Alimony outcomes in divorce cases are hard to predict. In high incomes cases, they are even more difficult. This is in part because most high income/high asset cases are resolved through settlement processes rather than litigation. However, a 2014 Maryland divorce case, Reynolds v. Reynolds, gives some insight into how one trial judge in a high income case dealt with the alimony issue, and how the appellate court reviewed that decision on appeal.
Background Facts. The parties were married for 21 years. The husband earned $800,000 annually, while the wife stopped working during her pregnancy with the parties’ twins and has been a homemaker ever since. The trial court awarded indefinite monthly alimony to the wife in the amount of $14,194.
The Importance of the Parties’ Standard of Living During the Marriage. Maryland law makes clear that where there are sufficient resources, the standard of living which was established during the marriage is an important factor in deciding what current expenses of the wife are “reasonably necessary” to support an alimony award. In this case, the Husband’s income, after subtracting his own reasonable expenses, left him with “a surplus of monthly income large enough to pay for the present alimony award twice-over.” And the court found that the wife’s expenses for discretionary items such as a large home, housekeeping services, therapy, vacations, and savings for retirement were reasonable when compared with expenditures in the same categories during the marriage.
The Wife’s Detailed Financial Statement. Both the trial court’s and the appellate court’s findings make clear that the wife’s financial statement was a critical document in her divorce case. The line items from the wife’s financial statement for various categories of expenses are referenced throughout the opinion.
In preparing a financial statement, while some expenses are easy to calculate (i.e., the monthly gas bill), others require a well-thought out theoretical basis. For example, the court took exception to using the wife’s expenditures during 2011 for the categories of home repairs, home improvement, and furnishings to justify her expenditures in those categories extending many years into the future, finding her numbers for these categories to be “inflated.”
A key take-away from this case is that in an alimony case, the financial statement of the economically-dependent spouse merits detailed analysis and careful preparation.
Alimony as a Percentage of the Husband’s Income. The court awarded to the wife $14,149 per month of alimony, which, together with her investment income, gave her income which was approximately 29% of the Husband’s gross income. While each alimony case is unique, and there are many relevant considerations, this percentage approach represents one way of looking at an alimony award.
Wife’s Earning Capacity. Once the wife showed her monthly expenses and her inability to pay them, it became the husband’s burden to prove her employability and potential salary. Said another way, if the husband had met his burden of proving that the wife was employable, and capable of earning a particular salary, the court could have used that evidence to reduce the wife’s alimony after giving her a suitable period of time to gain employment.
The appellate court upheld the trial court’s decision in every respect.
Of course, every case is different and will be judged on its unique facts, and the court has a great deal of discretion in alimony cases. This case highlights some important aspects of a Maryland’s court’s decision-making in alimony cases – the standard of living during the marriage, the wife’s financial statement, and the relative financial situations of the parties after the alimony award has been made.