3.5 Other Support Considerations

• Library: Negotiating and Drafting Marital Agreements (Virginia CLE) (2019 Ed.)

3.5 OTHER SUPPORT CONSIDERATIONS ²⁶¹

3.501 Liability of the Payor's Estate. The agreement may provide that the recipient spouse is entitled to his or her intestate share of the payor's estate until divorce, or that the recipient is entitled to it only if the payor fails to maintain the life insurance required by the agreement.

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These provisions should be coordinated with the other provisions of the agreement. ²⁶²

In Caine v. Freier, ²⁶³ the wife tried to claim a statutory share when her husband died before he signed a marital agreement negotiated by separate counsel giving her certain rights at his death. He had failed to sign a new will reflecting the agreement and left a previously executed will giving her nothing. The court held that sections 20-155 and 64.1-49 [now section 64.2-403 ] of the Virginia Code (will must be written and signed) controlled and that the unsigned agreements and any oral understanding regarding them were unenforceable.

In Faulknier v. Shafer, ²⁶⁴ the property settlement provided that the wife would remain the beneficiary of her husband's life insurance policy. Before he died, the husband substituted Shafer as the beneficiary. Shafer claimed to have had no knowledge of the beneficiary designation or the separation agreement. Nevertheless, the Supreme Court reversed the trial court's sustaining of Shafer's demurrer and allowed Faulknier to bring suit for a constructive trust to be imposed on the life insurance proceeds paid to Shafer.

Since the decree in Faulknier did not incorporate the agreement, the case gives no guidance regarding the remedy of constructive trust in a case involving contempt of a court order in which the contract has been merged.

However, when the life insurance plan is governed by federal law and the spouse fails to change the beneficiary designation, state law is preempted. In Hillman v. Maretta, ²⁶⁵ the United States Supreme Court affirmed the Virginia Supreme Court's decision and found that Virginia Code section 20-111.1(D) was preempted by the Federal Employees' Group Life Insurance Act of 1954 (FEGLIA). ²⁶⁶ Although the trial court had issued an order that required the first wife to pay the insurance proceeds to the widow, both appellate courts found that federal law controlled and the employee's beneficiary designation could not be waived or restricted by state law.

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3.502 Automatic Modification Provisions ("Escalator Clauses").

A. In General. An escalator clause provides for a specified modification of the support amount upon future changes as enumerated in the agreement. The circumstances of either party may change by reason of health, employment failure or success, inheritance, or general economic changes such as inflation. What may be fair at the time of the agreement may not be fair to either party after the passage of time. In the past, however, escalator clauses were consistently disapproved by Virginia courts for both child and spousal support. ²⁶⁷ Because escalator clauses involve speculation about future events that might or might not occur, courts held that they defeat the purpose of the statutory scheme to base the support award on the then-current circumstances of the parties.

For instance, in Jacobs v. Jacobs, the husband was ordered by the trial court to pay the wife $800 per month spousal support and maintenance and "25% of all income received by him in any calendar year . . . in excess of $32,000." ²⁶⁸ The Virginia Supreme Court reversed. It ruled that awards must be made on the basis of the circumstances disclosed by the evidence at the time of the award and that section 20-109 grants courts continuing jurisdiction to modify awards "where changed circumstances are demonstrated." The court stated: "This statutory scheme recognizes that comparative needs and capacities change as circumstances change, that changes are not fairly predictable, and that spousal support awards must be determined in light of contemporary circumstances and then, if necessary, redetermined in light of new circumstances." ²⁶⁹

On the other hand, spousal support has traditionally not received the same level of scrutiny as child support. It may be possible to draft a provision that is specific enough to remain enforceable over time and be self-modifying, especially in light of the legislature's approval of self-modifying provisions for child support in section 20-109.1. ²⁷⁰

Since the advent of rehabilitative alimony, however, it appears permissible for the trial court to speculate at least over a few years. In

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Bruemmer v. Bruemmer, ²⁷¹ the Court of Appeals upheld a trial court's ruling awarding the wife spousal support that decreased over five years to zero.

B. Advantages over Modification by Court or Arbitrator. If it is decided that the support should be flexible in amount, the modification can be left to the trial court, be subject to arbitration, or be specified in the agreement itself. Although the court or an arbitrator has greater flexibility, the required hearing may create additional friction and animosity between the parties as well as expense. The decision of the court or arbitrator may also go so far beyond expectations that neither of the parties desires to face the risk. A specific provision agreed to in advance avoids costs and may be less apt to cause friction.

C. Content and Implementation.

1. In General. An automatic modification scheme avoids fixed payments frozen by contract but stops short of the full flexibility of future review by the court or an arbitrator. The exact provision may take various forms. The provision may change support in both directions or only one direction (usually an increase, but sometimes an escape clause in the event of disability of the payor is invaluable). It may provide for support modification based on changes in the income of the obligor or in the expenses of the payee, or it may simply specify an agreed change each year.

2. Consumer Price Index. A popular escalator clause ties the amount of support to the Consumer Price Index (CPI). ²⁷² The CPI provides a reasonable basis for change because changes in the CPI approximate the increase in the income of the payor and in the expenses of the recipient. In lean times, payor spouses invariably insist that payments also be allowed to decrease with decreasing income. Using the CPI provides greater certainty of expectation, which reduces the likelihood that court action will be needed and may be a satisfactory compromise between the fixed payment frozen by contract and the complete flexibility of court review.

3. Percentages. Another alternative is to specify the support amount as a percentage of the obligor's income (less a percentage of the recipient's income) or a specific sum plus a percentage of any increase in the income of the obligor. A unique situation could thus be fairly resolved by agreement that perhaps could not be fairly resolved by the court in the absence of an agreement.

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3.503 Medical and Dental Expenses. ²⁷³ Future medical and dental expenses of the recipient spouse and the children may be uncertain. Although section 20-108.2(D) of the Virginia Code requires that any child support order provide for the parents to pay in proportion to their gross incomes any reasonable and necessary unreimbursed medical or dental expenses for the child as these are defined in that statute, there is no such requirement for the spouse. The court, in the absence of an agreement, may be limited to awarding a monthly periodic payment for spousal and child support that does not include provision for a former spouse's medical insurance or...