Taking funding earnings under consideration when adjusting upkeep | Burns & Levinson LLP

The Massachusetts Court of Appeals recently issued another decision interpreting the Alimony Reform Act, which went into effect in 2012. In the Dolan v. Dolan on March 2, 2021, the Circuit Court of Appeals provides guidance on the meaning of General Law Chapter 208 Section 53(c)(1), which states:

(c) When ordering alimony, the court shall exclude from its calculation of income:

(1) Income from capital gains and income from dividends and interest derived from assets fairly divided between the parties pursuant to Section 34.

In Dolan, the husband requested a downward revision of his wife’s alimony under a 2016 divorce decree after he sold his business, leaving him with less earned income. The husband continued to receive payments from the sale of the company. He argued that capital gains from the sale could not be taken into account in determining his ongoing maintenance obligation since he owned the business as an asset at the time of the divorce. The wife argued that changing the alimony is a two-step process: the judge must first determine that there has been a material change in circumstances, and only after that threshold is reached can the judge then calculate a modified alimony payment. The Court of Appeals agreed with the wife.

In deciding whether someone has satisfied the burden of proving a material change of circumstances necessary to reduce an existing maintenance order, the judge must consider the entirety of the circumstances, including all income and assets. The Court of Appeal reasoned that there was a clear distinction between ordering a party to pay alimony with income from property received in the divorce and determining whether a party’s income and property together demonstrate the ability to continue an existing maintenance obligation to pay. GL c. 208, sec. 53(c)(1) applies only after the judge has first determined that a material change in circumstances has occurred. The Court of Appeals further held that the trial judge’s decision to grant the husband a reduction in maintenance but to delay the implementation of that reduction was not an abuse of power. The trial judge found that the husband was able to pay the original alimony for five more months as he continued to receive payments from the sale of his business.

The Dolan decision tells us that income from capital gains may be included in an amendment claim if that income enables a payer to continue an existing alimony payment – and thus there has been no material change in circumstances. However, if the court determines a significant change in the circumstances due to the totality of the financial circumstances, the investment income income must be excluded when determining a modified maintenance amount.

Am I the only one still scratching my head?

Until next time,

Robin

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