By David L. Duff of Duff & Kronfeld, P.C. posted in Family Law on Friday, December 29, 2018.
Virginia law allows one’s spousal support obligation to be modified, or terminated, by a judge, provided two things are proven: (1) first, that there has been a “material change in circumstances” since the last order establishing spousal support; and (2) an analysis of both party’s respective financial circumstances warrants such modification or termination.
With retirement, the first prong of this test is generally easy to establish. By Statute in Virginia, age 67 is acceptable for one’s voluntary retirement, and will be deemed by the Court as satisfying this first hurdle of showing a “material change in circumstances.”
The second prong of the test is far more uncertain, and often highly-contentious.
The mere fact that one retires, and no longer receives a regular stream of income through employment, does not necessarily mean that he or she no longer has income or other financial resources, from which to pay spousal support. Monies received from interest on investments, dividends, rentals, and gifts are all treated by the Court as constituting “income” to the recipient, notwithstanding his or her retirement.
In addition, the retiring payor often has accumulated a significant amount of money in an IRA, 401-K, SEP, ROTH, or similar tax-deferred retirement plan. Federal tax laws, and IRS regulations, require that at age 70.5 years, a certain percentage of the funds contained in these retirement plans must be withdrawn annually – and treated as “income”.
Finally, the second prong obligates a judge to examine the entire financial circumstances of the retiring party, before reducing or ending that individual’s spousal support obligation. Thus, a person who owns multiple rental properties, or interest in several different businesses, or a significant stock portfolio, can certainly retire, but may not obtain any relief in his or her spousal support obligation.
Merely ending one’s “day job” does not necessarily mean that there are not other assets available from which spousal support can continue to be paid.
If you are contemplating retirement, and wish to discuss the effect that such retirement may have on your spousal support obligation, call an attorney at Duff & Kronfeld and schedule a complimentary, 30-minute telephone consultation to discuss your options. (703) 591-7475