Consideration of Income From Assets in Modifying Alimony

The Massachusetts Appeals Court recently issued another decision interpreting the Alimony Reform Act, which went into effect in 2012. In the March 2, 2021 decision of Dolan v. Dolan, the Appeals Court provides guidance on the meaning of General Law Chapter 208, section 53(c)(1), which states:

(c) When issuing an order for alimony, the court shall exclude from its income calculation:

(1) capital gains income and dividend and interest income which derive from assets equitably divided between the parties under section 34.

In Dolan, the husband sought a downward modification of his obligation to pay alimony to the wife under a 2016 Judgment of Divorce after he sold his business, leaving him with lower earned income. The husband was continuing to receive payments from the sale of the business. He argued that capital gain income from the sale could not be considered when determining his ongoing alimony obligation because the business was an asset assigned to him at the time of the divorce. The wife argued that modification of alimony is a two-step process: the judge must first determine that there has been a material change in circumstances and only after that threshold is met can the judge then calculate a modified alimony award. The Appeals Court agreed with the wife.

In deciding whether someone has met the burden of showing a material change in circumstance required to reduce an existing alimony judgment, the judge must look to the totality of the circumstances, including all income and assets. The Appeals Court reasoned that there is a clear distinction between ordering a party to pay alimony with income flowing from an asset received in the divorce and determining whether a party’s income and assets together demonstrate an ability to continue paying an existing alimony obligation. G.L. c. 208, sec. 53(c)(1) only applies after the judge has first determined that there has been a material change of circumstances. The Appeals Court went on to hold that the trial judge’s decision to grant the husband a reduction in his alimony obligation, but to delay the implementation of that reduction, was not an abuse of discretion. The trial judge found that the husband still had the ability to pay the original alimony amount for five more months because he was continuing to receive payments from the sale of his business.

The Dolan decision tells us that capital gains income can be considered in a modification action where that income gives a payor the ability to continue to pay an existing alimony order – and thus there has been no material change in circumstances. However, if the Court determines that there has been a material change in circumstances based on the totality of the financial circumstances, then in setting a modified amount of alimony, the capital gains income must be excluded.

Am I the only one left scratching my head?

 

Until next time,

Robin