At long last, your divorce is OVER. You received a large amount of funds through trial or settlement. You were also awarded spousal support to be paid by your ex-spouse monthly. Time to go celebrate and buy whatever you want with your newfound financial freedom! Right?
Often, one spouse takes on responsibility for money management and investments. It can be overwhelming if your spouse managed a large community estate during the marriage and now you are left with half of the funds and assets to manage on your own.
It may be difficult to ascertain good investments from bad. If you received a sizable amount of money from your divorce, those funds must be invested wisely before coming to court to request an increase in support. The court may also impute a reasonable rate of return on uninvested assets when calculating spousal support.
Before making decisions regarding investment opportunities, it is important to consult with a financial expert. Poor financial decision making could greatly impact your ability to request an increase in spousal support.
If you, the recipient of monthly spousal support, decide to come back to court and request more support, one of the factors a court must consider is “the obligations and assets, including the separate property, of each party.” Cal Fam. Code § 4320(e). So, if you were awarded a large settlement or equalization payment through your divorce and mismanage those funds ahead of making a request for additional spousal support, the court may not sympathize much with your situation.
This is based on prominent case law found in a case called In re Marriage of McElwee, 197 Cal. App 3d 902 (1988), which states:
“Just as lack of diligence in seeking employment may lead to a refusal to award support, so to may improvident management of assets, which were sufficient to provide self-sufficiency in the accustomed lifestyle, justify termination of support and jurisdiction even though such an order may result in an alteration in the supported spouse’s lifestyle.” McElwee at 909-910.
In McElwee, the wife received assets and cash that totaled almost $500,000 (in 1980s money!). The wife then was found to have made “a series of imprudent, high risk investments from her share of the community property”. As a result, what started as her request to increase her $1,800 per month support payments ended with the court decreasing her payments to $500 per month and ordering termination of support after three years.