Alimony Does Not Necessarily End upon Retirement of The Wage Earner
Feb. 16, 2016
A common misconception is that alimony will automatically end when the person paying the alimony retires. Unless the settlement agreement specifically provides for alimony termination upon retirement, recent cases in hold that alimony will continue, although perhaps at a reduced amount.
In two Maryland cases, Ridgeway v. Ridgeway, 171 Md. App. 373; 910 A.2d 503 (2006) and Stewart v. Stewart, No. 2601, opinion filed Sept. 2015 (Md. App. Sept. 2013 term (unreported)), the trial and appellate courts reduced but did not terminate alimony after the former spouse/former wage earner (the “payor”) retired. In Ridgeway, after retirement the alimony recipient continued working and had a greater income than the payor after he retired. Furthermore, at the time of the settlement the parties had equally divided the marital assets such as the equity in the marital home and marital portions of the retirement accounts (e.g. 401(k), IRA, TSP, pensions) so that the alimony recipient and payor had an equal amount of marital assets at the time of divorce.
So why did the courts reduce but not terminate alimony? In those cases, the Courts looked at the expenses of the recipient as the determining factor. Although the payor’s income went down the recipient’s expenses did not. Therefore the Courts ordered the payor to continue alimony payments equal to the difference between amount the recipient received from the pension payment and what she would have received from the alimony award.
It is important to note that in both cases the payor stopped paying alimony when he retired, incorrectly expecting that his alimony payment would terminate. In Ridgeway, the Court specifically rejected the payor’s argument that “the retirement payment replaces the alimony payment, warranting termination of alimony.” In both cases, the payor was found in contempt and had to pay the recipient’s attorneys fees and alimony arrears.
Ominously for those with existing settlement agreements, the Courts hold that unless the agreement specifically provided for termination of alimony upon retirement, then there is no right to re-open that issue later. Rather, the presumption was that indefinite alimony meant indefinite alimony, and only the amount, not duration, would be modified.
If you are mediating a marital settlement agreement and want alimony to terminate upon retirement of the payor, then the Agreement must explicitly say that.
If you do not have an alimony termination clause in your mediated settlement agreement and want to seek modification of an alimony award, file early (when you have a date certain for retirement) but plan on paying the full amount of the alimony until the Court has decided.
If you stop paying alimony before the Court modifies it you may be found in contempt and have to pay the other side’s attorney’s fees.