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Retirement Income and Spousal Support – In re Marriage of McKarus

When spouses divorce in California, the court that grants the legal split often orders one spouse to pay the other what the law refers to as alimony or spousal support. The idea is to help the spouse receiving the payments to maintain something similar to the living standard that the couple enjoyed during the marriage. How much the payments might be and how long they might last vary widely based on the circumstances of the case. As a recent case out of California’s Second District Court of Appeals shows, judges have the authority to consider a full range of investment and retirement income in determining a spouse’s ability and obligation to make support payments.

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Husband and Wife separated in 2004, following 16 years of marriage in which they had two kids. Husband, who was 59 years old at the time, was retired and receiving monthly annuity payments from two investment and retirement accounts. Wife – 44 years old – had a high school degree but had not worked outside the family home since the couple married. A trial judge in 2006 ordered Husband to pay Wife $3,500 per month in spousal support. The judge imputed more than $10,000 to Husband as part of his monthly income based on what he would be receiving from the retirement funds had he not deferred the compensation.

Husband went back to court seven years later and asked that the spousal support obligation be terminated immediately. The trial court denied the request, but it did reduce the monthly payments to $2,000 and ordered that the payments be terminated altogether in December 2015. The trial judge concluded that Husband’s monthly income was more than $17,800. That figure, according to the court, included the monthly payments he received from two annuities. The annuities paid him $10,350 in interest income and $4,900 in principal payments.

Husband appealed, arguing that the $4,900 in principal payments shouldn’t be counted as income because he could have protected it by investing the money elsewhere. By putting it into the retirement account, he said he maximized the interest income of which Wife was entitled to a piece.

Affirming the decision, the Second District said the lower court didn’t abuse its discretion in considering principal payments as part of Husband’s income for support purposes. “A court may consider investment income in assessing a party’s ability to pay support,” the Court said. “Trial courts have broad discretion to include, exclude, or partially include retirement plan contributions, earnings, and accruals that are not withdrawn as income available for determining the amount to be ordered for spousal support.” That discretion is only limited in cases when a spouse hasn’t yet reached retirement age and the withdrawal of retirement funds would be subject to tax penalties, the Court said.

If you’re considering divorce or are grappling with spousal support and other issues in California, contact San Jose spousal support lawyer John S. Yohanan. With more than 30 years of experience, Mr. Yohanan is an accomplished family law attorney who has helped a number of clients resolve a wide variety of marital disputes. Call our office at (408) 297-0700 or contact us online to schedule a consultation.

Related blog posts:

Getting Divorced in California? Another Reason Why You Need a Lawyer – In re Marriage of Hendrix

‘Long-Term’ Marriage, Spousal Support in California – In re Marriage of Rush

California Court Enforces 20-Year-Old Marriage Settlement Agreement against Reluctant Husband – In re Marriage of Montague