A New Jersey Appeals Court recently ruled that a divorced couple's habit of saving the vast majority of their monthly income is a necessary element in calculating alimony.
The wife, age 48, filed for divorce in 2010. After a 28 day trial, the judge awarded her $7,600 per month in permanent alimony, $5,000 per month in child support, the marital home, mandatory life insurance to be carried by the ex-husband and half their savings of $4.18 million. But in reaching these numbers, the judge refused to consider the wife and husband's saving habit as part of the "marital lifestyle" determination. The Appeals Court that reviewed the case did not agree.
The couple started dating in college, married in 1990 and had three children. During the course of their 20 year marriage, they lived, relative to their income, very frugally. During the last 5 years of marriage the husband earned between $1,087,000 and $2,275,000 as a senior portfolio manager. The wife worked briefly at the start of the marriage, then left the workforce to become a full time homemaker.
They spent $22,900 a month to maintain their lifestyle and saved an additional $67,000 each month. As a result, their savings totaled approximately $4.18 million at the time of the divorce. The family never hired domestic help or used daycare services, only took vacations in the U.S., and established college savings accounts for all three children.
The Appeals Court ruled that if regular saving plays such an important role in a marriage, it should be considered part of the "marital lifestyle." The higher court said that savings is important because it protects against unforeseen "disaster, to make future major acquisitions such as automobiles and appliances and for retirement." There is, the judges said, "no demonstrable difference between one family's habitual use of its income to fund savings and another family's use of its income to regularly purchase luxury cars or enjoy extravagant vacations."
The case was sent back to the trial court judge for reconsideration, and it is highly likely that the ex-wife's alimony reward will increase substantially. Evan Xavier Bakhet is a J.D. Candidate at Rutgers School of Law-Newark with a scheduled graduation date in 2017. He collaborated with me on this blog.