple used only a small percentage of their income to pay expenses and lived modestly. They saved $67,000 a month so they could pay for their kids’ college and retire in comfort, with the goal for the husband to be able to retire at age 45 while still having enough to to maintain his lifestyle. The couple agreed on custody of the children, an equal division of the marital property and permanent alimony, but disagreed on the amount of alimony.
The trial court found that while the couple’s habit of saving nearly $70,000 a month was part of their marital lifestyle, the court did not find it necessary to include this in the alimony determination because of the woman’s ability to maintain her economic To ensure security, this would be protected if the alimony payments ended or were changed. The court denied that the wife should receive a savings component in her alimony, noting that she would receive half of the $4 million the couple had saved as part of the equitable distribution of their marital wealth. It awarded the wife a gross monthly premium of $7,600 and denied her request for an additional $30,000 per month for the savings component.
On appeal, the Appeals Division determined that the monthly savings were an integral part of their marital lifestyle and that both parties were entitled to live a lifestyle comparable to that of their marriage. The court found that there is no difference between families who make significant monthly contributions to savings and those who instead spend money on vacations, dinners and luxury cars. It found that the fact that life insurance could protect future alimony payments does not remove the court’s responsibility to consider a savings component. It also noted that fair distribution is not a substitute for alimony. It overturned the trial court’s decision and returned the case with instructions that the trial court should include a savings component in the alimony payment.
Retroactive effect of the savings component on the Pendente Lite period
Recently, the Appellate Division ruled AJV v. MVV, No. A-3990-18 (App. Div. May 14, 2021), an unpublished case with no precedent. The question was whether a savings component during a marriage can be applied retrospectively to the pendente-lite period before the final divorce decree. The trial court included a $5,000 monthly savings component as part of his 11-year $11,500 monthly alimony. It also granted a $260,000 retroactive savings component award for the 52 months of the Pendente Lite period.
The couple had a marital net worth of more than $8 million. The husband’s income in the last seven years of marriage fell from $1,022,923 to $633,606 last year. The court used $700,000 as an estimate for the husband’s annual income and $74,000 per year for the wife’s income. In 2012, the couple saved $12,800 every month. In 2013, they saved $21,250 a month. Both parties agreed that they had lived frugally and that saving had been a big part of their marital lifestyle. The court found that the couple had to downsize their marital lifestyle because of their combined annual income and could not maintain their marital lifestyle, and awarded the woman $6,500 a month in alimony to supplement her net income of $4,000 a month. The court added a monthly savings component of $5,000 and found that this had to be reduced due to the husband’s financial obligations of maintaining two homes and paying child support.
On appeal, the Appellate Division affirmed the court’s award of child support and the inclusion of a $5,000 monthly savings component. The Appellate Division also affirmed the trial court’s retrospective award of the savings component as a credit under Mallamo v. Mallamo, 280 NJ Super. 8 (1995). In this case, pending orders made during pending litigation may be amended at any time before final judgment is rendered, allowing for credit for support paid during the divorce. The court also noted that judges can grant loans to the beneficiary spouse if the beneficiary spouse has not received sufficient support during the Pendente Lite period.
While this case is non-precedent and non-binding, it shows that the savings component should be considered in alimony orders while divorce proceedings are pending. This can help prevent the higher earning spouse from getting an unintended windfall of not having to pay the savings portion of a child support claim until the divorce is final.
Jeralyn Lawrence is an executive member and founder of Lawrence law in Watchung, where she focuses on marriage, divorce and family law. She is the current President of the New Jersey State Bar Association.
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