RETIREMENT FACTORS: A PRACTITIONER’S CHECKLIST

This year, the baby boomers born in 1940 will be turning 60, and, over the next five years, millions more people will be reaching retirement age. Given this actuarial and unavoidable reality, matrimonial courts all over the United States are going to be faced with increasing numbers of post-divorce applications, as litigants approach or actually reach retirement and seek a reduction or modification of their support payments to their former spouses.

Family lawyers will be called upon to bring or to defend motions accordingly. In addition, even without regard to actual litigation, matrimonial practitioners must anticipate the possibility of future retirement, and draft appropriate language accordingly into their Property Settlement Agreements.

The following checklist is intended to assist in litigating or drafting possible retirement issues.

1. How old is the retiring party ? Given the comparative recent increases in wealth and asset availability, more people have begun taking “early” retirement, sometimes at an age as early as 55, or even earlier. After age 59 ½, the 10% “early withdrawal” IRA excise penalty is no longer be imposed. At age 62, a retiree may begin taking the first level of federal Social Security benefits. At age 65, the higher level of Social Security retirement benefits may be elected. Moreover, these age brackets are scheduled to be increased during the next decade.
    
2. What are the past and present health and physical conditions of either party ? Does either suffer from any disability ? Have there been or are there imminent any major surgical procedures ?
    
3. What are the past and present income of the parties ? If either party is “underemployed”, what level of income should be attributed ?
    
4. What are the respective asset and liability positions of the parties ? What is the actual income thrown off by their assets ? If there are “under performing” assets, what amount of income should be attributed ?
    
5. What, if any, were the original contractual terms of agreement pertaining to the retirement issue ? How many years ago were those terms agreed to ?
    
6. Is the retirement in “good faith” ? Is there a provable element of malingering or an intent to avoid alimony ?
    
7. Is the retirement voluntary or involuntary ? Has the retiree been offered a limited-time front-loaded inducement to retire that will not recur ? What are the terms and how financially favorable are they, compared to the normal retirement “package” ?
    
8. Has either party remarried ? To what extent does either party have financial obligations to new family dependents ?
    
9. Is the dependent spouse cohabiting ? What, if any, were the original contractual terms with respect to the issue of cohabitation ? What economic benefits are flowing to or from the cohabiting “paramour” ?
    
10. What was the length of marriage between the parties ? Was it their first marriage ? Was there a prenuptial agreement ? What did each party bring into the marriage ? What were the parties’ respective financial contributions to their marriage ?
     
11. Were there children of the marriage ? Are all the children fully emancipated ? Is there a legitimate remaining financial dependence by any of the children ?
     
12. Does either party have any retirement benefits ? Are there any pension or profit-sharing plans ? Are there any Keogh, 401k or IRA accounts ? Are there any unqualified retirement assets ? Are any of the foregoing in or about to be in “pay status” ?
     
13. To what extent will any retirement payments or distributions be subject to federal or state taxation ? To what extent will payments be tax-sheltered or tax-deferred through a Qualified Domestic Relations Order, rollover or by other means ?
     
14. What are the parties’ respective educational backgrounds ? Does either party have a professional license, degree or other accreditation ? What are the parties’ relative business and work experiences and additional training ?
     
15. To what extent does either party have assets immune from division in a divorce, such as inheritances, bequests or gifts from third parties ? What income is or could be earned from such assets ?
     
16. What inheritance expectancy does either party have, and how imminent is it ?
     
17. What is the current state of the economy in general ? Are there unusual business circumstances presently applicable and unique to either party’s business or occupation ?
     
18. To what extent has each party made full and complete disclosure of assets and income ?
     
19.  To what extent has each party complied with past support and other obligations ?
     
20. Has either party been subject to third-party litigation or other claims ? Has either party been party to a voluntary or involuntary bankruptcy proceeding, or other insolvency action ?
     
21. In any proceeding to terminate or reduce support being paid to a dependent spouse, what will be the benefit to the payor spouse, measured against the detriment to the recipient ? In balancing these two considerations, is there a clearly equitable result ?

In the last analysis, the cautionary words in Dilger v. Dilger, 254 N.J. Super. 350 (App. Div. 1992) bear careful scrutiny by every prudent matrimonial attorney:

It goes without saying that issues of possible early retirement and the like should be resolved in the first instance at the time of the divorce in a negotiated agreement. No thoughtful matrimonial lawyer should leave an issue of this importance to chance and subject his or her client to lengthy future proceedings such as we have here. [254 N.J. Super. At 359]

Those who ignore the clear admonition do so at their peril.

Charles C. Abut practices in Hackensack and Springfield, New Jersey. He is  a Certified Matrimonial Attorney and a Fellow of the American Academy of Matrimonial Attorney. He has been designated by the New Jersey Supreme Court as a Certified Matrimonial Attorney from 1998-2007 and as a Certified Civil Trial Attorney from 1984-1998.