Monied spouse income: $150,000; less-monied spouse income: $50,000
Under Existing Law:
$150,000 X .30 = $45,000
$50,000 X .20 = $10,000
$45,000 — $10,000 = $35,000/yr.
$150,000 + $50,000 = $200,000
$200,000 X .40 = $80,000
$80,000 — $50,000 = $30,000/yr.
Lower figure is annual maintenance: $30,000/yr.
Under New Law:
$150,000 X .20 = $30,000
$50,000 X .25 = $12,500
$30,000 — $12,500 = $17,500/yr.
(same as above) $30,000/yr.
Lower figure is annual maintenance: $17,500/yr.
Clearly, the new law will provide a significant break for the non-custodial parent. Using this example, and figured on a monthly basis, the savings is over $1,000 per month in reduced maintenance.
A further benefit to the non-custodial monied spouse comes indirectly in the calculation of child support. The new law provides that maintenance is to be calculated before determining child support, and that the amount of maintenance to be paid is subtracted from the payor’s income before considering child support. At least in the calculation of child support in a temporary award, this is a huge departure from existing law, where the courts are directed to use the income reported in the previous tax year, which, in theory, cannot include a deduction for maintenance because the obligation did not exist then. Under the new law, if the court is using the Child Support Standards Act to calculate child support (in a temporary award this is not always the case), the reduction in income used in the formula to calculate support means a lower child support award.
In addition to changes in the way that maintenance is calculated, the amendments provide suggested time periods for the duration of the final maintenance award. For marriages of 0 to 15 years, maintenance would be awarded for 15% to 30% of the length of the marriage. For marriages of more than 15 years, and up to 20 years, maintenance would be 30% to 40% of the marriage’s length. Finally, for marriages longer than 20 years, maintenance would be 35% to 50% of the marriage’s length.
This will be a big change in the law. There is currently no statute that directs maintenance duration. Case law from the appellate courts has not been much help either. Only if the trial court has “abused its discretion” in setting the duration of an award will an appellate court step in to change the result at trial. And, when it does, the results are often inconsistent from case to case. Now, with guidelines for duration of maintenance being put in place, the results after trial will be more consistent. Again, as with the formula for maintenance, consistency means predictability, and more cases will settle as a result.
A long-awaited change to the law included in the amendment is the elimination of enhanced earning capacity as a separate asset to be equitably distributed. Currently, under existing law, if a spouse has obtained a college degree or professional license during the marriage, the court will usually give some of the value of that degree or license to the other spouse. Value is established using an actuary, who provides a report showing the difference between the pre-degree/license income and the post-degree/license income, multiplied by the remaining working years in the degree-holding spouse’s life up to retirement age, with discounting for present value, and risks of attrition and mortality. Even with discounting, values for professional degrees and licenses tend to be large, and can easily hit six figures.
Many in the matrimonial law community have been unhappy with enhanced earning capacity, and will not be sorry to see it go. It strikes many as arbitrary and unfair. Although the new law specifically eliminates enhanced earning capacity as a separate asset to be distributed, it leaves the door open for the court to “consider” the contributions of the non-degree holding spouse in making an equitable distribution of assets generally. What this will mean in practice, is anyone’s guess.
The effective date of the new statutory amendment is 120 days after the governor signs the bill into law, with the exception that the provisions regarding temporary maintenance will go into effect 30 days after the bill is signed. Cases that have already been commenced prior to the effective date will not be subject to the revised statute. During this period of waiting for the statute to take effect, those considering starting a divorce would be wise to consult with an attorney to review their situation carefully. For some, such as non-custodial monied spouses, waiting for the new law might be best. For others, the opposite may be true. Strategic planning in advance of any litigation has always been important, but now more than ever.