Retire Early? Your Choice. Pay Less Support? NOT

by Robert A. Abrams
(This article appears in the September 6, 2004 issue of New Jersey Lawyer.)

As the population of the United States continues to age, the impact of retirement on matrimonial child support and alimony orders becomes greater. Post-judgment motions are being brought by individuals wanting to retire in hopes that their support obligations will be modified or eliminated completely.

Case law concerning a payor ex-spouse's voluntary retirement has been evolving. The conflict between the payor and payee spouse is evident. The supporting spouse may believe there should be some point in time when he or she may retire and either modify or eliminate the alimony and child support obligation. The dependent spouse invariably indicates that he or she is unable to support himself or herself in accordance with the standard established during the marriage. Further, the payee argues that he or she relied on the property settlement agreement that only permitted termination of alimony on the death of either party, his or her remarriage, or possibly cohabitation. The dependent spouse says that since none of those circumstances exist the dependent spouse should continue to be supported in accordance with that property settlement agreement.

First Impressions

An early case was Horton, Jr. v. Horton, 219 N.J. Super 76. It involved a former husband who requested a termination of alimony upon his early retirement at age 56. A property settlement agreement was executed resulting in divorce on June 15, 1984. The defendant wife received the marital home and the plaintiff received his pension, which had an agreed value of $103,000. The property settlement agreement further provided that the husband would pay to the wife $110 weekly alimony, to be increased to $125 on the graduation of the youngest daughter who was in college at the time. The daughter graduated in December 1984 and plaintiff continued to pay $125 weekly.

The plaintiff husband retired on January 1, 1986, only 1 1/2 years after the judgment of divorce. However, he did not file his notice of motion for termination of alimony until one year after retirement. The husband argued the retirement fund he received should not be considered for alimony purposes pursuant to D'Oro v. D'Oro, 187 N.J. Super 377.

In  D'Oro, the husband also moved to eliminate alimony on the basis that he retired. A judgment of divorce was rendered on February 22, 1982 after a contested trial. The parties had been married 37 years. The defendant was 64 at the time of the trial. He was to turn 65 in July 1982 and intended to retire at that age. The D'Oro court held the plaintiff-wife was not entitled to have the defendant's pension considered as income to him as it had been previously divided.

D'Oro was a precursor to Innes v. Innes, 117 N.J. 496 and our "double dipping" statute N.J.S.A. 2A:34-23(b) which reads as follows:

"When a share of a retirement benefit is treated as an asset for the purposes of equitable distribution, the court shall not consider income generated thereafter by the share for purposes of determining alimony."

The husband in Horton argued his pension income should be eliminated from consideration for alimony purposes as it had been subject to equitable distribution and consequently, his income was merely $400 per month - less than his $125 weekly alimony obligation.

Judge Conrad Krafte distinguished his own opinion from  D'Oro by indicating the husband's retirement in D'Oro was imminent and in Horton it was not. There was no reason for the wife to consider that the husband would not continue to work until a normal retirement age. The husband had voluntarily reduced his income substantially, and then claimed he couldn't comply with the voluntary agreement he made 2 1/2 years prior. Judge Krafte concluded that while the court could not prevent somebody from taking an early retirement, the pension income could be utilized for alimony consideration at least until the husband reached ordinary retirement age, which the court found to be the eligible age for receiving Social Security benefits. This, even though the pension had been previously distributed.

Dilger

The next case in the evolution was Dilger v. Dilger, 242 N.J. Super 380. The parties were divorced in September 1983 after a 30-year marriage. The judgment of divorce incorporated a property settlement agreement that the defendant husband pay alimony of $1,000.00 per month. Within six years of the divorce, the defendant elected an early retirement and ceased making alimony payments. Plaintiff filed a motion for enforcement and the defendant filed a cross-motion to terminate the payments. The issue before the court was whether a voluntary retirement at 62 1/2 constituted a change in circumstances justifying the termination of the obligation to pay alimony.

The trial court in Dilger recognized Lepis v. Lepis, 83 N.J. 139, which states the party seeking to modify an alimony award has the burden of proving changed circumstances to warrant modification and that those changed circumstances were not restricted to what was foreseeable at the time of the divorce. In Dilger, judge William G. Bassler's analysis included out-of-state cases that had examined voluntary reduction of income. Some courts have held that voluntary reduction undertaken solely or primarily to reduce support funds will not reduce the obligation. Judge Bassler rejected this single-focus standard:

"It seems to this court that the better approach in assessing whether early retirement constitutes a change of circumstances is to inquire not only whether the retirement was in good faith but also whether, in light of all the surrounding circumstances, it was reasonable for the supporting former spouse to elect early retirement. Relative to this inquiry are the age, health of the party, his motives in retiring, the timing of the retirement, his ability to pay maintenance even after retirement and the ability of the other spouse to provide for himself or herself. ...Also significant are the reasonable expectations of the parties at the time of the agreement, evidence bearing on whether the supporting spouse was planning retirement at a particular age, and the opportunity given to the dependent spouse to prepare to live on the reduced support."

Given those factors, the Dilger court concluded the defendant's retirement was not made in good faith, not was it reasonable. The court saw the defendant's retirement as a self-induced change of circumstance. Thus, a modification of alimony was not warranted.

Deegan

The next retirement case of note is Deegan v. Deegan, 254 N.J. Super. 350. In Deegan, the defendant retired four months prior to his 62nd birthday. He filed a notice of motion to terminate alimony and in support of that application he argued that he was 62 and that his wife previously shared in his pension which would eliminate that as a source for payment of alimony. The husband's decision to retire was based on facts that he worked 42 years for the Steam Fitters Union and was offered a single sum pension option for early retirement. He stated the work was very slow at the time and he had a real concern about being laid off. He also indicated that working as a steam fitter involved a great deal of physical labor including bending, lifting, climbing and working in the elements. It became increasingly difficult for him to do this work after he turned 60.

Then-Superior Court judge Virginia Long reviewed many of the cases cited in Dilger v. Dilger. The court stated that age, health of the parties, motive in retiring, timing of the retirement, ability to pay maintenance even after retirement and ability of the other spouse to provide for himself or herself are important starting factors. The reason for the early retirement should be a factor as should the expectation of the parties and the opportunity of the dependant spouse to prepare to live on the reduced support. But even in a case where the retiring spouse has been shown to have acted in good faith and has advanced entirely rational reasons for his or her own actions, there is one pivotal issue: Does the advantage to the retiring spouse substantially outweigh the disadvantage to the payee spouse? Only if that answer is affirmative, should the retirement be viewed as a legitimate change in circumstances warranting modification of a pre-existing support obligation. Where the interests were in equipoise, the payor's application will fail because he or she is unable to show that the advantage substantially outweighs the disadvantage to the payee.

The court further stated that where the sole problem is timing, a judge may condition approval of modification on a preparatory hiatus during which the moving party might retire or not, but the financial obligations would continue.

Judge Longs' Deegan opinion did not intend to limit an individual's freedom of action:

"Any party is free to retire, take a vow of poverty, write poetry or hawk roses in an airport, if he or she sees fit. The only limitation is discontinuance of the financial aid the former spouse requires."

Other states are now taking this flexible approach.

Legal mal warning

Judge Long had something to say to counsel as well:

"Issues of possible voluntary early retirement and the like should be resolved in the first instance at the time of the divorce in a negotiated agreement. No thoughtful matrimonial lawyer should leave an issue of this importance to chance and subject his or her client to lengthy future proceedings."

Silvan: foreseeable retirement

The next case dealing with retirement was Silvan v. Silvan, 267 N.J. Super 578. The husband retired at 63 1/2 and sought to reduce his alimony obligation. The reduction was denied by the trial court and affirmed on appeal. By the time of the affirmation, the husband had already reached age 65 and renewed his motion which was once again unsuccessful. He appealed again. The trial court denied the retired ex-spouse's application on the basis that his retirement was foreseeable. The Appellate Division reversed, stating forseeability does not end the inquiry and held at page 582:

"We do not hold that one who voluntarily retires is automatically entitled to a reduction in alimony ... Rather, we conclude only that a party who retires in good faith at age sixty-five may constitute changed circumstances for purposes of modification of alimony and that a hearing should be held to determine whether a reduction in alimony is called for."

Silvan or Deegan?

While the Silvan court did not cite Deegan, the tests are different because the situations are different.

Silvan holds that a party who retires in good faith at age 65 is entitled to a hearing on whether there is such a resultant change in circumstances that alimony obligations should be modified.

Deegan holds that when a payor spouse retires early, changes in alimony obligations will be judged by the advantage/disadvantage standard.

There is good rationale for the different tests: parties can reasonably anticipate at the time of divorce that one or both will not work forever. Retirement at age 65 is a reasonable life event and anticipated by everyone.

"Normal" retirement?

One cautionary note: it may not be so simple determining whether an individual is taking normal retirement or early retirement. Age is a factor. The type of employment of an individual may be a factor: a commercial airline pilot, astronaut or a professional athlete may "normally" retire far earlier than an individual who works in an office. Sometimes contracts of employment require an individual to retire. The court will have to examine facts and details to determine whether a person has "voluntarily" retired early or not.