February 26, 2016
A common misconception is that alimony ends automatically when the person paying the alimony retires. Unless the Settlement Agreement specifically provides for a termination of alimony upon retirement, current cases apply where alimony will continue, albeit possibly at a reduced rate.
In two Maryland cases, Ridgeway v. Ridgeway, 171 Md. App. 373; 910 A.2d 503 (2006) and Stewart v. Stewart, No. 2601, Opinion Filed Sept. 2015 (Md. App. Sept. 2013 Term (not reported)), the trial and appellate courts reduced the alimony payments, but did not recover a former spouse/former wage earner (the “payer”) retired. In Ridgeway, the alimony recipient continued to work after retirement and had more income than the payer after retirement. Additionally, at the time of the settlement, the parties had equally divided marital assets such as equity in the marital home and marital portions of retirement accounts (e.g., 401(k), IRA, TSP, annuities), leaving the support recipient and payer had equal marital assets at the time of the divorce.
So why did the courts cut child support payments but not cancel them? In these cases, the courts considered the recipient’s costs to be the determining factor. Although the payer’s receipts fell, the recipient’s expenses did not. Therefore, the courts ordered the payer to continue making alimony payments equal to the difference between the amount the recipient would have received from the annuity payment and the amount she would have received from the alimony payment.
It’s important to note that in both cases, the payer stopped making alimony when he retired because of the mistaken expectation that his alimony would end. In Ridgeway, the court specifically rejected the payer’s argument that “the annuity payment replaces the alimony payment and justifies the termination of the alimony.” In both cases, the payer was found in contempt and ordered to pay the recipient’s legal fees and arrears of child support.
Ominously for those with existing settlement agreements, the courts rule that there is no right to reopen the matter later unless the agreement specifically provides for the termination of child support upon retirement. Rather, the presumption was that perpetual alimony meant perpetual alimony and only the amount, not the duration, would be changed.
- If you are arranging a prenuptial agreement and want the alimony to end when the payer retires, the agreement must specifically state this.
- If you don’t have a child support termination clause in your mediation agreement and want to request a child support modification, submit the request early (if you have a specific retirement date), but plan to pay the full child support amount until the court has done so decided.
- If you stop paying child support before the court changes it, you may be charged with contempt and have to pay the other side’s attorneys’ fees.
Alternative Dispute Resolution has become Bob Baum’s specialty, although he remains an active litigator for cases requiring litigation. With over 30 years of litigation experience, he is a leader in promoting alternatives to litigation – what is now referred to as “Alternative Dispute Resolution”, “Appropriate Dispute Resolution” or simply “ADR”. Mr Baum… MORE >