Issue: Whether a Former Husband’s inheritance annuities, which he is not currently receiving any monies from, can be considered in determining his “income” and ability to pay alimony.
Brief Answer: The Former Husband’s inheritance annuities should not count as income to the Former Husband when determining either need or ability to pay alimony to the Former Wife.
ANALYSIS
A well-established principal in family law is that an inheritance by one spouse is a non-marital asset that is not subject to equitable distribution, so long as it is not commingled. [see Fla. Stat §61.075(6)(b)2; Martin v. Martin, 923 So. 2d 1236 (Fla 1st DCA 2006)] In the instance case, the Former Husband received three annuities through an inheritance of a deceased parent after the dissolution of is marriage. Therefore, these annuities are a non-marital asset and the Former Wife has no claim to them.
The annuities that the Former Husband was devised have no stream of income at the current time. Under current law, if funds are removed from an IRA or annuity before the participant is 59 1⁄2 years old, there is a 10% extra penalty tax. (see: http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics--- Tax-on-Early-Distributions) A mandatory withdrawal from these accounts does not occur until the Former Husband reaches the age of 70 1⁄2 years old. At this time, the Former Husband does not wish to make any withdrawals from the annuities and incur the penalty.
In order to determine an individual’s ability to pay alimony, one thing the Court must look at is all sources of income available to each party. Fla. Stat. §61.08(2(i). This includes income available to a party either through an investment or asset. The key word in the statute is “available” to the party. The Former Husband’s annuities aren’t technically available to him until he reaches the age of 70 1⁄2 without incurring a hefty penalty.
In the case of Boggess v. Boggess, 34 So. 3d 115 (Fla. 3rd DCA 2010), the Third District Court of Appeal found that the trial court erred in improperly including income from an annuity to Mr. Boggess. Id. at 116. The court held that payments from annuities, if the payments come from principal, are not to be considered income. Id. at 116-117. Even if the court in this case said that the annuities were available income to the Former Husband, the principal payments coming from the annuities should not be included as income to him.
As a reminder, the courts have maintained that it cannot require the Former Husband to diminish his non-marital assets to pay alimony payments. See Galligar v. Galligar 77 So. 3d 808 (Fla. 1st DCA 2011) (holding the trial court may properly consider a former spouse's assets in determining his or her ability to pay; however, the court cannot require the former spouse to deplete assets to make alimony payments). As such, the Former Husband should not be required to “tap into” his inheritance annuities that he is not receiving monies from to pay his Former Wife alimony.
CONCLUSION
Any principal payments that may be made to the Former Husband from the non- marital inheritance annuities should not count as income to the Former Husband when determining his ability to pay alimony to the Former Wife.
By Kenny Leigh
