Does a wife’s ability to withdraw from an IRA account constitute a material change warranting a reduction in spousal support?

Does a wife’s ability to withdraw from an IRA account constitute a material change warranting a reduction in spousal support?

Yes, according to Wright v. Wright, CL09-4587-01, from the Circuit Court of the City of Richmond, Virginia, the ability to withdraw qualifies as a material change that was unforeseeable at the time of the final order of divorce and justified a reduction in the husband’s spousal support payments.

The Circuit Court of Richmond City, Virginia, granted the parties’ final order of divorce and determined spousal support in 1992.  Eighteen years later, the husband made a motion to modify spousal support. In his motion, the husband argued the wife no longer needed spousal support and that his income had been substantially reduced.  The divorce judge had awarded to the wife in equitable distribution substantial investments and the former marital residence. Since the time of the award, the husband alleged the wife had increased her investments and available income. Moreover, he argued the wife now qualified for Social Security and could withdraw from her IRA account, and her assets would continue to grow as she became Medicaid-eligible.

In response to the husband’s motion, the wife alleged that the investment scheme was foreseeable at the time of the final decree and, thus, should not constitute a material change in circumstances.  In addition, she alleged any reduction in the husband’s earnings should be noted as the result of his voluntary actions, and he still had the ability and assets to pay support.

Legally, the Court may increase, decrease, or terminate an amount or duration of spousal support upon motion by either party. Va. Code. Ann. §20-109(A).   In order to modify support, the party seeking the change must prove 1) a material change in circumstances occurred, and 2) that the material change justifies modification of the award. Barrs. v. Barrs, 45 Va. App. 500, 612 S.E.2d 227 (2005).  This material change must have happened following the most recent judicial review and “must bear upon the financial needs of the dependent spouse or the ability of the supporting spouse to pay.” Street v. Street, 24 Va. App. 2, 480 S.E.2d 112 (1997). If the party seeking the change presents a prima facie case (evidence sufficient to prove the case), the opposing party must either present counter evidence or leave the question for the court’s discretion.

In Wright, the Circuit Court examined the factors established in Va. Code §20-107.1(E) as the basis of its determination. The Court held that the wife’s investment increases after the equitable distribution award were foreseeable and did not constitute a material change. However, the Court held that the wife’s ability to withdraw from her IRA account was unforeseeable at the time of the final divorce; therefore, it should be considered a material change. Because the wife voluntarily created the account and could now withdraw from it, the Court determined that the money could be treated as imputed income. Moreno v. Moreno, 24 Va. App. 190, 480 S.E.2d 792 (1997).  The Circuit Court of the City of Richmond Virginia noted that the court in the Rogers case held that the wife could withdraw half the amount in the IRA and be taxed at the rate applicable to a 30% tax bracket.  In Wright, the Circuit Court granted the husband’s motion to amend support payments as he had established a material change in circumstances and that the change justified a change in support.   The court scheduled the case for another hearing on the appropriate amount of the modification of support.

You should consult with your divorce lawyer in Richmond, Virginia, or Richmond Divorce Lawyer James H. Wilson, Jr., concerning how your retirement, or the retirement of your former spouse, might affect a spousal support obligation.

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