In Minnesota, the topic of spousal maintenance (also referred to as alimony) is a frequent financial issue during a divorce. Spousal maintenance is awarded to meet need, and it depends on a showing of need. The marital standard of living is analyzed in detail, along with cash flow and proposed budgets. Equalizing the parties’ net cash flow is not necessarily a starting point for spousal maintenance, but can be used as a starting point for settlement discussions. Spousal maintenance exists to provide for the recipient spouse’s needs, not to act as a “lifetime profit-sharing plan”. Snyder v. Snyder, 298 Minn. 43,53, 212, N.W.2d 869, 875 (1973). The purpose of spousal maintenance is to allow the recipient and the obligor to have a standard of living that approximates the marital standard of living, as closely as is equitable under the circumstances. It is the court’s duty to balance “the recipient’s need against the obligor’s ability to pay.” Prahl v. Prahl, 627 N.W. 2d 698, 702 (Minn. App. 2001). Financial precision and acumen is required in cases involving spousal maintenance. In many cases, a party may inflate a budget beyond the marital standard in an effort to secure additional spousal maintenance beyond what is needed, and to optimize cash flow post-decree. This is a common strategy.
Spousal Maintenance and The 8 Factors
If the district court awards maintenance, it considers eight statutory factors in determining the duration and amount of the award. Those factors include: the financial resources of the party seeking maintenance, the standard of living during the parties’ marriage, the duration of the marriage, the contribution of both parties to the preservation of the martial property, and the ability of the spouse from whom maintenance is sought to meet his or her needs while also meeting those of the requesting spouse. Minn. Stat. § 518.552, subd. 2 (2016).
Equalizing Income and Other Data Points
In a recent unpublished case, Hoolihan v. Hoolihan, the Minnesota Court of Appeals upheld a ruling to “equalize” the parties’ income because all 8 factors were properly analyzed by the district court. Husband and wife were married for 45 years, and were 70 and 65 years old respectively. Both parties were retired and received either a pension plan or severance payments. No. A17-0845, 2018 WL 3014570, at *1 (Minn. Ct. App. June 18, 2018). During the marriage, the parties divided their finances and both contributed to the parties’ monthly expenses. Based on wife’s claimed monthly income and budget, she requested maintenance of $2,328. The district court ordered husband to pay wife $1,400 per month in permanent spousal maintenance. This maintenance, combined with her monthly income, would allow her to meet her needs. In calculating the amount of spousal maintenance, the district court utilized the cumulative net monthly average income for the last three years of the parties marriage, which equalized $14,153 total (or $7,077 each). Hoolihan et al.
The court of appeals ultimately affirmed the district court’s decision despite the equalization because all key factors were met. The court stated, “The court’s order shows that the court used this number as a way to approximate the marital standard of living so as to quantify wife’s need for maintenance going forward and not merely to equalized the parties income.” Hoolihan et al. Awarding each party $7,077 per month would sufficiently allow both parties to spend on the expenses that are important to them.
The Purpose of Spousal Maintenance Is Not to Equalize Income
This decision is surprising because the court has adamantly stated that the purpose of spousal maintenance is not to equalize the parties’ incomes. In the case, Lee v. Lee, the court stated, “equalization of the parties’ incomes by an adjustment of maintenance is without authority or precedent.” 749 N.W.2d 51, 60 n.2 (Minn. App. 2008). Despite this finding, many practitioners, including some mediators, improperly equalize income as a starting point for a maintenance award, rather than using it as a data point for further analysis.
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