In their separation agreement, Mr. Moore promised to pay his wife alimony for seven years. They both agreed that alimony would be non-modifiable by the court. But the wife remarried before the end of the seven years. Mr. Moore stopped paying support. His reasoning was that Maryland law provides for termination of alimony on marriage. His wife argued that the non-modfiable clause in agreement should control.

The Maryland Court of Appeals agreed with the husband. It said that if the parties wanted something different than the law in their agreement they could have said so. As for the non-modifiable provision, the court said that modification was not termination, although the two dissenting judges said that it was the most radical type of modification imaginable. Moore v. Jacobsen, 373 Md. 185, 817 A.2d 212 (2003).

Many agreements do not have a cohabitation clause. In such a case, would the court terminate alimony upon cohabitation instead of remarriage? Probably not although no one has tried it yet. While there is case law that says alimony may be modified on cohabitation based on economic considerations, it is not a termination event in the Maryland statute.

In a recent U.S. Tax Court case, my client had signed a separation agreement that said certain payments by her husband would be treated as alimony. However, she did not report any of the payments as income and the IRS was coming after her for taxes for several years.

The agreement provided that the husband would keep the marital residence and buy the wife a new house. The husband paid the mortgage on the new house. The mortgage payments were characterized as support and alimony.

I argued that these payments did not meet the tests for alimony set forth in IRS Code Section 71. Alimony must terminate on death of either party or remarriage of the payee. Since the agreement was binding on the heirs, and it said in no event would the wife have to pay the mortgage, the husband’s obligation to pay the mortgage would survive his death or the wife’s death. And the wife had remarried twice already, but the husband continued to pay the mortgage.

The IRS argued that the parties’ agreement said it was alimony, but the Tax Court has ruled in the past that it does not matter how the parties have characterized the payment in the agreement — the statute controls as to whether it is alimony or not. Don’t feel too bad for the IRS though. They can still go after the husband for the tax. The reason for Section 71 is to prevent high income tax payers from turning a tax free property settlement into deductible alimony.

James. J Gross is the co-author of the e-book in PDF format called How to File For Divorce in Maryland, available for download today on DivorceNet.Com for $19.95.

He is also the author or co-author of the following books which are available at Amazon.com:

  • Fathers’ Rights: The Best Interest of Your Child Includes You
  • File for Divorce in Maryland, Virginia and Washington DC
  • Money and Divorce

He has been selected by Washingtonian Magazine and Maryland Superlawyers as one of the region’s top divorce lawyers.

Mr. Gross is a practicing partner in the Chevy Chase, Maryland law firm Thyden Gross and Callahan. He is the author of the blogs Maryland Divorce Legal Crier, The Daily Answer Desk, and Not Just Every Other Weekend and the e-mail newsletter In the Courts.

Mr. Gross is a seasoned and experienced divorce lawyer and eminently qualified to answer your questions, provide legal assistance, and to speak with authority on divorce, child custody issues, child support, property distribution, alimony, and family law topics.

We know that you will enjoy reading his insightful commentary and thoughtful blog postings.