In a recent Appeals Court case of Hassey v. Hassey, a provision in a divorce judgment requiring a husband to pay thirty percent of his anticipated future gross income to his former wife was struck down as inconsistent with the terms of the Alimony Reform Act of 2011.
While some divorcing parties can predict their paychecks to the penny fifty-two weeks a year, the income of many others may vary on a weekly, monthly or annual basis. For example, a police officer may earn a weekly salary of $1,200, but double that amount in certain weeks by working overtime. By way of another example, a sales associate may be paid a base salary of $50,000, but earn commissions of between $50,000-$100,000 annually. Similarly, a partner in a mid-size law firm may take a monthly draw of $10,000, but receive $150,000-$250,000 as a year-end profit distribution. Although overtime, commissions, profit distributions, and bonuses are almost never "guaranteed," they nonetheless often comprise a significant portion of a party's gross income, particularly in circumstances such as those set forth in the examples above.
Charged with the task of structuring a support order that captures a payor's "gross income" while remaining sensitive to the fact that certain types of income, though historically received, may not be guaranteed, it has long been the practice of the Probate and Family Court to award a fixed weekly or monthly payment in accordance with a payor's base salary or guaranteed income, with a further amount of support to be paid on any additional income received by the payor on an if, as, and when basis. This support structure is customarily considered a reasonable and practical way to ensure that a payor's true gross income is considered for support purposes. This support structure also avoids a fixed order that would burden the payor or prove inappropriately high in the event that the expected additional income is not ultimately received.
At first glance, the circumstances of the recently decided case of Hassey v. Hassey appear as the type of situation warranting such a support structure. Dr. Hassey was a self-employed dentist who reported approximately $360,000 in gross annual income in 2010, $90,000 of which was a payment made by his partner in order to buy-in to his dental practice over a five year period (2005-2010). At the time of trial in 2011, his current gross income was determined to be approximately $250,000, as the buy-in payments had ended. Dr. Hassey began renovating and expanding his practice in 2008, and he testified at trial that although the debt he incurred as a result of the renovations had not resulted in any further net income to date, the investment should prove profitable in the future as the debt was paid down. Mrs. Hassey had not worked outside of the home for approximately twenty years and had no income.
After trial, the probate court judge ordered Dr. Hassey to pay $8,500 per month as a fixed alimony payment, and further ordered Dr. Hassey to pay "additional alimony equal to thirty (30%) percent of his gross income in excess of $250,000, from all sources ... payable quarterly". The judge noted that this "self-modifying" alimony order would allow Mrs. Hassey to "continue to realize some benefits for the investment in the husband's practice made during the years of the marriage" and to "share in any increased profitability" of the practice. One issue on appeal involved Dr. Hassey's challenge of this provision of the judgment.
While it may seem, at first, that the alimony award entered by the court falls squarely within the structure commonly employed to capture all of a payor's gross income, there is a subtle but substantial distinction that caused the Appeals Court to remand the Hassey's case in light of the Alimony Reform Act of 2011 ("the Act").
The specific language of the Act now requires a judge to determine the parties' respective gross incomes at the time the alimony order is entered. Unlike bonus, commission, or overtime income, which, though not guaranteed, could reasonably be considered to comprise a party's "current gross income," Dr. Hassey's current gross income was determined to be $250,000 at the time of trial. Thus, the award to Mrs. Hassey of 30% of any income earned by Dr. Hassey over $250,000 was not intended to capture all of Dr. Hassey's "current gross income", but rather a portion of his anticipated "future gross income". The trial court judge presumably was aware of this distinction in that he deemed this provision a "self-modifying" order, as compared to a "self-executing" order. The Appeals Court held, however, that this "self-modifying" order could neither be reconciled with the Act nor with traditional Massachusetts practice.
Ordinarily, a party seeking an upward modification of a support order must show both an increased need and the ability of the obligor to satisfy that need. In the Hassey's case, however, the selfmodifying feature of the order, which required Dr. Hassey to pay additional alimony in the amount of 30% of "future gross income," was not based on a judicial determination, supported by subsidiary findings of fact, of an increase in the wife's need accompanied by the husband's ability to provide for the same. Further, the order required only Dr. Hassey to disclose quarterly income to Mrs. Hassey, yet imposed no reciprocal duty on her. For these reasons, the Appeals Court held that the order for selfmodifying alimony was inconsistent with Massachusetts law, and vacated and remanded the case to the trial court.
The extent to which the trial court judge considered Mrs. Hassey's current and future needs in entering the self-modifying order remains uncertain, because, as the Appeals Court stated, the trial judge "made no finding as to the amount of alimony the wife needed in order to maintain the lifestyle she enjoyed during the marriage." However, given that Dr. Hassey's total income in 2010 was $360,000 (and the parties had only one household to support), but only $250,000 at the time of trial, it is reasonable to assume that even with an alimony award of $8,500 per month ($102,000 annually) Mrs. Hassey would not be able to maintain the standard of living that the parties had enjoyed during the marriage. Were this the case, it would not seem unreasonable to award her a portion of Dr. Hassey's future income without requiring a modification or material change of circumstances. Although the language of the Act requires a court to consider "the parties' respective needs and incomes at the time the order is issued," the Appeals Court recognized in a footnote that "a general term alimony award established as a percentage of income and not as a fixed amount may be valid in some circumstances." The Appeals Court further recognized that in a "special case" a general term alimony award containing a "selfexecuting formula" based on the recipient spouse's needs may be permissible. Thus, if the trial court finds that Mrs. Hassey is unable to meet her needs from an alimony award based on Dr. Hassey's current income of $250,000 alone, it remains to be seen whether this would qualify as a "special case" which could justify a self-executing or self-modifying alimony award providing an automatic reach-in to Dr. Hassey's future anticipated income.