May 26, 2020

Change? Or Changed Circumstances? Does COVID-19 Constitute a Change in Circumstances for Alimony?

By Stefanie Jedra, CPA, Manager, Advisory Services

Change? Or Changed Circumstances? Does COVID-19 Constitute a Change in Circumstances for Alimony? Marital Dissolution

COVID-19 has affected us all in different ways. As things begin to move towards a resolution and we each begin to find our “new normal,” some people are wondering whether their new normal constitutes “changed circumstances” that warrant an alimony modification. The question is whether your new normal is simply a temporary change from the past, or whether you’ve experienced changed circumstances that impair your ability to maintain the standard of living as reflected in your original decree or agreement.

In New Jersey, Lepis v. Lepis 83 N.J. 139 (1980) is often cited when discussing what constitutes changed circumstances. The decision cites factors of changed circumstances that courts had previously recognized as warranting a modification. These factors include:

  1. An increase in the cost of living.
  2. Increase or decrease in the supporting spouse’s income.
  3. Illness, disability or infirmity arising after the original judgement.
  4. The dependent spouse’s loss of a house or apartment.
  5. The dependent spouse’s cohabitation with another.
  6. Subsequent employment by the dependent spouse.
  7. Changes in federal income tax law.

Maybe even more important than the cited factors in the decision is reference to the fact that courts had consistently rejected requests for modification based on circumstances that were only temporary. Herein lies the question: are the effects of COVID-19 temporary, or are they permanent, thus meeting the definition of changed circumstances. The answer will be different for every individual. Further, the answer may change as things continue to develop and, hopefully, resolve.

Amid all of upheaval wrought by COVID-19, some companies are doing better than ever – while some unfortunately will fail. The pandemic has affected individuals on a similar spectrum, and the result will be positive for some and negative for others. Whether these changes are permanent or temporary is not yet known. For many small, privately held businesses, social distancing has put operations on pause. Further, these limitations have caused expectations about income and cash flows to become more speculative than ever. Until restrictions are lifted and a clear path forward exists, the permanent effects for each individual are truly unknown.

If you believe that you’ve been affected by changed circumstances that are not temporary, you should contact a qualified family lawyer immediately. The facts and circumstances for each case will be different and may warrant different treatment. For example, when a privately held business provides a substantial source of income, an analysis of income and cash flow by a qualified forensic accountant may be necessary. We at Marcum LLP specialize in this area and are experienced in helping family law attorneys analyze income and cash flows during changing economic environments.

Coronavirus Resource Center

Have more questions about the impact of the coronavirus on your business? Visit Marcum’s Coronavirus Resource Center for up-to-date information.