Retirement of Maintenance Obligor in Illinois and its affect on Maintenance/Alimony
Questions:
- Does Illinois have hard-and-fast rules for when a maintenance obligor can retirement in good faith in a case involving either an indefinite maintenance award or a review of maintenance on retirement?
- Short Answer: No.
- In Illinois, can the disparity of the asset bases of the parties be considered in determining whether to continue maintenance indefinitely on good faith retirement?
- Short Answer. Yes.
The issue of voluntary retirement at a usual retirement age will be confronting the courts as people continue to live longer owing to advances in medical technology. During the first generation of cases following passage of the IMDMA, the courts favored awards of time-limited, or rehabilitative, maintenance. The pendulum, however, has swung in favor of indefinite maintenance awards for spouses in long-term marriages with a significant income differential as reflected by the 2015 Illinois maintenance guidelines. Today, we are faced with articles with titles such as the November 2021 Forbes articles, “Is the Great Resignation Actually a Mass Retirement?”[1] In cases where there exists a disparity between the asset bases of the parties, these cases can involve expert testimony involving the reasonable cash flow that their respective estates should be able to generate as discussed in Gitlin on Divorce: § 17-2[l] “Consideration of Disparate Asset Base in cases Involving Longer-Term Maintenance.”
In a marital settlement agreement, the parties can make reasonable assumptions as to what will happen in the future, including a likely date for voluntary retirement. In contested proceedings, however, the court should not speculate as to the date of retirement. Thus, in instances where the maintenance award is not made by virtue of a marital settlement agreement, the trial court should consider scheduling a review of the award at the time the maintenance obligor reaches normal retirement age, so that the issue may, if necessary, be equitably adjusted at that time.
In the 1977 case of Shellene v. Shellene,324 the former husband filed a petition to terminate or reduce his permanent alimony obligation required under a 1972 decree of divorce. His petition alleged that he was taking an early retirement from his job and that his annual income would be reduced from $30,000 to $14,000. The trial court found that the 55-year-old husband, after 30 years of employment, had a right to retire. It reduced alimony from $200 to $100 per month. The appellate court reversed, holding that a reduction in alimony was not warranted. The appellate court was influenced by the small amount of alimony he had been paying and the self-help aspect of the former husband’s actions:
After twenty-eight years of marriage and assisting in the raising of a family, plaintiff must work full-time to have a gross income of approximately $9,500 per year, while defendant retires at age fifty-five with a gross income of approximately $15,000. This result is not equitable in light of the length of the marriage, the time and effort required of plaintiff to maintain her standard of living when compared with the income of each of the parties.
The defendant has the right to retire; however, the age of fifty-five years is relatively young for retirement. Defendant saw fit to retire prior to the court’s reduction in alimony, so he must have been prepared to pay the alimony had the court not granted any reduction. [Emphasis added].
The 1979 case of Smith v. Smith325 also denied relief from the maintenance obligation because of early retirement. Smith involved an award of original maintenance. While the divorce was pending, the husband resigned his position as president of a corporation. He testified that he did so because he had to work 60 to 80 hours per week, and he no longer wished to work at such a demanding job. He was fifty-five years old at the time and in good health. The husband, after he resigned his $50,000 per year position, became a consultant resulting in a substantial reduction in income. The wife appealed because the trial court based its award of maintenance on the husband’s present income as a consultant. The appellate court reversed and remanded on this issue. The Smith court stated:
The Act refers to the “ability” of the maintenance-paying spouse to contribute to the other’s support. In our view, the word “ability” indicates that we should consider the level at which the maintenance-paying spouse is able to contribute, not merely the level at which he is willing to work.
Smith quoted with approval from a Colorado case:
“This language does not restrict a court to considering only his actual income at the time of trial, but also allows it to weigh evidence of his reasonable potential earning capacity … . [The husband] is free to choose his own lifestyle and to cease to be a productive individual in our social structure if he can afford such luxury. However, … certain responsibilities assumed must be met within the confines of the law.”
The retirement rule announced in Smith326 is:
Whether a spouse may rely on his retirement as a change in circumstances to justify the modification of maintenance depends upon the circumstances of each individual case. Relevant factors include his age, his health, his motives and timing for the retirement, his ability to pay maintenance after retirement, and the former spouse’s ability to provide for herself.
The 1993 First District case of In re Marriage of Waller,327 affirmed the trial court’s denial of the former husband’s petition to terminate maintenance following his retirement at age sixty-three. Following the parties’ 33-year marriage, wife was awarded $120 per week permanent maintenance. Husband had an annual income of $58,000 until he retired in 1991. His annual income after retirement came from pension and social security benefits and totaled $20,000 annually. He unilaterally lowered his maintenance payments to $200 per month after filing a motion to reduce or terminate his obligation. A factor in the appellate court affirming the trial court’s finding that there had not been a substantial change in circumstances was the former husband’s ability to continue to meet his monthly expenses.
Thus, the Smith328 and Waller329 opinions indicate that an indefinite maintenance obligor who chooses to retire early—such as age fifty-four or sixty-three and while in good health—has a higher burden to justify a reduction or termination in maintenance. On the other hand, neither case involved a lucrative early retirement package.
A common business practice involves employers encouraging older, well-paid employees to retire, either to eliminate their position (“downsizing”) or to fill the position by a younger and lower-paid employee. Employers frequently offer the older employee a “golden parachute”—an early retirement with bonus benefits as an inducement. In the 1993 case of Waldschmidt, the ex-husband filed a petition to terminate or reduce his indefinite maintenance obligation alleging that his ex-wife’s income increased after she inherited a large parcel of farm land, and his income decreased following his retirement. The opinion focused on whether it was bad faith for the former husband to retire at age fifty-five after 30 years at the Caterpillar plant. On this point, the appellate court stated:
Caterpillar established a program which encouraged employees to retire after 30 years. Denis took advantage of this option after considering his long working hours and minor health concerns. No evidence has been presented indicating that Denis’ retirement was in bad faith or that it was for the purpose of evading his maintenance obligations.331
The Waldschmidt divorce judgment required the husband to pay monthly maintenance of 17 percent of his gross income. When he applied for a reduction or termination of maintenance in 1989, the trial court had simply reduced maintenance to 7.5 percent of his gross income. The appellate court rejected this approach stating that “A trial court may not escape its duty to determine whether maintenance should be terminated or otherwise modified by ordering maintenance as a percentage of income.”
The Second District’s 2017 In re Marriage of Bernay decision[2] involved a petition to reduce or terminate maintenance where the former husband was in his 60s, was diagnosed with lymphoma, and testified that he planned to retire the following year. In the meantime, his employment income had been reduced from $225,000 to $145,000. Yet the appellate court observed that in addition to the former husband’s salary, he had a real estate and retirement accounts valued at $2.5 million and would be inheriting he expected to inherit approximately $1.9 million from the estates of his recently deceased parents. The former wife, in contrast, earned $27,000 annually as a nurse, and her investments were considerably less. At the time of the prior modification order, the ex-husband’s investment accounts generated $40,000 in annual growth, whereas the former wife’s investment accounts did not even total $40,000. Based on these circumstances, the trial court terminated maintenance. The appellate court’s opinion, by Justice Susan Hutchinson, reversed and remanded. The appellate court stated that it is axiomatic that the change must not have been contemplated when permanent maintenance was ordered.[3] The appellate court concluded that, “Given the history of this case before the trial court and this court, Jerry’s 2016 retirement—an eventuality anticipated in 2006—did not constitute a substantial change.”[4] The appellate court determined that there had been no change in the ex-husband’s ability to satisfy his $3,600 monthly permanent maintenance payments.[5]
The 2021 In re Marriage of Folley case[6] reversed the trial court’s decision to abate maintenance following the former husband’s forced early retirement. The parties divorced after 28 years of marriage. The terms of the settlement agreement required the husband to pay $20,000 per month maintenance. Five years later, after being forced to retire early by his employer, Caterpillar, Inc., the former husband filed a petition to terminate or modify maintenance and to terminate or reduce his obligation to maintain $3.3 million worth of life insurance for the benefit of his former wife. The trial court found that the former husband’s early retirement was a substantial change in circumstances and reduced the maintenance obligation to $0, with the former wife allowed to file a motion to review maintenance upon the ex-husband obtaining reemployment. It also ordered the former husband to continue to seek reemployment in good faith. The trial court further reduced the obligation to maintain life insurance from $3.3 million to $500,000. The former wife appealed, and the appellate court vacated the trial court’s order and remanded the case for further proceedings. At the time of the hearing, the former husband, Greg, was fifty-eight years old and had intended to continue to work until at least the age of 62, which was the age he would have received full retirement benefits at an unreduced rate. He also received a gross severance payment of $1.16 million. At the time of the filing of his financial affidavit, the former husband asserted a net worth of $12 million. The ex-husband testified that he put his pension benefits into pay status, which resulted in his receiving from this source $18,000 a month while his former wife would receive $11,000 a month. In contrast, the former wife was 56 years old and had total assets of $5.5 million.
The appellate court reasoned that despite the former husband’s forced early retirement and substantial decrease of income, it was clear from the record that the ex-husband had the present ability to continue to pay maintenance in some amount and to arguably meet his full maintenance obligation. The Folley court concluded that no reasonable person would have determined that the ex-husband had an inability to pay at least some portion of the permanent maintenance award the parties had agreed to under their settlement agreement. Accordingly, the trial court abused its discretion by reducing Anne’s maintenance to $0.[7]
Additionally, the appellate court observed that under the trial court’s order, the triggering event for the ex-wife to file a motion for a review of maintenance was her former husband’s securing reemployment. The trial court had ordered the ex-husband to provide quarterly employment search reports “until he obtains employment” so that his former wife “shall then” have the option to revisit the issue of spousal maintenance upon filing a motion to do so. The appellate court observed, however, that: “The trial court placed no time limitation for review, essentially reserving its jurisdiction over the issue of maintenance indefinitely.” Folley held that the trial court’s failure to set a reasonable and certain time for reviewing the maintenance issue was an abuse of discretion.[8]
Therefore, the Folley appellate court vacated the trial court’s judgment and remanded the case with directions for the trial court to:
1) reexamine its modification of the maintenance obligation in light of the former husband’s “clear ability to pay maintenance” and
2) calculate any arrearages.
The appellate court also directed the trial court to reexamine its reduction of the life insurance obligation since no evidence presented that the former husband could not afford to pay his portion of the premiums.
Conclusion.
Caselaw provides no hard-and-fast rules for the impact of retirement on an award of permanent maintenance. The courts place a higher burden on the indefinite maintenance obligor in early-retirement cases. Yet the appellate courts seem to be applying a “sliding scale” based upon the obligor’s age, health, and good-faith motives, while considering if the maintenance recipient can support herself or himself at a lifestyle somewhat consistent with that established during the marriage.
[1] Forbes, November 16, 2021. https://www.forbes.com/sites/avivahwittenbergcox/2021/11/16/the-great-resignationactually-a-mass-retirement/?sh=13b7632518ba
324Shellene v. Shellene, 52 Ill. App. 3d 889 (2d Dist. 1977).
325Smith v. Smith, 77 Ill. App. 3d 858 (2d Dist. 1979).
326In re Marriage of Smith, 77 Ill. App. 3d 858 (2d Dist. 1979).
327In re Marriage of Waller, 253 Ill. App. 3d 360 (1st Dist. 1993).
328In re Marriage of Smith, 77 Ill. App. 3d 858 (2d Dist. 1979).
329In re Marriage of Waller, 253 Ill. App. 3d 360 (1st Dist. 1993).
331The Waldschmidt opinion reversed the trial court and remanded with instructions to terminate maintenance. The reversal, however, was not based entirely on the issue of the husband’s retirement being in good faith. The evidence showed that for 1991 the ex-wife’s gross income would be approximately $31,500 and the ex-husband’s would be approximately $21,700.
[2] Bernay v. Bernay, 2017 IL App (2d) 160583.
[3] Citing: See In re Marriage of Virdi, 2014 IL App (3d) 130561, ¶ 30; In re Marriage of Reynard, 378 Ill. App. 3d 997, 1005 (2008) “we are reluctant to find a ‘substantial change in circumstances’ where the trial court contemplated and expected the financial change at issue”).
[4] Bernay v. Bernay, 2017 IL App (2d) 160583, ¶ 18.
[5] Bernay v. Bernay, 2017 IL App (2d) 160583, ¶ 19.
[6] In re Marriage of Folley, 2021 IL App (3d) 180427.
[7] Citing: In re Marriage of Heroy, 2017 IL 120205, ¶ 24.
[8] Citing: See Bothe, 309 Ill. App. 3d at 357 (although the trial court properly reserved the issue of maintenance, the trial court abused its discretion by doing so indefinitely; the trial court’s failure to set a reasonable and certain time for review of the maintenance issue amounted to an abuse of discretion”); See In re Marriage of Wojcik, 362 Ill. App. 3d 144, 168 (2005) (reserving the issue of the wife’s right to maintenance was warranted where the husband was presently unable to pay maintenance, but the trial court abused its discretion by indefinitely reserving jurisdiction over the issue).
