Opinion
No. FA93-0532661
June 24, 2008
MEMORANDUM OF DECISION
The parties to this action were divorced on November 21, 1996 after a 31-year marriage. Pursuant to paragraph 1.(A) of the judgment the defendant was to pay the plaintiff "the sum of $605.75 per week as alimony . . . said alimony shall terminate upon the death of either party or the remarriage of the Plaintiff/Wife."
The judgment provided in paragraph 1.(B) as follows: "the parties agree that the Plaintiff/Wife shall be entitled to earn up to $15,000 per year from employment and to receive rental income from either the current rental properties or any future rental properties purchased with the proceeds from the sale of these properties, or income generated by the proceeds from the sale of any rental properties without any such income constituting a substantial change in circumstances for the purpose of modification. In all other respects said alimony shall be modifiable and shall be specifically modified in the event that any of the Defendant/Husband's obligations under the terms of this Agreement including any obligation to indemnify and hold the Plaintiff/Wife harmless are discharged in bankruptcy."
On January 11, 2007 the Defendant/Husband filed a Motion to Modify Postjudgment (#150) alleging he was retiring from employment on July 31, 2007 at the age of 67 3/4. At the time of the divorce the defendant husband's pensions were divided equally; the Plaintiff/Wife received a home located at 15 Webb Street, Windsor Locks, CT; two lots in Windsor Locks, CT and the family's duplex home in Durham, North Carolina. The matter was heard by the court on February 15, 2008. Counsel was given two weeks to provide briefs on the legal issues raised and they were submitted on February 27, 2008.
FACTS
The defendant is 68 years old and reported that he is in relatively good health. He takes medications for anxiety, migraines, a mild mood enhancer and a statin for high cholesterol. The court observed the defendant visibly shaking during his testimony and he appeared elderly and frail. Prior to the dissolution of marriage Mr. Lloyd was the in the Navy Reserves and was Commissioner of Public Health from 1973-1987 and earned pensions. He began to work for the Federal government in 1990 as a consultant and in 1993 became a full-time employee.
The defendant retired from the Federal civil service on August 31, 2007. The parties stipulated at trial that the defendant's retirement constituted a change of circumstances.
The plaintiff received a two-family home located in Durham, NC in the original judgment. The outstanding mortgage as of the date of dissolution was $12,617 and was paid off shortly thereafter.
The defendant assumed the bulk of the family debt in the original judgment. This debt was due to the defendant's investment in a limited partnership that owned a Hartford apartment. The rental income was insufficient to cover the mortgage.
The defendant remarried in 1999 and his current wife was employed but planned to retire when she reached age 65 in three months.
The plaintiff has not been gainfully employed since 1996 despite training as a registered nurse and holding a VA Real Estate license.
The defendant did not know where the plaintiff has lived for the past 10 years and pays his alimony quarterly (in advance) to the plaintiff's brother's address in Peabody, MA.
Prior to his retirement Mr. Lloyd earned $169,000 including bonus income which terminated on August 31, 2007. His current income consists of Navy Pension $275.00, State of CT Pension $241.00, Social Security Benefits $518.00, FERS $503.00 for a total gross income of $1,537.00 per week (as stated below the FERS Pension was reduced to $503.00 when the amended QDRO was filed with the Federal Retirement Services). His Financial Affidavit submitted at trial shows total weekly expenses of $1,553.00, a home equity loan with a balance due of $20,000 and a weekly payment of $84.00 and total cash value of assets in the amount of $815,304.00. Prior to his retirement the defendant earned approximately $160,000 gross income and post-retirement earns $79,925.
The defendant testified he has taken one modest family vacation each year since the divorce. Mr. Lloyd waited to retire at age 68 because he had insufficient military time to buy into a pension. The defendant plans to volunteer at the Associate School for Public Health and has no present plans for paid employment.
The defendant's home located at 10894 Bird Song Pass has been owned by his current wife since 1985. Mr. Lloyd purchased half the equity in the home by paying for renovations to the kitchen, bathroom and a new roof. He currently divides the mortgage, utilities and food 50/50 with his current wife and pays 100% of the home equity loan taken to renovate the kitchen.
Mr. Lloyd described his post-divorce lifestyle as fairly frugal. He currently drives an 8-year-old car and has no plans to replace it. His longest vacation since his divorce was for 6 days. He recently resigned from the Army/Navy Club to save the $100 monthly fee.
The defendant terminated his federal life insurance upon his retirement and the cost of term life insurance through the AMA is $15.07 per $1,000 (Ex. A) or an annual cost of $3,767.50. The terms of the divorce judgment require the defendant to keep $250,000 life insurance in effect for the duration of his alimony obligation (Agreement Stipulation, November 21, 1996, page 3, paragraph 3).
Mr. Lloyd testified he was asking the court to terminate his alimony and $250,000 life insurance obligation due to his retirement and subsequent reduction in income.
Mrs. Lloyd is 65 years old and in good health. The plaintiff received a home in Windsor Locks, CT, 2 lots in Windsor Locks, CT and a two-family home in Durham, NC as a result of the couple's divorce settlement. Mrs. Lloyd has not been employed since 1972, however, she remains a licensed registered nurse and at one time held a real estate license in Virginia.
The plaintiff has knee problems but jogs and bikes on a regular basis and has trekked and traveled extensively worldwide. When she testified she appeared robust and fit. Mrs. Lloyd suffers from no mental or medical conditions that would have prevented her employment since the dissolution of the marriage. The court finds that Mrs. Lloyd has made a lifestyle choice and chosen not to be employed. Her financial needs have been met by alimony, social security benefits (since age 62) and income derived from her former husband's pensions.
The plaintiff testified she lived in the Windsor Locks home from 1996-2001. The home has not been occupied since 2001 and she failed to rent the property. The two-family home in Durham, NC has not been regularly rented since approximately 2001. The plaintiff reported numerous expenses and repairs for the Windsor Locks, CT and Durham, NC properties on her Financial Affidavit. However, it is clear that with minimal effort the properties could have been fully rented to provide Mrs. Lloyd with an additional income stream. As contemplated by the language in the Separation Agreement that the income would not be grounds to modify alimony. In the alternative, the properties could have been sold and the proceeds invested reducing her expenses and creating investment income which would not have been the basis of a modification. The court finds plaintiff failed to seek employment and increase her assets postjudgment.
In the 11 years since the dissolution Mrs. Lloyd's primary past time has been to travel extensively around the world. She has visited Nepal four times, staying 3-4 months each visit. The plaintiff made several trips to Morocco and West Africa. the last trip in February 2006 lasted 3 months. Mrs. Lloyd spent 3 months in Central America, traveled to southwest China and Tibet, toured Turkey and Greece for 3 months, visited Vietnam and India for several months, spent 6 weeks in New Zealand and 6 weeks in Egypt. Essentially her lifestyle choice was to become a world traveler.
The plaintiff began to collect social security benefits at age 62 (originally in the amount of $380 per month) under the mistaken belief she could collect half of her former husband's benefits at age 66.
Shortly prior to the trial the plaintiff purchased a new automobile for $26,000. She is eligible for medical/dental insurance from the Federal Blue Cross/Blue Shield plan for $126 per month (as a result of her former husband's employment). When she turned age 65 in April 2008 she qualified for Medicare benefits.
The defendant is paying for a survivor annuity for the benefit of the plaintiff. When the defendant dies the plaintiff will be entitled to receive $419-$441 per month survivor annuity.
Mrs. Lloyd failed to have the Durham, NC real estate appraised. She testified it had been assessed for $343,680 but she had appealed the assessment and she believed it was worth $300,000. When the Durham units were rented the tenants paid $950 per month. Mrs. Lloyd testified she did not need the North Carolina rental income but it "would be nice to have it."
Michael Allard testified as a real estate appraiser (Ex. B) regarding the value of the Windsor Locks property. He testified the home was worth $207,000 and if rented would generate $1,200 per month. The court notes that the fair market value appraisal was dated August 1, 2007 and was not adjusted for the recent downturn in the real estate market. The court finds that plaintiff could have generated $37,200 per year ($950 x 2 + $1,200 $3,100), or $3,100 additional monthly income minus expenses if the real estate she owned had been fully rented. While this income would not be a change of circumstances to modify alimony it could have been used to increase plaintiff's retirement assets postjudgment.
Attorney Jeffrey Winnick testified as an expert witness regarding the assignment of retirement benefits from the defendant to the plaintiff under the Federal Employers Retirement System (FERS). The parties ultimately agreed and stipulated that the Federal Employees Retirement System Division of Pension Order dated July 7, 1998 does not comply with the terms of the divorce judgment dated November 21, 1996 (Ex. 7). The parties signed an amended FERS Order that the plaintiff would receive $358.50 per month, an increase over the $102.38 the plaintiff had been receiving.
Mrs. Lloyd's Financial Affidavit indicates she is receiving $1,332 gross weekly income composed of the Social Security $175.00, Navy Pension $254.00. In addition, after the Amended QDRO was filed, she would receive $358.50 per month or $84.37 weekly from FERS. This represents an increase of $59.74 per week. The plaintiff's total gross weekly income without alimony equals $513.37. Her Financial Affidavit reflects weekly spending on vacations of $58, IRA contributions of $106, charity of $38 and loss on Durham, NC of $85.00 totaling $287 per week.
Michael Allard testified as a Real Estate Appraiser regarding the value of the Windsor Locks property if sold and the rental value. His testimony was persuasive that the rental value of the property was $1,200 per month. While this property had been unused as a home by the plaintiff for a significant time postjudgment she testified at trial she planned to make her home in Windsor Locks.
Attorney Jeffrey Winnick testified as an expert witness regarding the plaintiff's share of the defendant's FERS pension. The court found his testimony persuasive that the original computation of the plaintiff's monthly benefit did not correspond to what she was awarded in the divorce judgment. (Ex. 7).
As of the date of the original divorce the defendant's financial affidavit reports gross income of $2,215 per week, liabilities of $63,820 and assets valued at $83,789 ($154,979 — $71,190 value of Durham, NC real estate). At the time of the subject hearing Mr. Lloyd's assets totaled $815,304.
As of the date of the original dissolution the plaintiff's Financial Affidavit disclosed no income other than alimony. After including the Windsor Locks, CT and Durham, NC real estate, her assets (excluding the value of her share of defendant's pensions) totaled $252,342. Her Financial Affidavit as of February 7, 2008 shows total cash value of assets in the amount of $637,492.
ANALYSIS
The defendant argues that his alimony should be terminated because his post-retirement income is based on retirement assets divided on the date of the divorce or earned after the dissolution. He states that for his former wife to share in retirement assets accumulated post-divorce would be an impermissible modification of a property settlement and grossly unfair.
The defendant's argument that plaintiff failed to maximize income from the property she received as a result of the divorce is accurate but fails to take into consideration the fact that the Judgment dated November 21, 1996 specifically excluded rental income "from the current rental properties or any future rental properties purchased with the proceeds from the sale of these properties, or income generated by the proceeds from the sale of any rental properties without any such income constituting a substantial change of circumstances for the purposes of modification." (Judgment, page 2, paragraph 1.(B)). The Windsor Locks, CT property was vacant for a number of years and the Durham, NC 2-family has been inconsistently rented. Mrs. Lloyd chose to neither rent nor sell the real estate thus incurring expenses and gaining no income and limiting her ability to accumulate assets.
Mrs. Lloyd has made a number of poor financial decisions including opting to take reduced social security benefits based on her earnings at age 62 rather than waiting until age 66 to increase half her former husband's benefits.
The defendant did not take early retirement and in fact, waited until age 68 to retire. It is clear to the court that defendant's retirement was not motivated by a desire to reduce or terminate his alimony.
The plaintiff and defendant both cite Simms v. Simms, 283 Conn. 494 (2007), to support her/his argument.
In Simms, the Supreme Court found the trial court improperly determined it could not consider the value of the defendant's non-income producing assets in a modification of alimony and abused its discretion in reducing alimony from $78,000 to $1 per year. In Simms, the former husband filed a motion to modify alimony upon his retirement at age 67. His retirement income was $1,640 in social security benefits. However, Mr. Simms sold his interest in a business for $468,571 plus $400,000 to be paid in installments.
CGS § 46b-86(a) governs modifications or terminations of alimony after a dissolution. The statute provides that a "final order for alimony may be modified by the trial court upon a showing of a substantial change in the circumstances of either party . . . Under that statutory provision, the party seeking the modification bears the burden of demonstrating that such a change has occurred . . ." Simms v. Simms at 502.
The Supreme Court in Simms held that the trial court has the authority to consider the value of the parties' assets ruling on a modification of alimony.
The court has followed the direction of the Supreme Court in Simms in the case at hand. The Lloyds are a classic example of the ant and grasshopper parable where the ant works hard and diligently all summer while the grasshopper plays. As winter arrives (in this case as retirement arrives) the grasshopper has no food stored to sustain him for the winter and asks the hardworking ant to share what he has stored.
If Mrs. Lloyd spends the time and energy to rent the Durham duplex she would have had additional income during the last 11 years. If she sold the property for what she claims it is worth ($300,000) and invested it at 4% interest she would have had $12,000 additional income per year (and more when the economy was doing better).
The plaintiff failed to increase her assets by not working and not maximizing the income from her rental units. The defendant should not be held responsible for his former wife's failure to plan for her retirement, nor should he be expected to pay full alimony when his income has been significantly reduced due to retirement for legitimate purposes.
Mrs. Lloyd is also asking the court to order the defendant to maintain $250,000 life insurance at a cost to him in excess of $3,700 per year. Mr. Lloyd, however, has insured the continued payment of an increased FERS pension benefit by opting for a survivor benefit annuity.
CONCLUSION CT Page 10378
Based on the facts of the case, including the applicable statutes and case law, the court grants the defendant's motion to modify alimony reducing alimony to $100 per week or $430 per month. In addition, in consideration of the FERS survivorship annuity paid for by Mr. Lloyd the requirement that he carry $250,00 of life insurance is reduced to $50,000