By Anne L. Roddy
There are three important takeaway points for domestic relations lawyers from recent legislation – two bills from the 2018 General Assembly session and one from Congress:
If you want spousal support to be non-modifiable, state that affirmatively in your agreements.
Effective July 1, clients can retire at maximumsocial security age (currently 67) and that age is a material change in circumstances sufficient for a motion the court to modify support.
Spousal support in agreements or final decrees entered after Dec, 31, 2018,shall no longer be deductible for the payor, and shall be tax free for the recipient.
Modification of Spousal Support
Currently, under Pendleton v. Pendleton, 22 Va. App. 503, 471 S.E.2d 783 (1996), if there is a provision for spousal support in a stipulation or agreement, and the agreement does not contain a statement that the award is modifiable based on a material change in circumstances, then the award is fixed and cannot be changed by a court.
There is a new law effective July 1, 2018. Senate Bill 614 amended Virginia Code § 20-109(C) and changed the current law significantly. If an agreement executed after July 1, 2018, is silent as to modifiability, the court shall modify support based on a material change in circumstances, or the circumstances identified in the contract. The new law states:
“No request for modification of spousal support based on a material change in circumstances or the terms of stipulation or contract shall be denied solely on the basis of the terms of any stipulation or contract that is executed on or after July 1, 2018, unless such stipulation or contract contains the following language: “The amount or duration of spousal support contained in this [AGREEMENT] is not modifiable except as specifically set forth in this [AGREEMENT].”
Practice Tip. Add language to your standard forms to prevent modifiability, or to control when the support is modifiable:
“The amount or duration of support contained in this (agreement) is not modifiable except as specifically set forth (agreement).”
Modification of Support and Retirement of Payor
Under the new law, retirement at age 67 is now a material change to amend spousal support.
And under the new law, on a motion for modification, the court may consider support factors, and shall consider six new factors, to include considering the property and assets of both parties.
SB540 amended Virginia Code § 20-107.1(F), and requires “any order of support granting or reserving any request for spousal support shall state whether the retirement of either party was contemplated by the court and specifically considered by the court in making its award, and if so, the order shall state the facts the court contemplated and specifically considered as to the retirement of the party.”
Why? This removes argument from litigants about whether or not retirement was contemplated and whether or not retirement of payor spouse is a material change in circumstance sufficient to modify spousal support. The orders will clearly state what was contemplated at the order of support.
SB540 added new subsections to Virginia Code § 20-109.
The new subsections:
(E) provides guidance on when a party may retire. This section clarifies and softens the ruling of Stubblebine v. Stubblebine, 22 Va. App. 703, 473 S.E.2d 72 (1996). “Retirement age” is now defined by maximum social security age under federal statute. That birthday (currently age 67) creates a material change in circumstances sufficient to petition the court for a modification of support. “For purposes of modification of an award of support and without precluding the ability of a party to otherwise file for modification of support based upon any other material change in circumstances, the payor spouse’s attainment of full retirement age shall be considered a material change in circumstances. For the purposes of this subsection, “full retirement age” means the normal retirement age at which a person is eligible to receive full retirement benefits under the federal Social Security Act, but “full retirement age” does not mean “early retirement age” as defined under the federal Social Security Ace (42 U.S.C § 416, as amended).”
(F) applies to modification of spousal support based on the retirement of the payor spouse and clarifies confusion from conflicting case law, and indicates that while the court is not required to consider the factors set forth in Virginia Code Section 20-107.1, the court “may” consider the factors at a modification hearing. There are now additional factors the court shall consider: “in an action for the increase, decrease or termination of support based on the retirement of the payor spouse… the court may consider the factors set forth in subsection 20-107.1(E) and shall consider the following: (1) Whether the retirement was contemplated by the court and specifically considered by the court when the spousal support was awarded; (2) Whether the retirement is mandatory or voluntary, and the terms and conditions related to such retirement; (3) Whether the retirement would result in a change in the income of the payor or the payee spouse (4) The age and health of the parties; (5) The duration and amount of support already paid; (6) The assets or property interest of each of the parties during the period from the date of the support order and up to the date of the hearing on modification or termination; the provisions of this subsection (i) shall be subject to the provisions regarding stipulations or contract as set forth in subsection (C), and (ii) shall not apply to a contract or stipulation that is non-modifiable.”
By adding in factor No. 6 as a consideration – the assets or property interest of each of the parties during the period from the date of the support order up and to the date of the hearing – the new law specifically reverses Driscoll v. Hunter, 59 Va. App. 22, 716 S.E.2d 477(2011). In Driscoll, the Court of Appeals held that it was proper to consider the assets of the payor spouse in considering a modification of spousal support, but that the court need not consider the assets of the payee spouse.
Under the new law, effective July 1, 2018, the assets or property interest of each of the spouses shall be considered in a hearing for the modification of spousal support. Logically, if the assets and property interests of both spouses were considered at the initial determination of support, the assets and property interests of both spouses at modification should be considered.
Of note, the code provides “the provision of subsection F and subsection E shall apply to suits for modification or termination of spousal support orders regardless of the date of the suit for the initial setting of support or the date of entry of any such order or decree.” This is interesting, as substantive changes in the law go into effect July 1 of each year. This language appears to retroactively apply to suits filed before July 1, 2018.
(G) Applies to modification of support (for all reasons except the retirement of the payor spouse, which is addressed in (F)). Section G similarly reverses Driscoll and adds in new factors for consideration on modification, but indicates that the court may consider the factors of subsection F.
Alimony no longer a deduction
The Tax Cut and Jobs Act (TCJA), Public Law number 115-97, amended the Internal Revenue Code of 1986. Section 11051(c) provides that alimony is nondeductible to the payor, and tax-free to the recipient for decrees of divorce or execution of separation agreements after Dec. 31, 2018. This shifts the cost of support for the payee to the payor, and reduces the burden on the payee spouse. Agreements executed before December 31, 2018 that are modified after Dec. 31, 2018, follow the prior law, unless the agreement expressly states that the new law is applicable.
Practice tip: Confirm that the payments included in your separation and nuptial agreements executed in the next six months conform with alimony as defined under Internal Revenue Code Section. 26 U.S.C 71, 26 U.S.C. §§ 215(a) and (b).
Anne L. Roddy
Earned her law degree in 2008 from the University of Richmond, where she was a staff member of the Richmond Journal of Law and Public Interest. She was the recipient of the Pro Bono Publico Award, given by the Public Interest Law Association. She earned her undergraduate degree from the University of California, San Diego, where she earned Provost’s and Athletic Director’s Honors. She was a clerk in Chesterfield County Circuit Court for two years and practiced with other firms in the Richmond area before joining Barnes & Diehl. She is president-elect of the Chesterfield County Bar Association. Anne is a member of the Legislative Committee of the Metro Richmond Women’s Bar Association and the Young Lawyers Division of the Virginia Bar Association.