Question: My wife and I divorced several years ago after a very long marriage. Over the years, I have paid both child support and spousal support. Our children are all adults, and my ex-wife has a job, where she is still working. I am not sure exactly how much money she makes. I retired this year at age 65. I have been offered the opportunity to do some consulting work for a friend, but that would only be on a part-time basis, as needed.
As part of the divorce, my wife took her portion of my retirement. It doesn’t seem fair that I would have to continue to pay her from assets that we already divided in the divorce. Isn’t that double-dipping? Will my ex-wife be able to make a claim to take part of my retirement, or is that now off limits?
Answer: The legal issue you raise involves the intersection of two issues in divorce proceedings, spousal support and division of community property. When you divorced, you and your spouse were each entitled to one-half of the community property, which included your retirement accounts. Retirement accounts can include both “defined contribution accounts,” accounts that have an actual balance (IRA, 401k, or 403(b) accounts) and “defined benefit accounts” such as pensions.
Although the issues are all addressed at the time of the divorce and there is some overlap, the questions regarding property division and spousal support are addressed separately. Community property is divided with one-half portion to each party. Spousal support is ordered, or agreed on, based on income available from the supporting spouse’s income and what would meet the supported spouse’s relative needs based on the marital standard of living.
With your retirement, you will likely need to file a motion in court to modify your spousal support based on a change in circumstances. You will be asserting that your income has declined since you are retired. Your income is no longer from earnings at work but rather your retirement income and any money you receive from Social Security.
If you choose to work in retirement, the court can look to that income in making or modifying an order. In other words, you may want to reconsider your consulting opportunities for the moment. If the consulting income supplements your retirement income to the point where your overall gross income has not changed, the court may be less inclined to modify the order the way you want.
The main question will be what portion of your retirement income will be considered “income” for the purposes of spousal support. With an IRA, for example, you aren’t so much receiving income as drawing down on a combination of investment principal and interest income. Your point is well taken that the investment principal was already divided, and you should not be required to pay her a portion of what she already received. Indeed, courts have held that for the purposes of support, only the investment income should be considered, not investment principal.
But if you are drawing on a defined benefit pension, the courts have not declared that “off limits” for the purposes of support. Even where a spouse has received one-half of the community property pension benefit, certain courts have condoned the practice of looking to that income for the purposes of spousal support. This may appear to be at odds with its rule about not looking to investment principal, but the courts are required to review each case on its own facts. Assuming that your ex-spouse can draw on a pension benefit and receive roughly the same amount as you do, this may not be much of an issue. But if your pension benefit is greater than hers, the court may take that into consideration.
Retirement comes with its own anxieties, and you are right to be concerned about your financial obligations. Your current problem demonstrates why it is a good idea during the divorce proceedings to try to negotiate a termination of spousal support when the supporting party is able to retire. You should seek the help of a family law attorney in addressing this issue as it can get complicated quickly.
Preston Morgan is a partner at Kopper, Morgan & Dietrich, a Davis law firm providing family law, estate planning and trust litigation representation. His column is published every other week in the Davis Enterprise. To pose a question to Preston Morgan, contact him at https://kopperlaw.com.
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