While the issue of savings being a component of alimony has been around for decades, since the Lombardi case in 2016 (which we previously blogged about), the issue of a savings component, especially where parties live reasonably frugally, but save a lot, have become more of a front burner issue.
In Lombardi, the Appellate Division discussed the concept of marital lifestyle and how savings fit into the lifestyle. Specifically, the Court held:
Overall, “[t]he goal of alimony is to assist the supported spouse in achieving a lifestyle ‘reasonably comparable’ to the one enjoyed during the marriage.” Lombardi v. Lombardi, 447 N.J. Super. 26, 37 (App. Div. 2016) (quoting Steneken, 183 N.J. at 299). Establishing the standard of living experienced during the marriage “serves as the touchstone” in the analysis. Crews, 164 N.J. at 16. Marital lifestyle is ascertained by considering “the marital residence, vacation home, cars owned or leased, typical travel and vacations for each year, schools, special lessons, and camps for [the] children, entertainment . . ., household help, and other personal services.” Weishaus v.Weishaus, 360 N.J. Super. 281, 290-91 (App. Div. 2003), rev’d in part on other
grounds, 180 N.J. 131 (2004). A marital lifestyle finding must be based not just on the amounts expended but ultimately what is equitable. Glass v. Glass, 366 N.J. Super. 357, 372 (App. Div. 2004). ….
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“The most ‘appropriate case’ in which to include a savings component is where the parties’ lifestyle included regular savings [b]ecause it is the manner in which the parties use their income that is determinative when establishing a martial lifestyle.” Lombardi, 447 N.J. Super. at 39. The fact that “the payment of the support ultimately is protected by life insurance or other financial tools, does not make the consideration of the savings component any less appropriate.” Ibid. Indeed, “[t]he Supreme Court has recognized the need to consider regular savings in determining a marital lifestyle by including a line item for monthly savings in Schedule C of the case information statement parties must file in family matters.” Id. at 40-41.
Notwithstanding Lombardi this issue still comes up often in high net worth and high income cases, as it did in the unreported (non-precedential) Appellate Division case decided on May 14, 2021, of A.J.V. v. M.M.V. In this case, the trial judge included $5,000 as a savings component in his 11 year limited duration alimony award of $11,500 per month. In addition, the Court awarded the savings component retroactively 52 months representing $260,000 due from the husband to the wife in the judgment of divorce.
In this case, the parties had amassed over $8 million in assets during the marriage. The court found that the husband’s income fluctuated in the last 7 years (2012-2018) between $1,022,923 in the first of the years and $633,606 in the last. The trial judge fixed support using $700,000 in earned income for the husband and approximately $74,000 for the wife based on her earnings history. The parties lived frugally (in fact the judge specifically found that they had a “frugal lifestyle”, vacationed off-season and/or in connection with work trips covered mostly by the husband’s employer. The drove company cars and then Fords because they were able to use the husband’s father’s executive discount. Both parties agreed that savings was a large component of their lifestyle. Even the husband conceded that they saved $12,800 per month in 2012 and $21,250 per month in 2013. The trial judge concluded that the parties’ monthly marital lifestyle was approximately $10,588, and they had an additional monthly savings component of $19,087. Based upon that lifestyle, the trial judge reasoned that “it will not be possible for both parties to maintain the marital lifestyle based upon their combined annual gross income of $776,415.” Taking into account their incomes, need to downsize and income from their equitable distribution, the trial judge concluded that $6,500 per month in alimony as supplemented by the wife’s imputed net income of approximately $4,000 per month “equates to and reasonably supports the prior $10,588 per month” marital lifestyle”
As to the savings component, the judge found that:
… the $5,000 monthly savings component was “reasonable and appropriate based upon the history of the parties’ marriage” during which they saved approximately $19,087 per month. He recognized that “[w]hile 50 percent of the monthly marital savings component would be $9543.50 for each party . . . the savings component must decrease dramatically as a result of [Alan’s] alimony obligation and his having to maintain two households.”
The Appellate Division agreed and affirmed the decision and stated: “In short, we agree with the trial judge and conclude that the $5,000 monthly savings component is reasonable under the circumstances – particularly given the couple’s joint emphasis on regular savings as part of the marital lifestyle.
The Appellate Division also affirmed the Mallamo credit to make up for the the absence of a savings component in the support paid during the pendente lite stage. Mallamo is the case that stands for the proposition that pendente lite support orders are subject to modification at any time prior to entry of final judgment and credits may be awarded to adjust the support paid prior to final judgment. Further,
… When,as here, it is the latter, a judge may consider awarding the supported spouse a credit to equalize the fact that the supported spouse was short-changed during the pendente lite stage …
This decision reeks of equity and justice – something that is often elusive in litigated cases. Moreover, when cases drag on, it is often very easy to sweep credits under the rug. In fact, some people use that as a strategy, knowing that the cost of a trial may exceed the amount at issue. When here, there was a small pendente lite aware yet the income remained substantial, a windfall on the part of the husband was a possible outcome that the court corrected by this retroactive adjustment.
The case was also interesting for how the court handled deferred compensation that was granted pre-complaint but vested post-complaint. Stay tuned for another post on that issue.