What is the Effect of a Business or Property Buyout or Equalization on Alimony?

Understanding Spousal Support and Buyouts in Divorce Cases

Sometimes a spouse argues because they have to pay their spouse a significant buyout or equalization payment for a business or other assets, they should not also have to pay spousal support consistent with the marital standard of living.

This argument essentially states, "My spouse is getting enough money in the buyout; why does [he or she] need spousal support?"

It is a common complaint. Let's look into it further.

Case Overview - The Marriage of Martin case

The case In re Marriage of Martin deals with the dissolution of the marriage between Dominic M. Martin and Patrice Martin. Dominic Martin (Appellant) challenged the trial court's decision to award spousal support to Patrice Martin (Respondent), arguing the buyout and equalization payments she received should negate the need for spousal support.

The appellate court upheld the trial court's decision to award spousal support. Although this is an old appellate case, it is still good law in California.

Key Issue: Spousal Support Award Despite Buyout and Equalization Payment

Property Division and Buyout

During the divorce proceedings, Dominic and Patrice agreed on a property division. Dominic retained the community property assets and paid Patrice $209,500 in cash, which included $136,000 for her share of the winery's stock, $51,000 for her share of the family residence, and $22,500 for her share of the winery's pension and retirement accounts.

Spousal Support Award

Despite the significant buyout, the trial court ordered Dominic to pay Patrice $600 monthly in spousal support starting October 1, 1989. The spousal support was to continue until further order, Patrice's death, or her remarriage.

Court's Rationale

The appellate court emphasized a spouse cannot finance a "buyout" of community property and then claim an inability to pay spousal support. The trial court appropriately considered all financial aspects, including the buyout and Patrice's separate property, when determining the need for and amount of spousal support.

This case demonstrates that receiving a buyout and equalization payment does not automatically eliminate the possibility of being awarded spousal support. Courts will thoroughly assess both parties' financial needs and contributions, ensuring that support is provided when reasonable to maintain the standard of living, especially in long-term marriages.

Fairness and Exceptions

Is This Always the Right Result?

Is this a fair result? Yes, but that doesn't mean it is the right result in every case.

There are instances where the buyout is so significant that spousal support becomes unnecessary and can be "reserved" and potentially put at zero (and arguably potentially even terminated). However, termination is uncommon in long-term marriages (10 years or more), especially where the supported spouse has little to no income.

Contact Us for Expert Legal Advice

Do you have a case involving a buyout and are concerned about its impact on spousal support? Contact us for help. We have also listed below additional alimony/spousal support articles you will find informative.