While the Appellate Division’s in the case of Tannen v. Tannen (addressed in another blog by Larry Cutler), primarily ruled that income paid to the divorcing wife as the beneficiary of a discretionary trust (the “WTT”) cannot be considered an asset available to fund alimony, that discussion naturally begged the question which was addressed in the second part of the case; namely – what effect does the actual income disbursed from the trust have on a determination of the needs of the parties in setting the alimony and child support obligation of the supporting spouse?
It is well-settled in New Jersey that the “marital standard of living” serves as the touchstone for the initial alimony award in a divorce. The standard of living during the marriage is the way the couple actually lived, whether they resorted to borrowing and parental support, or if they limited themselves to their earned income. The Court examines the couple’s “lifestyle expenses” in order to determine how much support is required by the dependent spouse to maintain that lifestyle support.
In Tannen, the trail judge sought to apply his conclusions regarding the parties’ lifestyle expenses to the calculation of the amount of support required by the dependent spouse to maintain that lifestyle. The judge acknowledged that the lifestyle expenses included those incurred by the parties and their children, however did not give any analysis as to the costs associated with the wife’s actual needs post-divorce in light of the fact that income was paid to her at least monthly by the WTT. He also failed to consider at all the husband’s post-divorce needs. The Appellate Division took issue.
While the Appellate Division held earlier in the case that the trial judge improperly imputed income from the WTT to the wife and also improperly ordered distributions of that income by the trust, they determined that same was not at odds with what the wife’s actual need is to maintain her lifestyle post-divorce, which must necessarily include the historical record of payments made by the WTT on the wife’s behalf. Simply put, the Appellate Division refused to ignore the reality of the parties’ marital lifestyle which was that for years prior to the divorce, the WTT subsidized many of the parties expenses. To do so, the Appellate Division reasoned, would clearly result in a windfall to the wife and be entirely inequitable to the husband. The Appellate Division thus remanded the case for the purposes of determining alimony.
The Appellate Division similarly remanded with regard to child support. Reducing the child support under the Child Support Guidelines based upon the wife’s decreased housing costs which were subsidized by the WTT, the trial judge required the husband to pay $273 per week in child support. While the wife took issue, the husband responded that the judge acted within his discretion in adjusting the Guidelines to reflect actual spendingbased on Appendix IX-A to the New Jersey Court rule relating to child support awards (R. 5:6A), providing:
To qualify for a deviation based on average costs, a parent must show that the family’s marginal spending on children for all items related to a consumption category differs from the average family (e.g., there are no housing costs).
To that end, the trial judge found that a deviation from the Guidelines was appropriate because the wife not an average homeowner, having no mortgage or real estate taxes to pay, but he also noted that "[the wife] d[id] incur some housing costs.” The Appellate Division again took issue, noting that in so deciding, the trial judge wholly negated a different section Appendix IX-A, which provides: “Note: The fact that a family does not incur a specific expense in a consumption category is not a basis for a deviation from the child support guidelines." Indeed the list of expenses contained in the "housing" category includes a number of items which defendant continued to pay. Thus, the Appellate Division concluded that deviation from the Guidelines on this ground was not appropriate.
While this case primarily stands for the proposition that income paid to a spouse as a beneficiary of a discretionary trust cannot be considered that spouse’s income in the court’s alimony calculation, it is also comforting to know that despite the Court will not turn a blind eye to the a party’s economic reality in determining support.