On January 19, 2006, the Michigan Court of Appeals decided in an unpublished opinion that a trial court has to consider the needs of the parties and their ability to pay when ordering a party to make the COBRA payments for an ex-spouse.
In Murphy v Murphy, the defendant husband appealed the trial court’s award of three years of COBRA benefits to plaintiff wife. The trial court had awarded alimony to her in the amount of $300 per week. Together with the child support, the husband would thus pay nearly 50% of his after-tax income to her before the cost of the COBRA benefits was even considered.
The Court of Appeals ruled that it was improper for the trial court to order the husband to make the COBRA payments without any indication of how much they would be and how those payments would affect his income. The court likened the analysis to one for alimony, saying:
"It cannot be said that, in awarding COBRA benefits to plaintiff, the trial court balanced the needs of each party or considered how much defendant or plaintiff could afford without any evidence or even consideration of the actual cost of doing so."
Thus, the court remanded to the trial court for further proceedings with regard to the COBRA payments and to consider whether the COBRA payments would affect the trial court's prior ruling on alimony.
An additional issue considered by the court was whether the trial court should have considered the husband's recent reduction in overtime when setting the amount of alimony. Since this issue often is raised, it's important to note the Court of Appeals' response:
"Defendant’s complaint that, because of his reduced overtime hours, the annual income imputed to him does not reflect his current income, was considered and rejected by the trial court. This was perfectly reasonable and well within the trial court’s discretion. Given that the number of hours defendant worked varied over the years (as did his income), taking a sample of defendant’s most recent completed calendar years of work and then averaging the number of hours worked is a very reasonable method to measure his income. If it turns out that defendant earns less income now or in the future, due to reduced hours of overtime, or any other reason, he is free to file for a change of alimony due to changed circumstances. Gates, supra at 433-434. With regard to the permanency of the alimony, defendant may likewise request a change in alimony when he retires."
Read the entire case of Murphy v Murphy here.
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