Leap of Faith Retiring while Paying Spousal Maintenance, 1019 COBJ, Vol. 48, No. 9 Pg. 28

• Author: By KATHARINE LUM
• Position: Vol. 48, 9 [Page 28]

48 Colo.Law. 28

Leap of Faith Retiring while Paying Spousal Maintenance

Vol. 48, No. 9 [Page 28]

Colorado Lawyer

October, 2019

FAMILY LAW

By KATHARINE LUM

This article discusses the effect of a spouse's good faith retirement on the modification of his or her spousal maintenance obligation. It focuses on the recent Colorado Court of Appeals decision In re Marriage of Thorstad.

The incidence of divorce among couples approaching retirement age has been steadily increasing for more than 20 years: from 1990 to 2015, the incidence of divorce among those 50 years of age and older increased by 109%.^[1]Thus, the litigation of spousal maintenance cases (both pre- and post-decree) is increasingly likely to be affected by the impending retirement of one or both parties. The decision about when to retire is a difficult one for many workers. For workers considering retirement while under an obligation to pay spousal maintenance, the decision is doubly fraught. The payor spouse must contemplate a change in employment that will likely reduce his or her income with no guarantee that the court will reduce the maintenance obligation as a result of the income reduction. To make matters more challenging, retirement is often an irreversible decision, particularly for individuals who are not self-employed.

This article discusses the effect of a spouse’s retirement on the modification of his or her spousal maintenance obligation in light of the recent Colorado Court of Appeals decision In re Marriage of Thorstad.² The article explores the factors that may influence a court’s decision of whether to reduce or eliminate spousal maintenance where the payor has made a good faith decision to retire.

Legal Principles Governing Spousal Maintenance

The initial award of spousal maintenance is governed by CRS § 14-10-114. Modifications of spousal maintenance are governed by CRS § 14-10-122. In 2013, the Colorado legislature enacted substantial revisions to both sections,³ which took effect on January 1, 2014.⁴ For ease of reference, this article refers to 2014 as the date of the change.

CRS §14-10-114

Before 2014, whether to make an initial award of spousal maintenance was a two-part decision. First, the court determined whether the spouse seeking maintenance lacked sufficient property to meet his or her reasonable needs and was unable to support himself or herself through appropriate employment.⁵ Second, if the spouse seeking maintenance passed this threshold, the court reviewed the factors then codified at CRS § 14-10-114(4), including:

■ the financial resources of the party seeking maintenance, including marital property apportioned to that party, and the party's ability to meet his or her needs independently;

■ the time necessary to acquire sufficient education or training to enable the party seeking maintenance to find appropriate employment and that party's future earning capacity;

■ the standard of living established during the marriage;

■ the duration of the marriage;

■ the age and physical and emotional condition of the spouse seeking maintenance; and

■ the ability of the spouse from whom maintenance was sought to meet his or her needs while meeting those of the spouse seeking maintenance.⁶

The 2014 version of CRS § 14-10-114 introduced the maintenance advisory guideline and substantially changed how courts render an initial decision on whether to award spousal maintenance. Now, the court must first make findings regarding a number of factors, including the amount of each party's gross income; the marital property apportioned to each party; the financial resources of each party, including but not limited to the actual or potential income from separate or marital property; and the reasonable financial need established during the marriage.⁷

Second, the court must determine the amount and term of spousal maintenance that is fair and equitable to both parties after considering

1. the guideline amount and term of spousal maintenance;

2. the factors set forth in subsection (3)(c). These factors slightly modify and expand on the factors previously set forth at CRS § 14-10-114(4), as discussed below; and

3. whether the party seeking maintenance lacks sufficient property to provide for his or her reasonable needs and is unable to support himself or herself through appropriate employment.⁸

Pre-2014 CRS § 14-10-122 and In re Marriage of Swing

Before 2014, CRS § 14-10-122 offered no specific guidance regarding a request to modify spousal maintenance based on the retirement of one spouse; it simply provided that spousal maintenance could be modified “only upon a showing of changed circumstances so substantial and continuing as to make the terms unfair.”⁹

In 2008, the Colorado Court of Appeals issued In re Marriage of Swing.¹⁰ In that case, the husband petitioned the trial court to reduce or eliminate his spousal maintenance obligation due to a voluntary job change he had undertaken in anticipation of his early retirement.¹¹].

The wife argued that her spousal maintenance payments should not be reduced because the husband’s job change and upcoming retirement constituted voluntary underemployment.¹² The Court concluded that an obligor spouse’s reduced income that resulted from early retirement may be a basis to modify spousal maintenance if (1) the obligor’s decision was made in good faith (i.e., not primarily motivated by a desire to decrease or eliminate maintenance); and (2) the decision was objectively reasonable based on factors such as the obligor’s age and health, and the practice of the industry in which the obligor was employed.¹³ The Swing court noted specifically that its analysis applied to early retirement and suggested, but did not directly address, the possibility of a more limited analysis if the obligor retired at age 65 (or the normal retirement age in the relevant industry).¹⁴

Post-2014 CRS § 14-10-122 and In re Marriage of Thorstad

The 2014 version of CRS § 14-10-122 did not change the overall standard governing the modification of spousal maintenance. The statute continues to direct courts to modify maintenance only if there has been a substantial and continuing change in circumstances that renders the original award unfair.¹⁵

However, CRS§ 14-10-122 now specifically addresses the possibility of the payor spouse retiring during the term of the maintenance obligation, stating "[a] payor spouse whose income is reduced or terminated due to his or her retirement after reaching full retirement age is entitled to a rebuttable presumption that the retirement is in good faith."¹⁶ The statute notes that "full retirement age" means "the payor's usual or ordinary retirement age when he or she would be eligible for full United States social security benefits, regardless of whether he or she is ineligible for social security benefits for some reason other than attaining full retirement age."¹⁷"Full retirement age" varies depending on the retiring party's birth year.¹⁸

In January 2019, the Court of Appeals decided In re Marriage of Thorstad, the first appellate case to address the retirement-related revisions in CRS § 14-10-122.¹⁹ In Thorstad, the husband filed a motion to terminate his spousal maintenance obligation in 2017 based on his decision to retire due to his declining health.²⁰ The magistrate automatically terminated the husband’s maintenance obligation upon finding that he had reached “full retirement age,” without any further analysis.^[21] The district court subsequently affirmed the magistrate’s decision.²²

The Court of Appeals examined CRS § 14-10-122 and reached the following conclusions about its application in the retirement context:

■ CRS § 14-10-122 does not operate to automatically terminate the spousal maintenance of an individual who meets the statutory criteria of a "good faith" retirement. Rather, it merely establishes that such individual is entitled to a rebuttable presumption that his or her decision to retire was made in good faith.²³

■ Once the payor satisfies the rebuttable presumption, the burden shifts to the payee to show that the payor's decision was not made in good faith. If the payee does not meet this burden, the court will presume "as a matter of law, that the payor's decision to retire was made in good faith."²⁴

■ The payor's "good faith retirement" then becomes one factor among many that a court must consider when deciding whether circumstances have changed in such a substantial and continuing way as to make the terms of the existing maintenance order unfair.²⁵

■ To make its final determination of whether to modify or terminate maintenance, t he court should then examine "all circumstances pertinent to an initial maintenance award, including all relevant circumstances of both parties" under the version of CRS§ 14-10-114 that was in effect at the time of the original maintenance award.²⁶ The party seeking modification bears the burden of demonstrating the changed circumstances to the court.²⁷

Interaction of Good Faith with Other Modification Factors

Appellate courts have not yet applied the Thorstad framework to other modification of maintenance cases in Colorado. Thus, there is little guidance on the interaction of a good faith decision to retire with the other relevant circumstances that would ordinarily affect an initial award of spousal maintenance. Out-of-state cases that have analyzed a good faith decision to retire in conjunction with other relevant circumstances shed some light on this analysis, as do Colorado cases that analyze the financial circumstances of the parties in other maintenance modification contexts. The circumstances courts have reviewed in these cases generally fall into two broad categories: (1) the payor's...