An Alimony S.O.S.

Let’s be honest, Minnesota’s spousal maintenance law is a mess.

And not simply some errant untidiness—socks on the floor, dishes in the sink, a yoga mat draped over the radiator (ugh).

A colossal mess.

A vague set of statutory factors made continually worse by a conflicting conglomeration of non-binding decisions handed down regularly from the Court of Appeals.[1]

The result is predictably gruesome for divorcing couples who are left to trying to arrange their lives and financial futures against the backdrop of the every-shifting vagaries of Minnesota’s spousal maintenance law.

It’s even worse, if that’s possible, for public confidence in our system of family laws, which relies in no small part on our ability to provide regular, reliable, and impartial outcomes from case-to-case. Seemingly what our current spousal maintenance law (and case law) is tailor-made not to do.

A History of Not-So-Benign Neglect

At best, Minnesota’s spousal maintenance law has suffered a long history of not-so-benign neglect, both at the hands of our state legislature (which hasn’t amended the substantive portions of the statute since 1985) and our appellate courts.

Just as a point of reference, the Minnesota Court of Appeals last issued a published (i.e. binding) opinion on how the amount and duration of spousal maintenance should be decided over four years ago. See Passolt v. Passolt, 804 N.W.2d 18 (Minn. Ct. App. 2011).

The absence of guidance can’t be chalked up to a lack of opportunities.  A quick online search pulls up no less than 86 unpublished Court of Appeals opinions in the four years since Passolt, and that’s likely an underestimate.

Echoing this almost deafening interpretive silence, the Minnesota Supreme Court has not offered an answer to the question of how much maintenance should be awarded and for how long since 1997.  Dobrin v. Dobrin, 569 N.W.2d 199 (Minn. 1997). [2]

But not for much longer.

Because for the first time in nearly 20 years, a case about establishing spousal maintenance is headed to Minnesota’s highest court.

An Issue Only Lawyers Could Love

On its face, Curtis v. Curtis, which was accepted for review on September 15, 2015, presents issues only a lawyer could love.  As summarized in Wife’s Petition for Review, the high court must decide:

When determining an award of spousal maintenance, may the court consider speculative earnings that may potentially be realized if current financial assets that, by agreement, were awarded to one party were liquidated and reinvested in different financial assets?

Or, to pull from my prior post on this case: can a spousal maintenance recipient be required to reallocate investable assets awarded to her in a divorce in order to achieve a higher rate-of-return thereby reducing (or eliminating) her need for spousal maintenance?

The answer should interest us for any number of reasons, not least of which are several prior opinions from the Court of Appeals that decided the issue in precisely the opposite way. See Schneider v. Nicholls, No. C5-91-832 (Minn. Ct. App. Nov. 26, 1991); Hislop v. Hislop, No. C7-98-144 (Minn. Ct. App. Aug. 18, 1998); Levinson v. Levinson, No. C5-99-1772 (Minn. Ct. App. July 3, 2000).

And while the appropriate rate of return on investable assets is important (yes, I really mean that) the heart of this case isn’t whether Wife should earn 3% or 7%.

Instead, Curtis goes to the heart of why we award spousal maintenance in the first place.

It asks what spouses owe each other at the end of a long-term marriage.

And, perhaps even more importantly, Curtis forces us to confront if and how the law should compensate a spouse at the end of a marriage when his or her investment into the relationship was primarily of the non-monetary, caregiving variety.

How Much is Enough?

The spouses in Curtis were married roughly 23-years, for much of which time Wife stayed home with their two children while Husband ran a successful dental practice.  The parties presumably lived well, but also prudently.  By the time of the divorce they had accumulated over $5 million dollars in assets and Husband earned “ongoing cashflow of $642,213 per year ($53,518 per month).”

By agreement, Wife received the parties’ home as well as investable assets of over $2.2 million, while Husband received his practice, his home, a commercial building, and two vacation properties.[3]

At trial, the parties disputed whether Wife had any need for maintenance given the substantial assets available to her for investment.

Accepting testimony from Husband’s financial expert, the trial judge concluded that Wife’s assets (which during the marriage had been invested for growth and earned very little income) could be “reallocated” to generate income, including capital gains, of 7% annually.

With $149,000 per year in investment income, the trial court found Wife did not need continuing support from Husband, and denied her request for spousal maintenance. Wife objected, arguing the Court’s conclusions would require her to change the character of her assets from a focus on growth to a focus on income while also incurring a substantial tax burden.  The Court was unpersuaded:

[T]he assets awarded to [Wife], specifically her investments, can be shifted to different investments that will provide a higher yield and less growth. This is not an invasion of assets; it is a reallocation that takes into account the changed circumstances of the investor. The value of [Wife’s] principal will not be reduced on a monthly basis to pay for ongoing expenses. Rather, [Wife] will have the same principal (with some tax consequences associated with the reallocation of assets) after the reallocation as before. [Her] theory is that any change in investment is an invasion of the assets awarded to her. Under this theory, [she] could leave the investments in accounts where they are producing just 1.7 percent in income, rather than reinvest them in a manner that will allow her to earn a 7 percent yield, and expect [Husband] to make up the difference indefinitely

The Court of Appeals agreed, albeit with a blistering dissent from Judge Kirk, reasoning that expecting Wife to pursue a different investment strategy couldn’t be equated with a requirement that she “invade the principal of her investments” or liquidate assets. C.f. Bury v. Bury, 416 N.W.2d 133 (Minn. Ct. App. 1987); Lee v. Lee, 775 N.W.2d 631 (Min. 2009).

In other words, $2.1 million is enough.

What is Spousal Maintenance For?

Let’s set aside for a moment the aggressive financial assumptions underlying a 7% rate of return.

Let’s also set aside the Court’s apparent failure to consider that, to keep pace with inflation, Wife’s investments will actually need to do far better than 7%.

Because, at its heart, Curtis isn’t about rates-of-return; it’s about how we appropriately value spouses’ investments in their marital partnership upon divorce.

So, with that in mind, why is $2.1 million enough?

“Well,” the Curtis majority seems to reason, “because spousal maintenance is all about meeting needs. If the spouse requesting maintenance has the ability to meet needs independently (even if she currently is not), then maintenance isn’t appropriate.” See Lyon v. Lyon, 439 N.W.2d 18 (Minn. 1989).

In other words, if Wife could appropriately invest her property and earn sufficient income to maintain herself at the standard of living she enjoyed during the marriage, no further support from Husband is required.

The point being that spousal maintenance is essentially a privatized social safety net:  a means of ensuring that, following divorce, a non-wage-earning spouse or a lower-wage-earning spouse is able to salvage something approaching the marital lifestyle.

Which is why, traditionally, spousal maintenance has been entirely about incomes and budgets. See Maeder v. Maeder, 480 N.W.2d 677 (Minn. Ct. App. 1992). Once your budget is met, no maintenance required, regardless of the other spouse’s income or any contributions that helped create that income. See Lyon v. Lyon, 439 N.W.2d 18 (Minn. 1989).

But if that’s the answer—if all that a denial of spousal maintenance requires is some nearby possible world where property is differently invested to maximize potential income—why stop at guessing at rates of return?

Imagine Wife was awarded a $2.1 million vacation home.  Should she be expected to sell it and invest the proceeds to generate additional income, or rent the property to the same end? Should heirlooms be sold? Jewelry pawned?  Collectibles hawked? How far does a dependent spouse need to go to generate investable cash?

And if the character of assets can be changed to maximize income, why should we maintain a prohibition on formerly dependent spouses liquidating assets to meet needs?

If Wife’s assets, spread over her actuarial life, would be sufficient to support her until death, why shouldn’t she be expected to spend them down to support herself?

Assuming, that is, that spousal maintenance is just a safety net.

How Do You Place a Value on Caregiving?

But while $2.1 million may provide Wife with adequate economic security, it does nothing to compensate her for the 23-years of caregiving that enhanced Husband’s economic prospects while severely limiting her own.

Instead, Husband leaves the marriage not only with half of the property accumulated during the marriage, but with the entire benefit, sown of Wife’s sacrifices, from which Husband will reap many more millions over the next decade.

It’s hardly a secret that caregiving is the most valuable, uncompensated task in the modern economy.[4]  So often we speak of this work as “priceless,” which really only saves us from having to place a price on it, and thus compensate it appropriately.

But as family dynamics change, and caregiving increasingly becomes a conscious choice rather than a gendered-assumption, the law must place some value on both monetary and caregiving contributions if our goal is equity and healthy families.

As Judge Kirk noted in dissent:

When they began this union, wife said, “I will stay at home for the good of our children and family,” and husband said, “I’ll take care of the money.” The contributions of one spouse should not outweigh the contributions of the other when the goal is a balanced and well-functioning family.

Unfortunately, the law has done such an extraordinarily poor job at recognizing and compensating the contributions of a caregiving spouse, that some financial advisors now advise spouses to get a postnup before leaving the workforce to care for children.

Such is the value Minnesota family law places on caregiving: if you choose to devote your life to it, you better watch your back.

More Chances for Review Ahead

Curtis may not be the only opportunity for the Supreme Court to wade into the culturally divisive waters of spousal maintenance.  Just a day after Curtis was accepted for review, a petition was filed in Spolum v. D’Amato. No. A14-1335 (Minn. Ct. App. Aug. 17, 2015)

Though unlike Curtis in many of its particulars, Spolum strikes just as directly at core justifications of spousal maintenance, as the Court of Appeals reversed a trial court’s permanent award of  maintenance following a 10 (or 9 depending who you ask) year marriage.

In reversing both the amount and duration of Wife’s award, the appellate court reasoned that Wife’s economic contributions (and sacrifices) were not substantial enough, nor the marriage long enough, to justify the maintenance awarded.

Never mind that Wife “primarily cared for the parties’ son.”  The Court of Appeals dismissed Wife’s  caregiving contributions in a single sentence (even paraphrasing Minnesota’s statutory factors to including only economic rather caregiving contributions).

Again, such is the value our law places on caregiving

A Cry for Help

Whatever the outcome of Spolum and Curtis, one thing is clear: our spousal maintenance laws cannot continue to limp along based on an out-dated vision of the family, in which “The primary purpose of any alimony or support decree is to provide a substitute for the husband’s duty to support his wife and children.” Bollenbach v. Bollenbach, 175 N.W.2d 148 (Minn. 1970).

Husbands can no longer be reduced to breadwinners and wives to caregivers.  Indeed, even the presence of a husband and a wife can no longer be taken for granted.

And just as we must move beyond the implicitly gendered notions that inform our family laws, we must leave behind the explicitly sexist prejudices that refuse to recognize the value of caregiving both to families and to society more broadly.

We cannot continue to expect spouses to place themselves at economic risk to engage in one of the most important (albeit unpaid) tasks in our society: raising the next generation.

Minnesota’s families, breadwinners and caregivers, first and second-shifters, deserve better than the uncertain and oft litigated status quo.

They deserve a law that is “nimble in adapting to the changing dynamic of the marital partnership in our rapidly evolving society.”

Let’s see if they get it.

Update (9/29/15): The Minnesota State Bar Association’s Family Law Section and the Minnesota Chapter of the American Academy of Matrimonial Lawyers have both filed motions seeking leave to participate as amicus in both Curtis and Spolum. You can read the petition in Curtis here, and in Spolum here.

Notes:

[1] See David Herr & Haley Schaffer, Suggestions from the Practicing Bar: Things Practitioners Wish the Court of Appeals Would Do Differently, 35 Wm. Mitchell L. Rev. 1286 (2008-2009); see also Jenny Mockenhaupt, Comment, Assessing the Non-Publication Practices of the Minnesota Court of Appeals, 19 Wm. Mitchell L. Rev. 787 (1993)

[2] Here I’m ignoring both 2009’s Lee v. Lee, 775 N.W.2d 631 (Minn. 2009) (regarding the consideration of marital and non-marital pension benefits as “income” from which maintenance can be paid upon retirement) and 2008’s Butt v. Schmidt, 747 N.W.2d 566 (Minn. 2008) (regarding the requirements of waivers of the right to modify maintenance) on the theory that case neither really drives at the central question in most maintenance cases: how much and for how long?

[3] There is some suggesting that this may have been an unequal division (57 percent to Wife and 43 percent to Husband) but because the division was the product of a stipulation, it’s somewhat unclear.

[4] See generally, Julie-Anne Stebbins, Family Law—The Rehabilitation Illusion: How Alimony Reform in Massachusetts Fails to Compensate for Caregiving, 36. W. New Eng. L. Rev. 407 (2014)

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