Appellate Division Confirms That a Marital Savings Component Can Be Applied Retroactively When Addressing Support
A recently unpublished Appellate Division decision, A.J.V. v. M.M.V, touches upon the intricacies of alimony, both during the pre-judgment, litigation phase (also known as pendente lite support or interim support) and the final alimony award.
Navigating alimony cases in New Jersey has always been a nuanced journey. Most clients commencing divorce proceedings are nearly always focused on the end result. For those people who know they will be paying or receiving alimony, the question is always the same on both sides of the table – namely, “how much and for how long.” The question, of course, requires the lawyer’s most coveted response – namely, “it depends.” A much longer blog is required to fully explain that answer. In short, trial courts are afforded a great deal of discretion in establishing both the amount and duration of alimony under the New Jersey Alimony Statute, N.J.S.A. 2A:34-23(b), which consists of fourteen (14) statutory factors and results in significant variation.
The recent unpublished decision, A.J.V. v. M.M.V., underscores two issues relating to alimony that many people do not think about (at least initially), which only serve to demonstrate the significant discretion and variation in establishing alimony. The first issue, common to most contested divorce cases in which alimony is appropriate, is the establishment (and modification) of interim support to be paid to the supported spouse during the pre-judgment/litigation stage. This is called pendente lite support or interim support. The second issue is that alimony, the general purpose of which is to assist the supported spouse achieve a lifestyle comparable to the one enjoyed during the marriage (with neither party having a greater entitlement to that standard than the other), requires a court to consider the parties’ regular savings habits during the marriage as part of establishing the lifestyle. These two issues, pendente lite support and the consideration of a regular savings component in establishing a final alimony award, intersected in the A.J.V. v. M.M.V decision.
First, as to pendente lite support, trial courts are authorized to award support to the supported spouse during the litigation phase, which in a contested divorce case can last for a long time. For instance, in A.J.V. v. M.M.V., the litigation appears to have lasted over five years. “The general purpose of pendente lite support is to maintain the parties in the same or similar situation they were in prior to the inception of the litigation.” Rose v. Csapo, 359 N.J. Super. 53, 61 (Ch. Div. 2002). Notably, the general purpose of pendente lite support is not the same thing as the general purpose of alimony itself, which, as set forth above, is to maintain a comparable standard of living enjoyed during the marriage. As such, pendente lite support is by nature a temporary solution and is awarded without an evidentiary hearing after a Court “is presented reams of conflicting and, at times, incomplete information concerning the income, assets, and lifestyles of the litigants.” Mallamo v. Mallamo, 280 N.J. Super. 8, 16 (App. Div. 2005). As such, pendente lite support does not always reflect a reasonably complete picture of the financial status of the parties which is why Courts can and often do modify interim support orders upon final judgment after a full investigation of the case. Id. at 11-12.
Second, baked into the quantification and qualification of the marital “standard of living” which is central to the alimony analysis, is consideration of a savings component. That is to say, to the extent that the marital lifestyle included a sustained regular savings component, same should be included in the final alimony analysis. Lombardi v. Lombardi, 447 N.J. Super. 26, 39 (App. Div. 2016).
In the case of A.J.V. v. M.M.V, both the Husband and Wife acknowledged that they amassed substantial assets during their marriage because they placed a priority on savings. Indeed, they lived a deliberately “frugal lifestyle” in which the Wife “sewed the drapes for their living room and dining room, purchased clothing for herself at the Salvation Army….and made use of hand-me-down clothing” for their children. They also did not spend funds on domestic help to clean their house nor did they spend funds on childcare. The court determined that the parties saved on average approximately $19,087 per month during their marriage in addition to their marital lifestyle which was approximately $10,588 per month.
The trial court then concluded it would not be possible to maintain the marital lifestyle based upon the parties combined annual gross income. Notably, the trial court, in determining alimony, found that the supporting spouse (in this matter, the Husband) earned approximately $700,000 per year in the years preceding the parties’ divorce and the supported spouse (the Wife) was capable of earning approximately $76,000 per year based on her prior earnings history.
The trial court reasoned that the savings component “must decease dramatically as a result of the Husband’s alimony obligation and his having to maintain two households,” post-divorce. In the ultimate analysis, the trial court ordered the Husband to pay $11,500 per month in limited duration alimony, of which $5,000 per month was designated as a savings component. In reaching this decision, the trial court “concluded that $6,500 per month in alimony as supplemented by [Wife’s] imputed net income of approximately $4,000 per month ‘equates to and reasonably supports” the marital lifestyle, exclusive of savings, of $10,588 per month. The trial court then “found that the $5,000 monthly savings component was ‘reasonable and appropriate based upon the history of the parties’ marriage.’”
On appeal, the Appellate Division agreed with the trial court and concluded that the $5,000 monthly savings component was reasonable under the circumstances – “particularly given the couple’s joint emphasis on regular savings as part of the marital lifestyle.”
Critical to this case, the trial court also awarded the Wife a credit of $5,000 per month “to make up for the absence of a savings component in the support [Husband] paid during the pendente lite stage.” Specifically, the trial court found that Husband’s payment of Wife’s shelter and transportation expenses in addition to the $4,500 per month in direct support he paid to the Wife, for a total monthly pendente lite support payment of approximately $9,202 per month, “did provide [the Wife] ‘with any monthly savings component.’” Conversely, the trial court found that the Husband was able “during this same time…to continue saving whatever was left over” after he paid the pendente lite support each month. As such, the trial court determined that the Husband owed the Wife $5,000 per month for the pendente lite phase, specifically from November 2014 through March 2019, which amounted to $260,000.00 (not an insignificant sum).
The Appellate Division affirmed the trial court’s decision, confirming that a savings component was appropriate during the pendente lite period and can be applied retroactively.
Interestingly, the Appellate Division was not offended by the Wife receiving pendente lite support that exceeded the final alimony award after the trial court’s application of the $5,000 per month savings credit (also known as a Mallamo credit). Specifically, as set forth above, the Husband was paying pendente lite support of approximately $9,202 per month (inclusive of paying the Wife’s shelter and transportation expenses). After the savings credit was applied, the Husband was essentially paying or otherwise contributing the sum of $14,202 per month in pendente lite support to the Wife, which is $2,702 per month more than the final alimony award of $11,500 per month (inclusive of the $5,000 savings component).
It appears the trial court did not impute an income to the Wife in determining the final pendente lite support award and credit; yet did apply same in determining the final alimony award.
This decision is notable in its application of the savings component retroactively under Mallamo as case law addressing savings components as part of the marital lifestyle continues to develop post-Lombardi. It is important, as a result, that to the extent possible the savings component be quantified when presenting a recitation of the marital lifestyle to the court for consideration, whether in the form of a Case Information Statement, forensic accounting analysis or otherwise.