Divorce is a big transition in the lives of many people. So is retirement. A significant number of people entering retirement have to deal with divorce-related financial obligations, including alimony. Whether you are the spouse who’s receiving alimony or the spouse who’s retiring, a knowledgeable Maryland divorce lawyer can help you best protect yourself and your financial needs.
K.R. was one of these retiring Marylanders. He and his wife divorced in 2014 after 39 years of marriage. The spouses worked out a property settlement agreement. With regard to alimony, the agreement said that the husband would pay the wife $10,000 per month. It also said that the alimony obligation would reduce to “36.36% of the husband’s earned income” starting in 2019… unless the alimony obligation was “otherwise terminated or modified by a court.”
In 2020, the husband went back to court to extinguish his alimony obligation. He argued in his motion that he’d retired due to the COVID-19 pandemic and no longer earned any income. The court concluded that, although the husband had no income, he had over $1 million in assets, and refused to terminate alimony, but did reduce the sum from $10,000 per month to $4,000 per month.
In addition to failing to get his alimony obligation terminated, the husband had an additional problem. The parties’ agreement made the automatic reduction provision contingent on no court entering an order of termination or modification of alimony. When the court decided to reduce the husband’s alimony to $4,000 per month, that was an order of modification and it wiped out the automatic reduction provision.
The husband argued in his appeal that the trial court made an impermissible error in refusing to retain the automatic reduction provision even after ordering the downward modification. The appeals court pointed out that, not only did the trial judge not err, it would have been an error if the trial court had preserved the automatic reduction term.
Modifiable Versus Non-Modifiable Terms of Property Settlement Agreements
The law gives contractual parties wide latitude to construct the terms of their agreements. Unless an agreement triggers one or more of a small number of exceptions, the parties are free to write their contractual terms however they want. That includes property settlement agreements between divorcing spouses. In terms of alimony, the law leaves divorcing spouses free to decide if an agreed-upon alimony provision can be modified by a later court ruling (“modifiable”) or not (non-modifiable”).
K.R. and his wife could have written in language making the automatic reduction provision non-modifiable. They did not; rather, the “plain language” of the agreement indicated that the automatic reduction clause was modifiable. As a result, the trial judge “had no choice” but to deny the husband the relief he sought.
Readers can take away several key concepts from this result. One of the biggest is understanding the importance of negotiating and executing a property settlement agreement carefully. Another is understanding the impact of that contract’s terms should you later decide you want to modify some aspect of your divorce outcome, including alimony.
Whether you need to set up a property settlement agreement or need to seek a modification of some part of your divorce — such as alimony — the experienced Maryland family law attorneys at Anthony A. Fatemi, LLC are here to help. We’ve amassed many years of successfully helping spouses around Maryland, and we are eager to help you. Contact us today at 301-519-2801 or via our online form to set up your consultation.