Should a Pension be Considered an Asset or a Source of Income?

In Booth v. Booth, the Massachusetts Appeals Court vacated the Probate and Family Court’s decision to consider the Husband’s pension as a source of income for alimony purposes in the divorce, as well as the alimony award, and remanded.

The parties were married for 35 years. Both of the parties’ children were emancipated. The Husband had been the primary wage earner for the family. The Husband took an early retirement and received payments from his pension. Following retirement, the Husband continued to earn a small amount of other income and also received Social Security benefits. The Wife was the children’s primary caretaker but also worked during the marriage. The Wife resigned from her full-time employment to care for her mother and received payments for doing so from the Commonwealth. The Wife also worked a part-time job and received some contributions from her mother. Besides the Husband’s pension, the only other significant asset was the equity in the marital home.

The Probate and Family Court did not divide the Husband’s pension as an asset but, rather, considered it as a source of income for purposes of alimony. The Judge reasoned that the parties’ incomes going forward were uncertain, specifically focusing on the Husband’s other income that could potentially cease, the period during which the Wife would care for her mother, and whether she could obtain employment afterwards, were unknown. The Probate and Family Court determined that “[e]quitably dividing the pension [,which] would be a final and unmodifiable result … would involve an undesirable amount of speculation by the Court as to how the circumstances of the parties will change in the future.” Further, the Wife was awarded alimony that amounted to 20% of the difference in the incomes of the Husband and the Wife. The Wife appealed as to the Court’s consideration of the Husband’s pension and the alimony amount.

The Appeals Court determined that the Probate and Family Court’s decision to consider the Husband’s pension as a source of income rather than an asset did “not flow rationally from the judge’s findings.” The Court explained that the “uncertainties cited by the judge . . . are not insignificant, but they are hardly atypical for divorces, especially for those following long-term marriages.” Although it noted that this was not a determination that the Probate and Family Court’s decision was wrong, the Appeals Court did explain that further analysis was needed given that considering the pension as income (1) resulted in the Wife receiving less of the pension than if it were an asset; (2) restricted the Wife personally since alimony would terminate upon her remarriage or cohabitation; (3) created greater economic uncertainty for the Wife in comparison to the Husband; and (4) that “the Supreme Judicial Court has often encouraged structuring divorces so as to avoid continued strife and uncertainty between the parties. [Citations omitted]. Treating the pension, the relationship’s major source of wealth, as an asset arguably serves that end.”

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