Opinion ID: 3160531
Heading Depth: 2
Heading Rank: 3

Heading: Wife’s Dependency And The Alimony Award

Text: Husband next argues that the Family Court erred by not considering the substantial assets allocated to Wife when determining dependency. According to 18 Gately v. Gately, 832 A.2d 1251 (Del. 2003) (Table); Linder v. Linder, 496 A.2d 1028, 1030 (Del. 1985); see also Olsen v. Olsen, 971 A.2d 170, 178 (Del. 2009) (“[The Family Court] is not required to place equal weight on each factor, it is simply required to analyze and balance the factors in reaching a conclusion as to the division of property between the spouses.”). 19 Wife (L. R.) v. Husband (N. G.), 412 A.2d 333, 334 (Del. 1980) (“If there was no abuse of discretion, we must affirm even if we would have reached different conclusions had we been the trier of fact.”). 20 Opinion I at 31-36. 10 Husband, the Family Court allocated to Wife substantial marital assets, and Wife should be required to exhaust those assets before being eligible for alimony. Wife states in response that the Family Court considered the marital assets allocated to Wife when it reduced her alimony award based on the income those assets might produce, and properly determined that Wife was dependent based on the couple’s standard of living during the marriage. Under the alimony statute, 13 Del. C. § 1512, the Family Court must consider “all relevant factors,” including the enumerated statutory factors, when determining dependency and calculating alimony if dependency is found. The dependency determination and alimony award are relative, and based on the standard of living established during the marriage. 21 As one of the factors, the Family Court must consider the assets allocated to a spouse in the property division.22 “The Family Court’s rulings ‘will not be disturbed on appeal if: (1) its findings of fact are supported by the record; (2) its decision reflects due consideration of the statutory factors found in section 1512; and (3) its explanations, deductions and inferences are the product of a logical and deductive reasoning process.’” 23 21 Id. at 1145-46. 22 13 Del. C. § 1512(b)(2); § 1512 (c)(1). Assets can be allocated in the property division in lieu of alimony. 13 Del. C. § 1513(a)(4). 23 Thomas v. Thomas, 102 A.3d 1138, 1142 (Del. 2014) (citing Gray v. Gray, 503 A.2d 198, 201 (Del. 1986)). 11 Where the Family Court finds a deficit exists between spouses based on the couple’s standard of living during the marriage, and the supporting spouse has the financial resources to pay alimony, as a general rule the dependent spouse is not required to liquidate marital assets allocated in the property division before qualifying as dependent.24 This rule reflects the equitable nature of both property division and alimony awards, and the support obligations that marriage creates. It would in many cases be unfair for the less pecunious spouse to have to liquidate marital assets while the supporting spouse keeps his or her allocated marital assets and maintains the marital standard of living. If the supporting spouse has the ability to pay alimony, the dependent spouse should be able to maintain the same 24 27B C.J.S. Divorce § 621 (2015); Marian F. Dobbs, Determining Child & Spousal Support § 3:64 (2015); see, e.g., In re Marriage of Drury, 740 N.E.2d 365, 369 (Ill. Ct. App. 2000) (“A spouse seeking maintenance should not be required to sell assets or impair capital to maintain herself in a manner commensurate with the standard of living established in the marriage as long as the payor spouse has sufficient assets to meet both his needs and the needs of his former spouse.”); Wright v. Wright, 135 So. 3d 1142, 1145 (Fla. Dist. Ct. App. 2014) (“In determining the need for alimony, the trial court should be mindful that the former wife is not required to liquidate and deplete her assets to provide for her living expenses.”); Ashlock v. Ashlock, 154 S.W.3d 419, 421 (Mo. Ct. App. 2004) (“[A] person seeking maintenance is not required to consume or deplete his or her marital property to meet his or her expenses before being entitled to maintenance.”); In re Marriage of Bounds, 60 P.3d 1090, 1093 (Or. App. 2003) (affirming an award of spousal support despite the fact that dependent spouse received a lump-sum cash award of $400,000 and allegedly would be able to earn investment income from the award); Perrine v. Christine, 833 S.W.2d 825, 827 (Ky. 1992) (“The circuit court order does not require Patricia to liquidate, it merely concludes—and reasonably so—that she possesses sufficient property to provide for her reasonable needs and to continue the standard of living established during her marriage, all while maintaining an undisturbed investment principal of $533,000.”); In re Marriage of Kerber, 574 N.E.2d 830, 832 (Ill. App. 1991) (“A spouse need not be reduced to poverty before maintenance is appropriate. Further, a spouse is not required to sell off his or her assets or capital in order to maintain the standard of living established during the marriage.”); In re Marriage of Smith, 471 N.E.2d 1008, 1017 (Ill. App. 1984) (“Even where a spouse is awarded sufficient marital property to pay her own fees, the other spouse can be ordered to pay them so that she is not required to deplete her capital assets.”). 12 standard of living enjoyed during the marriage without liquidating marital assets.25 The Family Court has previously followed this rule. 26 In this case the Family Court considered the marital assets awarded to Wife, the couple’s standard of living during the marriage, Wife’s relative economic disadvantage following the divorce, and Husband’s stipulation that he could afford to pay alimony. The court properly exercised its discretion and did not require Wife to exhaust those assets before qualifying as dependent. Husband argues that our decision in Thomas v. Thomas 27 requires that Wife exhaust the substantial marital assets allocated to her in the divorce before she can be considered dependent. In Thomas, the husband earned approximately $60,000 per year, and would be “barely able to cover his own expenses” if required to pay alimony, despite the wife having $629,000 in assets after accounting for a separate 25 See Thomas, 102 A.3d at 1145-46 (“The meaning of dependency must be ‘measured against the standard of living established by the parties during their marriage.’”) (quoting Gregory J. M. v. Carolyn A. M., 442 A.2d 1373, 1375 (Del. 1982)); Kelly v. Kelly, 925 So. 2d 364, 368 (Fla. Dist. Ct. App. 2006) (“A spouse of a relatively long-term marriage is entitled to maintain the style or standard of living enjoyed during marriage if possible. And a spouse is not required to deplete her capital assets to maintain the standard of living she enjoyed during the marriage.”); De Cenzo v. De Cenzo, 433 So. 2d 1316, 1318 (Fla. Dist. Ct. App. 1983) (“[P]ermanent periodic alimony is used to provide the needs and the necessities of life to a former spouse as they have been established by the marriage of the parties. The two primary elements to be considered when determining permanent periodic alimony are the needs of one spouse for the funds and the ability of the other spouse to provide the necessary funds.”). 26 See, e.g., G.W.S. v. J.M.G., 2000 WL 1658414, at  (Del. Fam. Ct. July 20, 2000) (Wife not required to deplete investments to meet recurring monthly expenses when Husband “can well afford to meet his needs and assist Wife with hers.”). 27 Thomas, 102 A.3d at 1148. 13 inheritance. 28 The Family Court found that Wife was dependent, and excluded the approximately $500,000 inheritance from its dependency determination. 29 On appeal we recognized that while an inheritance is excluded from marital property for purposes of property division under § 1513,30 this exclusion did not apply to alimony awards under § 1512. We reversed, and found that the Family Court erred by not considering the wife’s inheritance when determining dependency. 31 Our decision in Thomas is not controlling in this case. In Thomas, the spouse seeking support had independent resources adequate to maintain her lifestyle, while the husband would barely be able to cover his expenses. Here, Wife did not have independent financial resources. Her assets following divorce came from the division of shared marital assets, which neither party would have to liquidate to maintain their affluent lifestyle during marriage. Husband also stipulated that he could afford alimony. 32 The Family Court found that Husband will be able to maintain a comfortable lifestyle and high income, and maintain the assets allocated to him in the divorce. The Family Court also determined that, given the couple’s wealthy standard of living before divorce, and Wife’s relatively 28 Id. 29 Id. at 1145-48. 30 13 Del. C. § 1513(b)(1). 31 Thomas, 102 A.3d at 1147-48. 32 App. to Answering Br. at 15 (Husband’s Resp. to Mot. to Compel) (“[Husband] is not contesting his ability to pay . . . reasonable alimony should the Court find that [Wife] is eligible for the same.”). 14 limited earning capacity after divorce, Wife was at a significant economic deficit compared to Husband. 33 The Family Court applied the required statutory factors before determining dependency, awarding alimony, and fixing the amount. The court did not abuse its discretion when it found Wife dependent and awarded Wife alimony without requiring her to exhaust assets allocated to her in the property division. D. Excluding The New Home Cost From Wife’s Investment Assets Husband argues that the Family Court erred by subtracting the cost to buy a new home from Wife’s assets when it determined which assets Wife could expect to derive income from, and thus how much investment income she could expect to earn when calculating alimony. The parties argue over whether this was equitable. The Family Court has the discretion to formulate an alimony award considering all of the relevant factors, provided it follows a logical deductive process.34 The court decided to make this allowance after reasoned consideration of the parties’ relative resources and needs, and therefore did not abuse its discretion. 33 Wife testified to expenses not covered by alimony including legal fees, college expenses for the children, and out-of-pocket costs for medical care for one of the children. App. to Answering Br. at 173-77, 179, 195-98 (Hr’g Tr., Apr. 16, 2014). The court found that “based upon the parties’ affluent standard of living, the Court finds the case herein is distinguishable from Thomas and Wife does not have sufficient funds to meet her reasonable monthly expenses and is dependent upon Husband for support.” Opinion II at 12. 34 Thomas, 102 A.3d at 1142 (“The Family Court’s rulings will not be disturbed on appeal if . . . its explanations, deductions and inferences are the product of a logical and deductive reasoning process.”). 15 E. The Rate Of Return On Wife’s Investment Assets Husband also argues that the Family Court erred as a matter of law when it found, based on expert testimony, that Wife could reasonably expect a 4.5% annual rate of return from her investment assets. The rate of return affected how much income the court attributed to Wife, and thus affected her alimony. Husband claims that the Family Court arrived at 4.5% by selecting the mid-point between Husband’s expert’s projected rate of investment return and Wife’s expert’s projected safe withdrawal rate. The withdrawal rate is the rate at which Wife could withdraw assets from her investment portfolio without the risk of depleting her principal. Husband argues that the two rates reflect distinct concepts, and the Family Court erred by taking an average of the two percentages. The Family Court “use[d] the middle point of [the experts’] projections.”35 It is not entirely clear how the “middle point” was chosen, but the court appreciated the distinction between rates of return and withdrawal rates. The Family Court recognized that the experts’ “respective analysis was [sic] quite different.”36 When the court discussed rates of return, it clearly identified them as 35 Opinion I at 29-30. 36 Id. at 29. 16 such and discussed what they were. 37 When it discussed withdrawal rates, it did the same. 38 Husband’s expert testified that Wife could expect a cumulative rate of return on her assets of between 6 and 8% per year, and even possibly 10 to 12%. 39 Wife’s expert was unwilling to state with the same level of certainty what Wife could reasonably expect to earn, 40 but Wife’s expert provided projected rates of return for certain specific investments that she would recommend for Wife. These varied, though they were all lower than Husband’s projected cumulative rate. 41 Husband’s expert calculated an average of Wife’s expert’s projected rates, and 37 Id. at 23 (“[Husband’s expert] testified that he believed Wife could earn at minimum a [6%] rate of return on her investments.”) (emphasis added); id. at 26-27 (“[Wife’s expert’s] analysis provided that one and three year return on the Ultra Conservative Growth and Income strategy was 4.13% and 4.19%. The benchmark yield on the portfolio was 1.82% and the risk based return for the strategy since its inception in 2009 was 7.29%. A management fee for the strategy would generally be 1.0%. [Wife’s expert] also included an analysis of the Intermediate Fixed Income Strategy to indicate how the 70% of the assets invested in fixed income securities in the Ultra Conservative Growth and Income Strategy could be expected to perform. The benchmark for returns for 1 and 3 years was .086% and 2.91% respectively and the annualized five year return is 3.96%.”) (emphasis added); id. at 28 (“[Husband’s expert] interprets [Wife’s expert’s] report to suggest an annualized rate of return of approximately 4.311% and a sustainable withdrawal rate of 2.8% annually.”) (emphasis added). 38 Id. at 27 (“[Wife’s expert] also testified as to the rate Wife could safely withdraw from her investments each year while continuing to retain enough principal to grow her assets.”) (emphasis added). 39 App. to Opening Br. at 670 (Husband’s Expert Report). 40 App. to Answering Br. at 124 (Hr’g Tr., Apr. 16, 2014). 41 For example, Wife’s expert noted a .086% return benchmark after one year for her Intermediate Fixed Income Strategy to a 4.19 % annual return for her Ultra Conservative Growth & Income Strategy after three years. App. to Opening Br. at 675 (Wife’s Expert Report). 17 arrived at an annualized aggregate return of 4.3%.42 The experts also seemed to agree that 2.8% per year was a reasonable safe withdrawal rate. 43 The rate of return is a factual determination which this Court will not disturb unless it is clearly wrong or otherwise demonstrates that the Family Court abused its discretion.44 In this case, the Family Court used a 4.5% annual rate of return on investment. This rate was well within the experts’ range, from negligible returns predicted by Wife’s expert for certain investments, to Husband’s expert’s 4.3% aggregate rate of return derived from Wife’s expert’s projections, to Husband’s expert’s own projections of at least a 6% and up to (an improbable) 12% rate of return. The court’s number was thus not clearly wrong and supported by the ranges predicted by the experts. Husband also argues that the court erred in selecting a 4.5% rate of return because the couple had been earning between 5% and 6% rates of return on certain riskier Wells Fargo investments before their divorce, and should have used those in its alimony calculation. But Wife no longer has the security of Husband’s income, and so is likely to be more risk averse than she was during their marriage. 45 As a result, the court did not abuse its discretion in refusing to consider higher-yielding but riskier investments. 42 Id. at 826 (Hr’g Tr., Apr. 15, 2014). 43 Opinion I at 28. 44 Roberts v. Roberts, 19 A.3d 277, 280 (Del. 2011). 45 Opinion I at 24-25 (“[W]omen in Wife’s situation [are] generally very risk [averse] . . . .”). 18 F. The Insurance Policies Husband argues the court erred by requiring him to maintain certain life insurance policies, originated during the marriage, with Wife as beneficiary. He claims that the court did not give sufficient consideration to the present value of Wife’s alimony award or tax consequences when it reasoned that these policies were meant to be guarantees for the alimony award. The relevant statute, 13 Del. C. § 1512(e), expressly authorizes the Family Court to “direct the continued maintenance and beneficiary designations of existing policies insuring the life of either party.” This Court has sustained other orders to maintain insurance policies as security for alimony awards. 46 Requiring the maintenance of life insurance policies was within the court’s discretion. G. Attorney’s Fees In the “Nature and Stage of Proceedings” section of her answering brief, Wife requests that this Court award her fees as she believes Husband’s appeal was meritless and lodged to harass her. Wife did not file a motion or otherwise argue the claim in her briefing. “Although we have authority under Supreme Court Rule 20(f) to award attorneys’ fees in the case of a frivolous appeal, we will not consider an informal request in the absence of a formal motion made and presented 46 See Norris v. Norris, 808 A.2d 758, 761 (Del. 2002); see also Jerry L. C. v. Lucille H. C., 448 A.2d 223, 226 (Del. 1982). 19 in accordance with the Supreme Court Rules.” 47 Accordingly, Wife’s informal request is denied.