Does the Family Court Have to Consider Expected Increases in Value of Assets when determining Alimony
Alimony is one of the most challenging issues to advise clients about in their divorce cases. SC Code Ann. Section 20-3-130(C) sets forth the 13 factors that the Family Court judge must weigh in determining whether to award alimony. But, once the Family Court has determined that alimony is appropriate to order in a particular case there is no guidance on the amount.
The South Carolina Supreme Court addressed an issue related to alimony in its opinion that was issued on March 20, 2019 in Sweeney v. Sweeney.
This case deals with a very specific issue about whether there should be a requirement for the Family Court judge to assign a specific value to a party's investment income when determining an alimony award. This clarifies one of the alimony factors found in S.C. Code Ann. Section 20-3-130(C)(6), "the current and reasonably anticipated earnings of both spouses" by examining what level of specificity is needed to be considered by the Family Court when evaluating the "reasonable anticipated earnings" of a spouse.
The Court specifically framed the issue as determining whether there should be a requirement for the Family Court Judge to consider the expected increase in value of a party's assets in determining alimony awards.
In Sweeney, Husband and Wife were married nearly 30 years. At the beginning of the marriage, Wife supported Husband as he earned his Masters Degree. Later in the marriage he began a consulting business which became successful enough for the family to be financially secure and for Wife to no longer need to work and remain home caring for the children. More specifically, Husband's gross monthly income was in excess of $30,000.
For the lawyers out there that want to know about the other alimony factors the Family Court considered, let's dive in: (1) parties were married nearly 30 years, (2) Husband's adultery contributed to the breakdown of the marriage - though Husband alleged that his affair did not begin until after the parties separated and had been having marital difficulties, (3) the parties enjoyed a well above-average lifestyle, and (4) Husband has the ability to pay alimony.
In the trial of the case, Husband's financial expert presented evidence that alimony was unnecessary in this case because Wife will be receiving a significant sum in equitable apportionment and this sum - a large amount of investments - will provide wife a substantial income each month in excess of her reported living expenses. Wife's expert disputed the claim and alleged that investment income from the investments should not be considered in the calculation of support because it was too speculative and Wife would have to invade the principal of the investments to maintain her lifestyle while Husband would not have to invade his portion of the assets.
The Family Court ordered $5,000 per month in alimony even though Wife "would receive substantial income from her share of the assets" though it did not specify or estimate how much "substantial income" would be.
The Supreme Court reviewed the record along with the statutory alimony factors and considered the Family Court's review of the factors and declined to require Family Court judges assign a specific number to future investment income of the parties when considering alimony awards.
Alimony in South Carolina
Alimony is a hot topic in many South Carolina divorce cases, but many times spouses ask for it in order to punish their spouse for some bad deeds committed during the marriage. So what is alimony?Alimony is defined as "a substitute for the support which is normally incident to the marital relationship" Lide v. Lide, 277 SC 155 (1981). What does that mean? It means that while the couple is together they have some expectation that there is some mutual financial support for the marriage. When the marriage is ending and the parties separate alimony helps the spouse with the smaller income to have a similar lifestyle to that which he/she became accustomed to during the marriage.SC Code §20-3-130(A) states that the Family Court may award alimony "in such amounts and for such term as the court considers appropriate as from the circumstances of the parties and the nature of case". Essentially what that means is that the Family Court Judge who is deciding the case has a lot of discretion to determine the amount of alimony that is awarded. Unlike child support, there is no calculator or formula for the court to use to determine an amount.
Types of Alimony
In general, the statute outlines four different types of alimony that can be awarded by the Court in SC Code §20-3-130(B):(1) Periodic alimony. This is alimony that is paid every month on an ongoing basis and is generally thought to be permanent. This type of alimony will only end when the receiving spouse remarries or on their continued cohabitation or either spouse dies. This alimony therefore may be terminated and is modifiable upon a showing of a substantial change in circumstances.(2) Lump-sum alimony is a set amount of money that is paid as alimony and not as a property division. It can be paid in one lump sum or it can be paid out in installments over time, but the end amount that is paid is fixed. For example, Husband agrees to pay Wife the sum of $100,000 in lump sum alimony. He can write her a check for $100,000 or they could agree for him to pay $10,000 per month for 10 months. This type of alimony is not modifiable and is only terminable upon the death of the supported spouse.(3) Rehabilitative alimony is another fixed sum of alimony that is paid in installments and is used in many cases to help the supported spouse financially while he/she obtains new training or completes their education that will allow them to become self-supporting. This type of alimony is terminable on the remarriage or continued cohabitation of the supported spouse and the death of either spouse, or when a certain event happens in the future (e.g. the supported spouse graduates from college). This type of alimony is also modifiable when an unforeseen event occurs that prevents the supported spouse from becoming self-supporting or if it frustrates the ability of the supporting spouse to continue to pay.(4) Reimbursement alimony can be paid in a lump sum or in installments and will end on the remarriage or continued cohabitation of the supported spouse, or upon the death of either spouse. This alimony will not end and cannot be modified based upon changed circumstances in the future. The statute describes this form of alimony as an options the the Court believes it is "desirable to reimburse the supported spouse from the future earnings of the payor spouse based upon circumstances or events that occurred during the marriage." A good example of this is when one spouse dutifully supports the other spouse as they go through medical school. Once the doctor spouse graduates from medical school and begins to earn some substantial income he/she decides to divorce the spouse that supported him/her through school. This allows the non-doctor spouse the opportunity to benefit from the investment they made into the family's future income.
Factors Considered by the Family Court to Determine Alimony in South Carolina
SC Code §20-3-130(C) sets forth the factors that the Family Court must consider when determining whether to award alimony and how much alimony should be awarded:(1) the duration of the marriage together with the ages of the parties at the time of the marriage and at the time of the divorce or separate maintenance action between the parties;(2) the physical and emotional condition of each spouse;(3) the educational background of each spouse, together with need of each spouse for additional training or education in order to achieve that spouse's income potential;(4) the employment history and earning potential of each spouse;(5) the standard of living established during the marriage;(6) the current and reasonably anticipated earnings of both spouses;(7) the current and reasonably anticipated expenses and needs of both spouses;(8) the marital and nonmarital properties of the parties, including those apportioned to him or her in the divorce or separate maintenance action;(9) custody of the children, particularly where conditions or circumstances render it appropriate that the custodian not be required to seek employment outside the home, or where the employment must be of a limited nature;(10) marital misconduct or fault of either or both parties, whether or not used as a basis for a divorce or separate maintenance decree if the misconduct affects or has affected the economic circumstances of the parties, or contributed to the breakup of the marriage, except that no evidence of personal conduct which may otherwise be relevant and material for the purpose of this subsection may be considered with regard to this subsection if the conduct took place subsequent to the happening of the earliest of (a) the formal signing of a written property or marital settlement agreement or (b) entry of a permanent order of separate maintenance and support or of a permanent order approving a property or marital settlement agreement between the parties;(11) the tax consequences to each party as a result of the particular form of support awarded;(12) the existence and extent of any support obligation from a prior marriage or for any other reason of either party; and(13) such other factors the court considers relevant.
Help! How Can I Get Started Seeking Financial Assistance from my Spouse?
Question: My husband has deserted me and refuses to help me financially. He has moved in with his mistress and won't have any contact with me! How do I file for spousal support? He is refusing to help me.Answer: You should consult with a lawyer immediately so that you can move forward with the Family Court to get some immediate relief. Unfortunately, the only way to obtain the relief you are seeking is to file an action with the Family Court for divorce/separation and request this relief through a Motion for Temporary Relief. I strongly suggest hiring a lawyer because alimony is a complex issue and there are some strict procedural rules about what the Court may consider at a temporary hearing and if you do not comply with those rules you may forfeit your rights or just plain miss out on relief you are entitled to.In South Carolina you have the option to file for divorce using one of five grounds (physical abuse, habitual drunkenness, adultery, desertion, or continuous separation for more than one year). You also have the alternative to file for separate support and maintenance which is similar to a legal separation. Those are essentially your keys to the courthouse. No matter which way you file, you will be able to ask the court to award you immediate relief such as alimony/spousal support, custody of minor children, child support, use of the marital home, health insurance coverage, etc.The family court will consider multiple factors in determining whether to award you alimony or not, and then if it does determine that you are eligible for support the Court will determine how much to award. The factors considered will be things like your ages, physical and mental health, employment history, income history, why you are currently unemployed (e.g. agreement to stay at home and raise the children), other assets you have, tax implications, length of the marriage, and a few more.As a side note and warning, I would encourage you to file something sooner rather than later. The longer you go without financial assistance from your spouse, the more it appears that it is not needed. While that is not a specific factor considered by the Court it could be relevant and a long term separation without a request for support could make it unlikely that you would be awarded support.To learn more about Temporary Hearings, check out these posts:
Divorce Process: What is a Temporary Hearing
What is a Divorce Temporary Hearing
Definition: Temporary Divorce Hearing
Temporary Hearing – What’s Next?
What Happens After my Temporary Hearing?
Potential Income Used for Calculating Child Support
Sometimes potential clients for issues of alimony or child support ask about what would happen if their spouse quit their job or was fired or laid off and their income dramatically changed. Typically, the other spouse threatens you by saying if you file for child support or alimony I will just quit my job and you won't get any money from me. Sometimes, the threat may be to just quit working the consistent overtime hours that are always available to significantly reduce the payor spouse's income.Last year I represented a client whose husband of 30 years abruptly left the home, quit his job that paid over $100,000 per year, and moved out of state in an effort to avoid having to pay his wife alimony. She came in very concerned that she would not be provided for financially. Here's what we discussed:
Potential Income Used in Calculation of Child Support
The South Carolina Child Support Guidelines set out the following as it relates to potential income:"If the court finds that a parent is voluntarily unemployed or underemployed, it should calculate child support based on a determination of potential income which would otherwise ordinarily be available to the parent.""In order to impute income to a parent who is unemployed or underemployed, the court should determine the employment potential and probable earnings level of the parent based on that parent's recent work history, occupational qualifications, and prevailing job opportunities and earning levels in the community."This means that a party who the Court finds has greater potential income than they are showing at that time due to intentionally quitting his/her job (or somehow have their income reported as much lower than normal) during the time that a child support matter is ongoing the Court may calculate the child support as if the payor spouse was still making the larger amount of money.
Potential Income Used For Calculation of Alimony
When a Court is determining whether to award alimony to a spouse in South Carolina, they refer to the statute that sets out the factors for the court to consider. After weighing all of the factors, the court will have a lot of discretion in determining the amount of alimony to award. Among the 13 factors outlined in SC Code §20-3-130(c), sub-paragraph 4 states that the Court must consider, "the employment history and earning potential of each spouse".So, if your spouse threatens to quit his/her job to reduce the amount of alimony he/she would otherwise have to pay, you can be sure the Court will consider that in the alimony determination.
What Impact will Adultery Have?
When consulting with potential clients about their divorce, I am often asked the following hypothetical question:
I would like to start dating again. What impact will it have on my case if I start seeing someone?
In other words, what impact will your spouse proving you have had an adulterous relationship have on your divorce case?
1. Divorce
The first place you should look is at the grounds for divorce. SC Code §20-3-10(1) allows for a divorce on the grounds for adultery. I wrote about the proof required for establishing a case of adultery in a previous post. By establishing the proof necessary for adultery, your spouse can divorce you without having to live separate and apart from you for the no fault 12 month period.Most of the potential clients I meet with wouldn't have a problem with this aspect of adultery because it means they are potentially getting their divorce sooner and then they can openly or legally move on with their new relationship.
2. Alimony
The second major issue deals with alimony. SC Code §20-3-130(C) sets out a list of factors that the family court judge must consider and weigh when determining whether to award alimony to one of the spouses in the case. Subsection 10 of that section states that, "marital misconduct or fault of either or both parties, whether or not used as a basis for a divorce or separate maintenance decree if the misconduct affects or has affected the economic circumstances of the parties, or contributed to the breakup of the marriage[.]" Adultery is considered marital misconduct and fault so it can be a factor weighed against you if your spouse is seeking alimony.On the other hand, if you are seeking alimony, you may barred from receiving alimony due to your adulterous relationship. See SC Code §20-3-130(A), "No alimony may be awarded a spouse who commits adultery before the earliest of these two events: (1) the formal signing of a written property or marital settlement agreement or (2) entry of a permanent order of separate maintenance and support or of a permanent order approving a property or marital settlement agreement between the parties."
3. Property/Debt Division
The third area to consider is the area of property and debt division. SC Code §20-3-620(B)(2) states, "marital misconduct or fault of either or both parties, whether or not used as a basis for a divorce as such, if the misconduct affects or has affected the economic circumstances of the parties, or contributed to the breakup of the marriage; provided, that no evidence of personal conduct which would otherwise be relevant and material for purposes of this subsection shall be considered with regard to this subsection if such conduct shall have taken place subsequent to the happening of the earliest of:(a) entry of a pendente lite order in a divorce or separate maintenance action;(b) formal signing of a written property or marital settlement agreement; or(c) entry of a permanent order of separate maintenance and support or of a permanent order approving a property or marital settlement agreement between the parties[.]"So depending on when the adultery occurred and the impact on the financial or economic circumstances of the parties, there could be an adjustment made to the equitable apportionment of marital assets and debts.
Reporting Alimony Received on Income Taxes
Alimony is a tricky issue in a divorce case. Many people want it (or don't want to pay it) but the tax implications of alimony are important to note and consider in the negotiation of your divorce settlement. In general, alimony is taxable income to the recipient and is a deduction for the payor.The Tax Girl, Kelly Phillips Erb, recently answered a question on her tax blog about claiming alimony on your income tax return. It's a quick and short read, but provides some good guidance on the importance of claiming alimony received on your income tax return even if that is the only income you had for the year.