Trying to predict how the swings of the financial market will affect an investor’s portfolio is an impossible task, and one that family court judges need not dabble in when deciding whether to award alimony, the South Carolina Supreme Court has ruled.
The justices reiterated that family courts must consider the investment income of both parties when making such awards, but declined to require them to assign a specific number to future investment income given the “uncertainty of market fluctuations.”
Mark Sweeney sought a divorce from his wife, Irene, in Greenville County Family Court in 2012. Irene counterclaimed and sought alimony.
At trial, Mark’s expert testified that Irene didn’t need alimony because she could draw enough income from her investment account to cover her living expenses. The expert made his calculations using the account’s five-year historical rate of return as a predictor of future returns.
Irene’s expert said that using a hypothetical return rate to offset alimony would be a mistake because of the uncertainty in returns. While Mark’s expert testified that the account would make about $5,600 a month, Irene’s expert showed that the account had made significantly less than that in the past—$1,281 a month in the first quarter of 2014. (Past performance is no guarantee of future results, as the saying goes.)
Greenville County Family Court Judge David Phillips granted the divorce and ordered a 55/45 split of the total assets in favor of Mark, leaving Irene with about $1.2 million in liquid assets. Phillips also awarded Irene a monthly alimony payment worth $5,000.
Both parties moved to reconsider, with Mark arguing that Phillips should have specified how much income Irene could expect from the investment account and factored that into the alimony award. After the state’s Court of Appeals affirmed the decision, Mark again appealed.
Justice Kaye Hearn, writing for a unanimous Supreme Court in a March 20 opinion, said that Phillips was correct in considering the “substantial income” that Irene would receive from the investment, but that it was impossible to arrive at a specific number that could be subtracted from the alimony award, as Mark had requested.
“Requiring the family court to identify a specific amount would be speculative at best,” Hearn said. “The testimony presented in this case was not sufficiently certain to ascertain the rate of return to a mathematical certainty.”
Hearn said that while investment income should be considered in determining a party’s earnings, income is just one of 13 factors a family court must consider in deciding whether to award alimony, and since Phillips had extensively analyzed all of these factors, he did not err in awarding alimony.
Put away your crystal balls
David Yokel of Greenville represented Irene on appeal. He said that the court’s opinion still allows parties in a divorce to use predicted earnings of an investment account as a factor in alimony, as long as the assessed value can be factored with certainty.
“The message here is that the door is open,” Yokel said. “This adds, not just income, interest and dividends, but potential rates of returns … The court just said it can be considered. It’s the responsibility of practitioners to get the evidence out there.”
Gregory Forman, a solo family law practitioner from Charleston who was not involved in the case but reviewed the court’s decision, said that it seemed obvious that investment income should be a factor in alimony, but he was surprised the justices didn’t require family courts to determine an actual numerical value to apply to investment income.
“Clearly, liquid assets can be a factor in setting alimony,” he said, “but there is a tremendous amount of discretion in the family court in how much weight to give that.”
Bruce Bannister and Luke Burke of Bannister, Wyatt & Stalvey in Greenville represented Mark on appeal. Bannister did not immediately respond to requests for comment.
The five-page decision is Sweeney v. Sweeney (Lawyers Weekly No. 010-014-19). The full text of the opinion is available online at sclawyersweekly.com.
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