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NJ Family Legal Blog Pertinent Information As It Relates To New Jersey Family Laws

Another Reason to Settle – Parties can agree to things that Judge’s can’t mandate – like automatic reductions and formulas for alimony

Posted in Alimony, Modification, Practice Issues, Property Settlement Agreements

When settling a case, the parties and their lawyers can be far more creative in settlement then a judge can be if the case is tried.  While family judges have wide discretion in their decision making, creativity is crafting the most beneficial result for both parties is rarely something they can do.  In fact, in many ways, they are constrained from the type of creativity that we see every day in divorce agreements. 

What if you are a high earner, but your income fluctuates greatly from year to year?  While a judge will likely have no choice but to determine your average income over 3 to 5 years and base support upon that as well as the rest of the statutory factors, you may want to agree on some kind of formula so that there is fairness year over year, i.e. you pay more in a better year and less in a down year. For example, if your average income is $2,500,000 but your income fluctuates between $1 million and $4 million per year.  You would really hate paying alimony in those years you only make $1 million.  If a judge decided this case using averages, you might be forced to pay your entire net income, or more, to you ex spouse in the down year.  Similarly, a judge could never say that support "automatically" is reduced or even reviewed if your income is less than $X in the future. 

This concept was reiterated again by the Appellate Division on October 29, 2012 in an unreported  (non-precedential) decision in the case of Means v. Snipes.  In this case, after a trial, the judge decided that in the event that defendant’s annual income fell below $2 million, he would receive a reduction in alimony. This is the one thing that both parties agreed was in error – a rare agreement in a very contentious case.

Interestingly, as to the automatic reduction of alimony, the Appellate Division noted that:

Paragraph 21 of the AJOD provides for a pro-rata reduction in alimony payments if defendant’s annual gross earnings drop below $2,800,000 in a given year. In addition, paragraph 8 provides that defendant "will have an automatic right to receive a reduction in Alimony" if his gross annual earnings fall below $2 million. The parties did not agree to an automatic adjustment in alimony based upon this criterion. Each of the parties argues that the court erred in including this provision in the AJOD and that any  modification of alimony should be subject to the principles set forth in Lepis v. Lepis, 83 N.J. 139 (1980). We agree. Therefore, we reverse that part of the court’s decision set forth in Paragraphs 8 and 21 of the AJOD that calls for an automatic reduction in alimony based upon predetermined income amounts, and direct that it be vacated from the order. (Emphasis added)

As highlighted above and in this quote, the parties could have agreed to such an automatic review in advance.  In fact, it happens reasonably often.  A judge cannot because it would, in essence, be a pre-judgment of what happens when there is a future event. A court, for example, cannot say at the time of the divorce that alimony will terminate upon the payor’s retirement at age 65.  Parties can (but rarely do) agree to that.  At trial, judge’s also cannot say that the support will increase if the payor’s income goes up.  They cannot say that the support will go down if the recipient earns $X dollars.  On the other hand, parties agree to this all of the time.  It is rare to see courts impose different tiers of alimony (eg.  $50,000 a year for the first 3 years dropping down to $35,000 for the next two years dropping down to $20,000 thereafter, for example).  Parties do this all of the time too.

The bottom line is that one size does not fit all.  Unfortunately, trial judges are limited in their abilities to creatively decide cases.  So if you want the resolution that best meets your needs, settle.

 

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Eric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric practices in Fox Rothschild’s Roseland, New Jersey office though he practices throughout New Jersey. You can reach Eric at (973)994-7501, or esolotoff@foxrothschild.com.