Minnesota law defines spousal maintenance as an award of payments from the future income or earnings of a former spouse to the other former spouse. Minn. Stat. §518.003 subd 3a.
Income can include “any form of periodic payment to an individual, including but not limited to, salaries, wages, commissions, [and] self-employment income.” Minn. Stat. §518A.29(a). “Self-employment income includes “income from … operation of a business, including joint ownership of a partnership or closely held corporation.” Minn. Stat. §518A.30.
But there are so many different forms of income and earnings (wages, overtime, commission, bonuses, investments), making future income or earnings impossible to know. Awarding payments from an unknown source, can make a spousal maintenance award seem like a “hollow” remedy.
One way of making a spousal maintenance award from a variable source more workable is to create different categories of spousal maintenance payments. Parceling out maintenance into separate categories, depending on the source of the payment, is a way of making a just and equitable spousal maintenance award. If a spousal maintenance payment is limited to a certain type of income, the interests of both spouses can be protected. The spousal maintenance recipient doesn’t miss out on a spouse’s future income. The spousal maintenance obligor isn’t forced to pay spousal maintenance without the commensurate income.
Spouses to a divorce proceeding will often include this ‘tiered’ spousal maintenance scale as part of their final divorce agreement. ‘Tier I’ maintenance is a baseline award based on a spouse’s predictable and stable income stream, and ‘Tier II’ based upon the spouse’s clearly-defined, yet less predictable, income stream, such as bonus, commission, or investment income.
Minnesota courts are favorable to divorce agreements, and will treat a stipulated judgment and decree as a binding contract, and apply the language of the contract by its plain and unambiguous meaning. Sehlstrom v. Sehlstrom, 925 N.W.2ns 233, 238 (Minn. 2019). See also Carl Bolander & Sons, Inc. v. United Stockyards Corp., 215 N.W.2d 473, 476 (Minn. 1974). So it’s important to be careful when creating a ‘tiered’ spousal maintenance scale, to use the right words.
Recently, parties to a Minnesota divorce agreement, established a tiered spousal maintenance schedule, agreeing that Wife would receive a baseline Tier I maintenance award, and Tier II spousal maintenance award based on a percentage from Husband’s employment income. Wife later found that Husband also received investment earnings from his employer, which Wife argued should be included as ‘employment income’ and therefore part of her ‘Tier II’ spousal maintenance award.
The court disagreed, and found that the parties’ agreement to limit Tier II spousal maintenance to Husband’s ‘employment’ income, any other form of income, including investment income, was excluded from the Tier II spousal maintenance payment. Wife was precluded from claiming Husband’s investment income as part of her spousal maintenance award.
The point of a tiered spousal maintenance award is to ensure a fair and equitable spousal maintenance award is derived from a dynamic and variable steam of future earnings. To that end, careful selection and use of plain and unambiguous wording in a divorce agreement is vital, to ensuring spouses are not forced to go back and litigate what is meant by Tier I and Tier II spousal maintenance.
Consider seeking sound legal advice when spousal maintenance is a component of your Minnesota divorce.
Contact Beyer & Simonson
If you are facing divorce and any of the divorce-related issues such as spousal maintenance, child support, child custody, property division, or domestic abuse matters, you need our experienced Minneapolis divorce attorneys to help you. Contact Beyer & Simonson in Edina, Minnesota today at (952) 303-6007.