Source: https://levinedisputeresolution.com/divorce-mediation-blog/tag/Self-adjusting_alimony_orders/
Timestamp: 2019-04-20 19:12:07+00:00

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The husband’s employment income arose from seven different compensation programs, including stock options, bonuses, investor entity units and discount stock purchase program opportunities. The various compensation modes featured differing consistencies, liquidity and transferability attributes, “…both considerable and variable”.
The SJC worried that the trial court’s self-adjusting alimony award (one-third of the husband’s gross pre-tax compensation) would lead to uncertainty of implementation, causing “continued strife” between the parties, citing the potential for inexact drafting and employer-employee collusion (to depress applicable income). The trial judge implicitly recognized the chance of future contention by appointing a special master, to keep the peace. Think: alimony coordinator.
If Mr. Young were simply a salaried employee, without the corporate power to manipulate his compensation, might the result have been different?
What did the court decide and why; and might it have decided differently?
Here, we delve into the SJC’s analysis in Young v. Young.
Young was high income case, in which the husband’s executive compensation fueled a persistently rising lifestyle (“affluent, upper class”) for the parties during a 24-year marriage. Both parties sought fixed sum alimony in the wife’s favor, but at broadly disparate levels.
After trial, the Probate and Family Court judge concluded that the wife’s sworn representation of the costs required to maintain the marital station (i.e., her “need”) was unreliable; and that the husband’s compensation scheme (i.e., his capacity to pay) was complex, not clearly predictable, but implicitly at least, likely to maintain an upward trajectory.
Critically, the judge did not quantify the wife’s “need” in a finding. Instead, the opinion suggests, the trial court defined the marital living standard as an intangible expectation of rising station, supported presumably by family history, and with no apparent end in sight.
Self-adjusting alimony orders that “intend” to elevate the recipient spouse’s standard of living above the marital station are prohibited.
An alimony payor who is ill at the time of divorce, with depressed earnings for a period of recovery, and the expectation of resumed earnings that are closer to the marital experience, when health returns, per Wooters v. Wooters, 42 Mass. App. Ct. 929 (1997).
The paucity of fact precedent has long made trial judges reluctant to even consider variable support awards, and we expect that the Young decision won’t likely change this institutional reticence. As we discuss below, we see this as unfortunate.
What if she had made a finding that even at the rarefied level of Young finances, when following the 30-35% range of a “reasonable and lawful” alimony order (Hassey v. Hassey, 85 Mass. App. Ct. 518 (2014)), the wife could not live at the marital standard formerly funded when the parties lived as one household?
What if the trial court had quantified “need”, and capped the amount that the Wife could have received by application of the percentage formula, at that level?
[T]here may also be special circumstances where an alimony award based on a percentage of the supporting spouse's income might not be an abuse of discretion, such as where the supporting spouse's income is highly variable from year to year, sometimes severely limiting his or her ability to pay, and where a percentage formula, averaged over time, is likely not to exceed the needs of the recipient spouse.
If those findings had been made, we think they could, and should have, held differently.
Interestingly, the SJC did not comment upon the fact that the Young percentage-based support award also protected the husband from the very danger noted above: that his income might dip (it generally does at some point), and “severely limit his ability to pay” support commensurate with the marital standard. Had this been noted by the judge, might the SJC been more sparing in its critique? Maybe.
The primary purpose of an SJC case is to determine if there was error in the case before it, and secondly, but not necessarily secondarily, to create precedent for future cases. For every Young case, the trial court will encounter thousands of cases in which the marital station is in no way attainable on a 30-35% alimony award, and in which the court could carefully craft orders that meet all of the SJC’s concerns discussed above, without consigning the courts and the parties to serial modification actions.
In this respect, the Young decision represents a missed opportunity, in our view.
Finally, the SJC noted that variable support orders can lead to contention because of poorly worded criteria and complex compensation schemes. Correctly, the Young court pointed to the trial court’s appointment of an alimony coordinator (our term) to police the judgment; an unauthorized and unaffordable solution for most couples (though, ironically, affordable for thee parties). The court also lamented that formulaic orders could encourage fraud, and collusion between employers and employee alimony payors.
These are real concerns, but ones that exist in every case, regardless of the support structure, and based on this rationale, the trial courts should not accept settlements with self-adjusting formulae, which they properly do every day. It is equally lamentable, that the SJC does not apparently deem the bench and bar capable of proposing and adopting high quality judgments. We fear that this aspect of the case is rejecting the good because it is not perfect.
In our next entry, we will discuss the Young case treatment of determining how to determine “need” and the trial court’s particular challenge in this case to do what the SJC has ordered with respect thereto.
We introduce the subject that the Supreme Judicial Court (SJC) addressed in Young v. Young by examining the kinds of orders from which the case arose: variable or self-adjusting support orders. Here, we address the basics.
What are self-adjusting support orders? They are alimony orders expressed by a formula rather than a sum. The payor computes alimony periodically by applying a percentage to his or her defined income. Sometimes, different (usually declining) percentages apply to different tiers of income, and increasingly, thanks to M.G.L., ch, 208, § 53(b) (of the Alimony Reform Act (ARA) of 2011, eff. 3.1.12) the percentage(s) may apply to the parties’ income differential.
Think: Client A pays Client B 32.5% of the difference between the two parties’ gross pre-tax employment income each year, as received, and subject to a periodic true up after sharing of agreed income verification.
Who makes self-adjusting orders? Most often, self-adjusting alimony orders are a creature of agreement. A judge then approves and incorporates the agreement in its judgment, making the self-adjusting features court orders. For reasons discussed in previous and subsequent blog entries, judges rarely initiate such orders, being limited to doing so only in “special circumstances”, which Massachusetts caselaw has thus far identified only two: where an alimony recipient lives on another continent during high inflation times, which may justify an automatic cost-of-living provision; and one in which the payor was ill at the time of divorce, with resulting depressed earnings, but the court expected return of his historic income when his health recovered. We will discuss this standard more fully in a later blog entry.
Who uses self-adjusting orders? Most parties adopt this approach because the alimony payor’s income is subject to significant fluctuation, sometimes on the upside (think: bonuses or commissions) and sometimes up or down (think: profits). It protects the payor from having to pay alimony on income that he or she does not actually receive (downside risk protection), and the recipient is compensated by sharing when income is higher (upside benefit sharing). It echoes the way an intact couple live, economically.
Why don’t courts initiate many self-adjusting orders? The general answer is that self-adjusting orders “feel” like a violation of “due process” rights because they change the amount of support without the right to a court hearing for the purpose of showing current facts and circumstances that might mitigate against the change. The more precise reason is that case law discourages it. Young v. Young will likely reinforce the reticence of cautious judges; but we will suggest later that this ought not necessarily be the case.
In the next blog entry, we will begin to discuss the analysis that the SJC used in Young, and the standards suggested by it and earlier law.
With the long-awaited case Young v. Young, the Massachusetts Supreme Judicial Court (SJC) has revisited the important question of when may a trial court originate self-adjusting support orders, a subject that we have addressed here twice before. See, http://levinedisputeresolution.com/docs/Variable-Support-orders-3-28-16.pdf and http://levinedisputeresolution.com/divorce-mediation-blog/need-and-variable-support-orders-they-are-not-mutually-exclusive.
While the case does not address the situation where there is insufficient income to keep both parties living at the former marital standard of living, it does review and elaborate on existing precedent.
In a high income case of great executive compensation complexity, the trial court ordered the husband to pay to the wife a 1/3 share of all gross income that the husband receives going forward, rather than the fixed sum alimony that both parties sought, albeit in vastly different suggested amounts.
But, what does it all mean, really?
We will use Young as a jumping off point to address both its particular analysis and holdings, and to re-examine the curious case of variable support orders a/k/a self-adjusting support orders at large. We begin with just what is a variable support order and who uses them, then explore the analysis and implications of Young, and close (we think) with special problems in the area.

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