Recently in Alimony Modification Category


Rehabilitative Alimony May Be Modified Post-Divorce if Economic Rehabilitation Not Feasible

September 4, 2013 by The McKellar Law Firm, PLLC

In the case titled Owens v. Owens, No. 2012-01186-COA-R3-CV 2013 Slip Copy, WL 3964793 (Tenn. Ct. App. July 30, 2013) Knoxville divorce attorneys learn when it is appropriate for a rehabilitative alimony award to be modified to alimony in futuro.

Facts: Husband and Wife were married 25 years and divorced in 2004. As part of the divorce, Wife was awarded rehabilitative alimony. An appeal of the trial court's decision resulted in a change to the original division of marital property and increased the amount and duration of the alimony through November 2012.

In 2009, Wife filed a petition requesting the court to increase her alimony or change the award to alimony in futuro. To support her argument, Wife asserted she was unable to support herself selling real estate or teaching yoga classes. She averred she had to increase her credit card debt and borrow money from family in order to pay her living expenses while Husband had fewer expenses and a more disposable income.

A trial was held on Wife's petition in 2011. At the time, Wife was 62 years old. Wife provided proof to the court of her attempts to support herself through selling real estate and teaching yoga. She provided evidence of real estate classes and renovation bills to turn her pool house into a yoga studio. When this did not work, Wife rented the pool house for $700 a month. However, her mother became ill and was unable to pay for in home care, so Wife let the tenant go to allow her mother to move in so she could care for her. As further proof of her financial dilemma, Wife introduced a statement of monthly income and expenses an increase from the statement included with her original petition of more than $3,000 per month. These expenses did not include a mortgage or car payment as both were already paid in full.

In 2012 the trial court issued its Memorandum and Order denying Wife the relief she sought citing that she did not meet the preponderance of evidence standard. It further stated that Wife did not exhaust all reasonable efforts to support herself. However, the trial court did find Wife to have a need for continued alimony and kept her current award in effect. Wife appealed this decision.

Analysis & Conclusion: In the case a bar, Wife sought to extend her rehabilitative alimony or convert it to alimony in futuro. Tenn. Code Ann. § 36-5-121(c)(2) states that the court has discretion to control the duration, increase, decrease, termination, modification, or extension of rehabilitative alimony. It further states that the burden of proving reasonable efforts lies on the receiving party in order to show the court a need for an extension or increase of same.

The Tennessee Supreme Court has added that once an award of alimony has been made, it can be modified if it is shown to the court that the receiving party's prospects for rehabilitation have materially changed. If it is deemed by the court that the party cannot feasibly rehabilitate, the trial court can convert the alimony award to alimony in futuro. The standard for rehabilitation, as provided by Tennessee statute, requires the disadvantaged party, through reasonable efforts, to reach an earning capacity that permits the party to enjoy a reasonably comparable standard of living to that which was enjoyed when married. The Tennessee Supreme Court has also explained that a material change in circumstances occurs when an unanticipated change happens after the initial award has been granted by the court.
In this case, the trial court found that Wife had a continuing need for alimony and limited job skills. The appellate court agreed with these findings. At trial, it was learned that Husband earned a significant income and had the likelihood of continuing to earn same. Wife had not worked outside the home since 1980.

In considering these factors, the appellate court found Wife to have made reasonable efforts to rehabilitate by selling real estate, but, due to the market, she was unable to do so. It also considered her age and skill set and found that she did not have the capacity to earn a living comparable to that which she enjoyed when married. Therefore, it was determined that the modification from rehabilitative alimony to alimony in futuro was appropriate and within the court's discretion.

However, when looking at Wife's assets, the appellate court saw that Wife was awarded a partial interest in a real estate company that had the potential to produce rental income. It was also found that when Wife's mother moved in with her, Wife could then rent her mother's home for additional income.

For these reasons the appellate court modified the alimony award to alimony in futuro, and modified the amount from $3,000 per month to $2,000 per month.


Taking "Loans" While Self-Employed Will Be Viewed as Income (and Will Not Lower Your Alimony in Tennessee)

In the case titled Harkleroad v. Harkleroad, No. E2012-01804-COA-R3-CV, 2013 Tenn. App., WL 1933024 (Tenn. Ct. App. May 10, 2013) Knoxville divorce attorneys learn that not all income changes qualifies as a "material change in circumstance" in order to modify alimony.

Facts: Husband and Wife filed for divorce after forty (40) years of marriage. At the time of the divorce, the children of the marriage were over the age of eighteen (18) years. Wife alleged adultery while Husband alleged Wife was "verbally and mentally cruel to him." Wife requested spousal support. The court found her earning potential to be $14,000-$16,000 per year; Husband was assessed an earning potential of $60,000 per year. The court divided the martial estate and ordered Husband to pay wife alimony in futuro in the amount of $1,300 per month and to provide Wife's medical insurance. The court stated Wife needed the spousal support to make the mortgage payment on the marital home which she kept as part of the divorce.

In 2012 Husband petitioned to modify the alimony and medical insurance obligation arguing a "material change in circumstances." Husband alleged he had not received a paycheck from his insurance company (of which he was the sole stockholder) since 2009 and was solely living off his Social Security income. He averred that Wife never got a job as the lower court ordered, she refinanced the home prolonging the payments, and she now received Social Security income.

Income statements were submitted by both parties. The Husband's showed a loss of $1,574 per month; Wife's showed a net income of $149.19 per month. Husband testified that he received $1,660 per month in Social Security benefits and retirement income. He claimed he had not received income from his insurance business since 2009, however; he conceded that the business covered its expenses and provided him with personal loans over the years with the most recent loan being three (3) years after his divorce from Wife in the amount of $106,000. He averred that this loan was used to pay Wife's medical insurance premiums and alimony payments. Husband agreed that his business' appraisal value was $268,000, but he argued that he owed the company $260,000. Husband also admitted to obtaining personal loans from friends and family in the amount of $34,000.

Husband stated that the purpose of the alimony in futuro was to assist Wife in paying the mortgage on the marital home which was awarded to her in the divorce and that the mortgage should have been paid off in 2010, but Wife refinanced the home which extended the payment for another 30 year mortgage term. Wife rebutted that she was not working at the time she refinanced the home, and the alimony payments were not enough to cover the mortgage and her living expenses. She averred that the refinance of the home lowered her mortgage payment to $490 which allowed her to remain in the home.

Wife stated that she had been employed as a substitute teacher but had injured her back rendering her unable to work. In response to her costly medical insurance premiums, Wife explained that she had to have several operations on her back. Wife testified to the court that she was eligible and intended to apply for Medicare which would reduce the cost of her medical insurance premium to $98 per month.

In regards to Husband's income, the lower court found that the loans he received from his business were income as was his Social Security benefits. Therefore, it reasoned, Husband had the ability to pay the alimony in futuro in the amount of $1,300 per month and further ordered him to pay an additional $400 per month to pay his arrearage of same. It was also ordered that Husband pay Wife's Medicare premium in the amount of $98. Husband filed an appeal.

Analysis: On appeal Husband asserted that his entire estate was dissipated by the alimony in futuro and medical insurance premiums awarded to Wife in the divorce. He further asserted he had not received any income from his business since 2009. Wife argued that Husband did receive income from his business through loans instead of a traditional salary; therefore, the lower court's opinion should be affirmed.

The appellate court found that Husband reported an income of $20,000 from his company at the time of the divorce. That income would amount to approximately $1,666 per month. The court found that while Husband no longer received said income his Social Security benefits were almost exactly the same amount, therefore; his income had not drastically changed. It further averred Husband chose to take loans against his company instead of a salary, so, while he did not have a salary, he did have income from the business. In regards to Wife, the appellate court found her ability to work had drastically declined since the divorce was finalized and her Social Security benefits were "not commensurate with her imputed income at the time of the divorce."

Conclusion: The appellate court found the lower court did not abuse its discretion in finding that Husband did not prove a "material change in circumstance" in order to dictate a modification of the alimony in futuro obligation. The lower court's opinion was affirmed.


Modification of Alimony Requires Provable, Unanticipated Change of Circumstances

August 8, 2012 by The McKellar Law Firm, PLLC

The case of Hand v. Hand, No. M2010-02404-COA-R3-CV (Tenn. Ct. App. July 31, 2012) discusses modification of alimony post-divorce. This case shows Tennessee divorce attorneys that proving inability to pay by the obligor spouse and reduced need of the recipient spouse can sometimes be very difficult.

Facts: The parties divorced in 1990 with Husband keeping his business and paying Wife $13,000 from the marital estate. The parties then remarried prior to dividing any of the assets per the divorce. They remained married the second time for 14 years. The trial court ordered that the provisions of the first divorce decree were to be followed along with the following new obligations: a joint bank account with $75,000 was divided equally; Husband was ordered to pay $1,200 per month in alimony to Wife until her death, remarriage, or future order of the court; Husband was required to pay for Wife's medical insurance for 18 months; Husband was required to carry a life insurance policy for the term of the alimony; the marital home was awarded to Wife and each party was required to pay ½ the mortgage each month, with Husband's ½ obligation to continue to be paid to Wife even if Wife sold the house.

In 2009, Husband filed to have his alimony lowered or terminated based upon an "unforeseeable material and substantial change of circumstances" involving his ability to pay (lower income), Wife moving in with her boyfriend, and Wife's conveyance of the marital residence to her son as a gift. Wife filed to increase the alimony due to her worsened physical ailments, increased medication costs and lack of insurance. After a hearing, the trial court found: Husband's testimony about his lowered income was not credible, as he was a sole proprietor and self-employed; that Wife was a credible witness; that Husband had not proved Wife lived with her boyfriend; that Wife still needed alimony as previously ordered, denying Husband's request; finally, the court determined the Wife's transfer of the home to her son was a "sale" under the decree and Husband had to continue paying; finally, the court denied Wife's request for an alimony increase.

The Appeals Court found that Husband's business records did not support his testimony and that the trial court correctly concluded he had not experienced a decrease in income nor had an inability pay. Regarding Wife's alleged live-in boyfriend, T.C.A. §36-5-121(f)(2)(B) creates a rebuttable presumption that if an alimony recipient lives with a third party, that third party is contributing to the recipient's support, reducing their need for alimony or that the third party is receiving support from the alimony recipient, and therefore the need has gone away. Here, court found the Wife was not cohabitating with her paramour and therefore no reduction was proper based upon this argument.
Husband next claimed that even without a paramour, Wife's need for alimony had decreased due to her reduced debt burden (such as the home mortgage, conveyed to her son). However, Wife testified that she conveyed the property in order to avoid foreclosure while she was unemployed. Further, she stated she currently still pays $400 in rent each month, only $100 less than her half of the mortgage obligation. Wife also indicated that she pays utilities, phone, groceries, credit cards, vehicle maintenance and gas and $1,200 per month on prescription medication due to her diabetes and lack of insurance, causing her to borrow money from friends and family. Husband failed to show and evidence to contradict this testimony. Accordingly, Husband's petition for downward modification was denied.

Husband next argued that Wife's conveyance of the marital residence relieved him of his obligation to pay one-half of the mortgage each month ($500). The judgment of divorce stated that if Wife desired to sell or not live in the residence, Husband shall continue to pay the $500 until half of the amount owed on the mortgage is paid back to the Wife, determined as of the date that Wife vacates. Further, Wife did receive consideration for the sale: she retained a life estate while the son would pay her half of the mortgage debt each month. Therefore, Husband's obligation to pay $500 per month until half the debt is paid back to Wife continues and this request was properly denied by the trial court.