In Re the Marriage of Richard C. Mauer and Carol K. Mauer, Upon the Petition of Richard C. Mauer

IN THE SUPREME COURT OF IOWA
No. 14–0317
Filed January 29, 2016
IN RE THE MARRIAGE OF RICHARD C. MAUER
AND CAROL K. MAUER,
Upon the Petition of
RICHARD C. MAUER,
Appellee,
And Concerning
CAROL K. MAUER,
Appellant.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Black Hawk County, Jon
Fister, Judge.
Both parties seek further review of the financial provisions in their
dissolution decree. DECISION OF COURT OF APPEALS AFFIRMED IN
PART AND VACATED IN PART; DISTRICT COURT JUDGMENT
AFFIRMED AS MODIFIED.
Jacob R. Koller of Simmons Perrine Moyer Bergman, PLC, Cedar
Rapids, for appellant.
Allison M. Heffern and Diane Kutzko of Shuttleworth & Ingersoll,
PLC, Cedar Rapids, and Max E. Kirk of Ball, Kirk & Holm, P.C., Waterloo,
for appellee.
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WIGGINS, Justice.
Both parties seek further review of the financial provisions in their
dissolution decree. Pursuant to our discretion to consider issues raised
on further review, we let the court of appeals decision stand with respect
to the property distribution, child support, life insurance, and appellate
attorney fees. We do find, however, that the spousal support award by
the district court was too low and the spousal support award as modified
by the court of appeals was too high. Accordingly, we modify the spousal
support award in the dissolution decree as set forth in this opinion.
I. Prior Proceedings.
Richard Mauer filed a petition to dissolve his marriage to Carol
Mauer. Following a trial, the district court weighed conflicting evidence
submitted by the parties as to the value of various business assets and
real property. It then distributed the Mauers’ substantial assets,
ordering Richard to make an equalization payment to Carol in
installments and pay her half the net proceeds from the sale of three
commercial lots they owned. The court ordered Richard to pay $18,000
per month in spousal support, decreasing to $10,000 per month when
Carol reaches retirement age and $5000 per month when Richard
reaches retirement age or actually retires, whichever occurs later.
The court also awarded joint legal custody of the Mauers’ two
minor children to Richard and Carol, with Carol responsible for their
primary physical care. Accordingly, the court ordered Richard to pay
$3624 per month in child support initially, decreasing to $2598 per
month upon the high school graduation of the older minor child. In
addition, the court ordered Richard to designate Carol as beneficiary on
one of his existing life insurance policies until the entire equalization
payment was paid.
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Both parties filed posttrial motions to amend or enlarge the
findings or rulings of the district court. The district court issued an
order amending the decree and a stipulated nunc pro tunc order. In its
order amending the decree, the court adjusted the equalization payment
to $243,458 to correct errors in its original calculation. The court also
concluded the spousal support award was set too high and amended the
decree to order Richard to pay $9100 per month in spousal support
initially, decreasing to $7000 per month when Carol reaches retirement
age and $5000 per month when Richard reaches retirement age or
actually retires, whichever occurs later. The court declined to order
Richard to maintain life insurance to secure these support obligations.
Both parties appealed, and we transferred the case to the court of
appeals. The court of appeals affirmed the property valuations and
distribution in the decree, finding both to be equitable. In addition, the
court affirmed the child support determination in the decree as being
within the sound discretion of the district court. However, the court
concluded the spousal support award by the district court was
inequitable and modified the decree in this respect, ordering Richard to
pay $25,000 per month in spousal support until Carol’s remarriage or
the death of either party. In doing so, the court found its determination
to be consistent with the American Academy of Matrimonial Lawyers
(AAML) guidelines. The court also affirmed the district court’s refusal to
require Richard to secure his spousal support obligations with life
insurance.
Both parties sought further review, which we granted. In his
application for further review, Richard alleges the court of appeals
improperly awarded Carol lifetime spousal support in the amount of
$25,000 per month. In her application for further review, Carol alleges
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the district court and the court of appeals erred in failing to order
Richard to secure his spousal support obligations with life insurance.
II. Background Facts.
Richard and Carol married in July 1985. At the time of the trial,
they had been married for twenty-eight years. Carol was fifty-six years
old, and Richard was fifty-five years old. During the course of the
marriage, the couple had four children. Two of the children were still
minors upon dissolution of the marriage, including a daughter who was a
senior in high school and a son who was a freshman.
Richard and Carol met in 1984. At the time, Richard was in
medical school at the University of Iowa, where he had previously
completed his undergraduate degree in science in 1977. Carol had
recently received a master’s degree in business administration from the
University of Iowa, having previously graduated from Cornell College with
a double major in German and biology. Upon Richard’s graduation from
medical school, he completed an internship in internal medicine in
Des Moines. During his internship, he decided he was passionate about
ophthalmology. He was accepted into a residency program in Detroit,
Michigan. While awaiting the start of his residency, he worked for one
year as an emergency-room doctor in Ottumwa and Des Moines. During
that year, Richard and Carol were married.
While Richard was completing his three-year residency, Carol
worked in computer sales. She was the primary breadwinner for the
couple during that period, and Richard received only a small stipend as a
resident. Richard completed his residency in 1989. That same year,
Carol stopped working just before their first child was born. The couple
moved to Waterloo the following month, where Richard began working as
an ophthalmologist.
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Once the couple arrived in Waterloo, Richard rapidly developed a
successful ophthalmology practice that continued to grow over time.
Over the years, he also launched numerous business endeavors, some of
which were more successful than others. At the time of the trial, Richard
was the sole owner of three closely held corporations: Cedar Valley
Ophthalmology, P.C.; Mauer Vision Center, P.C.; and D’Vine Medical
Spa, L.L.C. Cedar Valley Ophthalmology does business as Mauer Eye
Center in Waterloo, Iowa, and has forty-five to fifty employees. Mauer
Vision Center is located in Waverly, Iowa, and has several employees. In
addition, Richard and Carol each owned an interest in Mauer Land,
L.L.C., a limited liability company that owns the building housing both
Mauer Eye Center and D’Vine Medical Spa. The couple also owned three
commercial lots at Pinnacle Prairie in Cedar Falls and a commercial
property leased by Veridian Credit Union.
Following the birth of the couple’s first child, Carol devoted herself
to being a mother and homemaker. Although she offered to return to
work several times, Richard preferred she stay home with the children.
In addition to caring for the children and the family home, Carol devoted
herself to various community activities. In 2007, she became a licensed
massage therapist and began practicing Reiki, massage, and shamanism
at D’Vine Medical Spa. For the next several years, she worked
approximately twenty-five to thirty hours per week. Unbeknownst to her,
Richard paid her through contributions to a 401k retirement account.
From 2009 to 2012, Carol also taught classes at a massage school, for
which she was paid approximately $3000 per year. However, she has not
had a regular income from employment since 1989.
Richard petitioned for divorce in August 2012 and moved out of
the family home a few days later in September 2012. Carol remained in
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the home with the two minor children who were still in high school.
While they awaited trial, Richard continued to pay between $11,000 and
$12,000 per month for the benefit of Carol and the two minor children,
which was consistent with his obligations under a temporary support
order.
III. Scope of Review.
When considering an application for further review, we have
discretion to review all the issues raised on appeal or in the application
for further review or only a portion thereof. In re Marriage of
Schenkelberg, 824 N.W.2d 481, 483 (Iowa 2012). In this case, we
exercise that discretion to review only the spousal support award. Thus,
the court of appeals decision affirming the dissolution decree as modified
will stand as the final decision of this court in all other respects.
Marriage dissolution proceedings are equitable proceedings. Iowa
Code § 598.3 (2011); Schenkelberg, 824 N.W.2d at 483. Thus, the
standard of review is de novo. Schenkelberg, 824 N.W.2d at 483; see
Iowa R. App. P. 6.907. Although we give weight to the factual findings of
the district court, we are not bound by them. Schenkelberg, 824 N.W.2d
at 483; see Iowa R. App. P. 6.14(6)(g). But we will disturb a district court
determination only when there has been a failure to do equity. In re
Marriage of Anliker, 694 N.W.2d 535, 540 (Iowa 2005).
IV. Spousal Support.
Before we begin our analysis concerning the spousal support
award in this case, we think it is important to discuss the general
principles governing such awards.
A. General Principles. We considered the subject of spousal
support in In re Marriage of Gust, 858 N.W.2d 402, 407–14 (Iowa 2015).
Although we acknowledged a few states determine spousal support
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awards by employing alternative approaches that rely on arithmetic
formulas, we cautioned Iowa courts “are compelled to follow the
traditional multifactor statutory framework” set forth in Iowa Code
section 598.21A. Id. at 407–10. Under the statutorily mandated
approach, a court may grant spousal support
for a limited or indefinite length of time after considering all
of the following:
a. The length of the marriage.
b. The age and physical and emotional health of the
parties.
c. The distribution of property made pursuant to
section 598.21.
d. The educational level of each party at the time of
marriage and at the time the action is commenced.
e. The earning capacity of the party seeking
maintenance, including educational background, training,
employment skills, work experience, length of absence from
the job market, responsibilities for children under either an
award of custody or physical care, and the time and expense
necessary to acquire sufficient education or training to
enable the party to find appropriate employment.
f. The feasibility of the party seeking maintenance
becoming self-supporting at a standard of living reasonably
comparable to that enjoyed during the marriage, and the
length of time necessary to achieve this goal.
g. The tax consequences to each party.
h. Any mutual agreement made by the parties
concerning financial or service contributions by one party
with the expectation of future reciprocation or compensation
by the other party.
i. The provisions of an antenuptial agreement.
j. Other factors the court may determine to be
relevant in an individual case.
Iowa Code § 598.21A(1). The legislature has not authorized Iowa courts
to employ any fixed or mathematical formula in applying spousal
support. Gust, 858 N.W.2d at 410–12. Rather, it has instructed courts
to equitably award spousal support by considering each of the above
criteria. Iowa Code § 598.21A(1); see id. § 598.3.
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Our recognition in Gust that, over time, our cases have established
general principles governing spousal support awards in no way
diminishes the statutory mandate to consider each criterion set forth in
section 598.21A(1). See 858 N.W.2d at 410. On the contrary, we merely
observed our cases establish the comparative weight or importance of
certain statutory criteria relative to others. Id. at 410. Thus, we
recognized fair and equitable consideration of the section 598.21A(1)
criteria ordinarily places some degree of emphasis on the duration of the
marriage and the earning capacities of the spouses as demonstrated by
the historical record. Id. at 410–12.
In attempting to assist courts applying the spousal support
analysis required by section 598.21A(1), we responded in part to
advocates for reform who criticized the traditional approach to spousal
support embraced by our legislature as lacking predictability and
consistency. See id. at 408–09. However, we recognize some degree of
inconsistency is inevitable in this context, because the financial
decisions spouses make are highly personal and responsive to
idiosyncratic facts and circumstances.
Although some advocates for reform have argued that using
guidelines to determine spousal support might alleviate predictability
and consistency concerns, agreement is lacking as to what appropriate
guidelines might look like. See id. The American Law Institute (ALI) and
the AAML have each suggested substantively different guidelines-based
approaches to spousal support determination. Compare Principles of the
Law of Family Dissolution: Analysis and Recommendations ch. 5, at 874–
1009 (Am. Law Inst. 2002), with Mary Kay Kisthardt, Re-thinking
Alimony: The AAML’s Considerations for Calculating Alimony, Spousal
Support or Maintenance, 21 J. Am. Acad. Matrim. Lawy. 61, 78–81
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(2008). See also Gust, 858 N.W.2d at 408–10. In addition, numerous
commentators have offered their own suggestions for reform, some of
which begin with consideration of the ALI or AAML guidelines. See, e.g.,
Cynthia Lee Starnes, The Marriage Buyout: The Troubled Trajectory of
U.S. Alimony Law 161–68 (2014); Jill C. Engle, Promoting the General
Welfare: Legal Reform to Lift Women and Children in the United States Out
of Poverty, 16 J. Gender Race & Just. 1, 39–43 (2013); Lara Lenzotti
Kapalla, Some Assembly Required: Why States Should Not Adopt the ALI’s
System of Presumptive Alimony Awards in Its Current Form, 2004 Mich.
St. L. Rev. 207, 232–36 (2004); Alicia B. Kelly, Sharing Inequality, 2013
Mich. St. L. Rev. 967, 973 (2013). Furthermore, a few state and local
jurisdictions have adopted their own guidelines-based approaches to
spousal support determinations. See Gust, 858 N.W.2d at 408–09;
Kisthardt, 21 J. Am. Acad. Matrim. Law. at 73–77.
In Gust, we noted our resolution on the spousal support issue was
consistent with the presumptive spousal support award that would have
resulted from application of the AAML guidelines to the facts before us.
Gust, 858 N.W.2d at 416 n.2. However, we clearly acknowledged the
AAML guidelines are not Iowa law and therefore clearly are not binding
on Iowa courts. Id. Nonetheless, we suggested the AAML guidelines
might “provide a useful reality check with respect to an award of
traditional spousal support.” Id.
However, even if spousal support guidelines may provide a useful
reality check in some cases, because they are not Iowa law, they can
serve neither as the starting point for a trial court nor as the decisive
factor for a reviewing court on appeal. See id. When application of the
factors contained in section 598.21A(1) results in a spousal support
calculation that is inconsistent with a spousal support calculation under
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any guidelines-based approach, the court’s application of the statutory
factors must prevail over the guidelines-based determination.
B. Application of Iowa Code Section 598.21A(1). In reviewing
the spousal support determination by the district court, the court of
appeals noted this case involves traditional spousal support. The court
of appeals agreed with the district court that the monthly budget of
approximately $23,000 Carol submitted at trial was excessive and she
could eventually downsize her home without decreasing her quality of
life. However, the court of appeals disagreed with the district court’s
finding that Carol’s healing arts practice was unlikely to amount to
anything more than a hobby, concluding Carol could be expected to earn
$25,000 per year working part-time as a massage therapist. Despite its
conclusion that Carol would bring in more income than the district court
accounted for, the court of appeals concluded the district court’s spousal
support award was inequitable because Carol was accustomed to a
standard of living well beyond the standard of living she could afford with
$9100 per month in spousal support.
Based on the evidence Richard provided of his annual income over
the past several years, the court of appeals concluded his expected
income was at least $1,000,000 per year. The court of appeals then
determined the $25,000 in monthly spousal support Carol requested
would achieve equity between the parties. The entire analysis applying
the section 598.21A(1) factors was contained in two sentences:
Upon our de novo review, we believe the district court’s
award of $9100 per month fails to do equity in this case. We
conclude that awarding Carol her request for $25,000 per
month in spousal support would achieve equity between the
parties.
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In a footnote citing Gust, the court of appeals acknowledged it consulted
the AAML guidelines in reaching this conclusion:
We observe our resolution on this issue is consistent
with the recommendation of the American Academy of
Matrimonial Lawyers (AAML). In this case, application of the
AAML guideline formula would produce a presumptive
unlimited support payment of $295,000 per year.
(Citations omitted.)
We disagree with the court of appeals’ analysis for a number of
reasons. First and foremost, any court, including our appellate courts,
must apply the section 598.21A(1) factors in making spousal support
determinations. As seen later in our analysis, the spousal support
awarded by the court of appeals is inconsistent with this requirement.
In Gust, we indicated in a footnote after applying the 598.21A(1)
factors that our resolution of a spousal support issue was consistent
with the presumptive result under the AAML guidelines. See Gust, 858
N.W.2d at 416 n.2. However, we did not use the AAML guidelines to
determine whether the spousal support awarded was equitable—we used
the section 598.21A(1) factors and principles suggesting the comparative
weight of those factors derived from our relevant caselaw. Id. at 410–12,
414–16.
We also find the court of appeals was incorrect to conclude
awarding Carol $25,000 per month was consistent with the AAML
guidelines. First, as previously noted, the court of appeals expressly
found Richard’s gross income exceeds $1,000,000 per year. The AAML
formula for determining presumptive spousal support “does not apply to
cases in which the combined gross income of the parties exceeds
$1,000,000 a year.” Kisthardt, 21 J. Am. Acad. Matrim. Law. at 80–81.
Second, the guidelines name several circumstances that may justify an
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adjustment to the presumptive amount or duration of spousal support,
and some of those circumstances were present in this case. Namely,
Carol was the primary caretaker of the dependent minors and gave up
her career or otherwise supported Richard’s career. See id. In addition,
the age and health of the parties and other circumstances may make
application of the presumptive formulas inequitable in this case. See id.
Carol was less than ten years from full retirement age, suffered from
recurrent shoulder pain that prevents her from working full-time, and
received a substantial property distribution in the decree. The court of
appeals concluded “application of the AAML guideline formula would
produce a presumptive unlimited support payment of $295,000 per year”
without addressing whether any of these circumstances called for
adjusting that presumptive determination. Even if this case had been
considered in a jurisdiction in which the AAML guidelines were binding,1
reliance on the presumptive determination in setting the amount or
duration of spousal support without addressing whether the above
circumstances called for departure would have been erroneous. See id.
More fundamentally, as previously noted, when application of the
factors contained in section 598.21A(1) results in a spousal support
calculation inconsistent with a calculation under any guidelines-based
approach, the calculation determined by application of the statutory
factors must prevail because the guidelines have not been adopted or
sanctioned by our legislature.
Upon its de novo review, the court of appeals determined a spousal
support award exceeding the amount accounted for in Carol’s excessive
budget was necessary to achieve equity between the parties even though
1Our research indicates no state legislature has enacted the AAML guidelines.
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it acknowledged a lesser amount would allow her to maintain the
standard of living she enjoyed during the marriage. We find this
determination was incompatible with the requirements of section
598.21A(1).
We begin our de novo review of the spousal support award by
reviewing the district court determinations in this case. Following its
initial award of spousal support, the district court reviewed its decision
after both parties filed motions to amend or enlarge findings of fact or
conclusions of law. In the final decree, the court reduced the spousal
support awarded in the original decree. In doing so, the court noted the
temporary support Carol had been receiving for more than a year had
satisfied her needs and the minor children’s needs well enough that she
made no complaint during trial that she or the children were suffering
any economic deprivation.
At the time of the trial, the parties had been married for twenty-
eight years. Both were in their fifties, and both were in relatively good
health. At the time of the marriage, both Richard and Carol had
completed advanced degrees, and he was completing his residency while
she provided primary support for the couple. After their first child was
born, they jointly decided Carol should give up her employment and
dedicate herself to raising their children. This decision allowed Richard
to build his ophthalmology practice knowing his children were being
cared for. Later in the marriage, Carol became a massage therapist.
Although Carol did not knowingly practice massage therapy for
traditional monetary compensation during the course of the marriage, we
agree with the court of appeals that her earning capacity at the time of
the trial was approximately $25,000 per year. Without spousal support,
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she will be unable to maintain the lifestyle she enjoyed prior to the
dissolution of the marriage.
The district court awarded Carol a property settlement valued at
$1,762,118. This property settlement included approximately $693,000
in liquid assets she could rely upon to generate pre-retirement income.2
Carol was also to receive half the proceeds from the sale of the
commercial lots in Pinnicle Park, which have a net value of
approximately $244,000. After paying commission and closing costs
following the sale of these lots, Carol should net at least an additional
$107,000. Thus, the district court awarded Carol investable
preretirement assets totaling approximately $800,000. Assuming a four
percent return, which is the rate of return her own expert conceded she
could realize, Carol is capable of generating approximately $32,000 in
annual investment income from these assets. We therefore conclude
Carol is capable of earning $57,000 per year in employment and
investment income.
To determine how much income Carol would require to support
herself at a standard of living reasonably comparable to that she enjoyed
during the marriage, we begin with the budget Carol provided to the
district court. Carol acknowledged the budget was essentially an
estimate of historical expenditures for the entire family before the
dissolution. Because it included past expenditures Carol was no longer
obligated to pay at the time of the trial, the budget was an inaccurate
basis for projecting her post-dissolution support needs. After adjusting
2Following the dissolution of her marriage to Richard, Carol retained retirement
assets valued at $854,856, including $831,662 in 401k accounts she was awarded in
the property distribution and $23,194 in a rollover IRA account she inherited. We do
not consider these assets in determining Carol’s pre-retirement earning capacity.
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the budget to eliminate every inaccuracy pointed out by the district
court, to remove child-specific items that could be paid for using child
support, and appropriately to reduce the cost of food, clothing, travel,
and household supplies, we find Carol requires approximately $13,000
per month, or approximately $156,000 per year, to enjoy a standard of
living approaching that she enjoyed during her marriage to Richard.
In determining how much spousal support Carol requires to
support herself at that standard of living, we must also consider the tax
consequences. Like employment income and investment income,
spousal support is taxable. Assuming an effective tax rate of twenty-five
percent, Carol requires approximately $208,000 in pretax income from
her employment, her investments, and spousal support. Thus, because
we find Carol can generate approximately $57,000 in pretax income per
year through her employment and her investments, we conclude she
requires approximately $151,000 in spousal support annually to
maintain a standard of living reasonably comparable to that she enjoyed
during the marriage. This equates to $12,583.33 per month. Richard’s
substantial income from his ophthalmology practice is more than
adequate to support this award. Schenkelberg, 824 N.W.2d at 485–87.
Accordingly, we determine $12,600 per month constitutes an equitable
spousal support award in this case.
Termination of spousal support may be appropriate when “the
record shows that a payee spouse has or will at some point reach a
position where self-support at a standard of living comparable to that
enjoyed in the marriage is attainable.” Gust, 858 N.W.2d at 412. But
based upon her age, educational background, training, employment
skills, work experience, and the length of her absence from the job
market, there is no reason to believe Carol’s earnings will ever increase
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such that she will become capable of earning enough to maintain a
comparable standard of living to that she enjoyed during her marriage to
Richard. See Schenkelberg, 824 N.W.2d at 484–87. Consequently, we
find Carol is entitled to lifetime spousal support. See id. at 487.
Nonetheless, for the following reasons, we agree with the district court
that equity requires the spousal support award to decrease when Carol
reaches retirement age and when Richard reaches retirement age. 3
When Carol reaches retirement age, in addition to drawing income
from the liquid assets she was awarded in the property distribution, she
can also draw income from the retirement assets we did not consider in
setting her preretirement spousal support. At the time of the dissolution,
the retirement and IRA accounts Carol was awarded in the property
distribution were valued at $854,856. Because these accounts will
continue to grow tax-free until Carol begins to draw upon them, by the
time Carol reaches retirement age, their value will have significantly
increased. Moreover, upon reaching retirement age, Carol will be eligible
to draw social security benefits based on her own prior employment.
In contrast, when Richard retires from his ophthalmology practice,
his income will decrease dramatically. In addition, once he begins
drawing his social security benefits, Carol will qualify to receive increased
social security benefits based on his prior employment.
Based on these facts and circumstances, we conclude section
598.21A(1) requires us to account for the retirement of both parties in
setting spousal support. When Carol reaches the age of sixty-six years
and six months, Richard shall pay spousal support in the amount of
3Neither party disputes that the question of whether or how the parties’
prospective retirements should impact the spousal support award was ripe. See Gust,
858 N.W.2d at 416–18.
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$6500 per month. When Richard reaches the age of sixty-six years and
six months or actually retires as a practicing ophthalmologist, he shall
pay spousal support in the amount of $5000 per month. If Richard
retires as a practicing ophthalmologist before Carol reaches the age of
sixty-six years and six months, Richard shall pay $5000 per month in
spousal support upon his retirement. Spousal support shall cease upon
any one of the following contingencies: Carol’s remarriage, Carol’s death,
or Richard’s death.
V. Disposition.
We affirm the court of appeals decision affirming the district court
with respect to the property distribution, child support, life insurance,
and appellate attorney fees. We vacate the decision of the court of
appeals as to the spousal support award and modify the judgment of the
district court with respect to spousal support as follows. Richard shall
pay Carol $12,600 per month in spousal support until Carol reaches the
age of sixty-six years and six months. At that time, Richard shall pay
spousal support in the amount of $6500 per month. When Richard
reaches the age of sixty-six years and six months or actually retires as a
practicing ophthalmologist, he shall pay spousal support in the amount
of $5000 per month. If Richard retires as a practicing ophthalmologist
before Carol reaches the age of sixty-six years and six months, Richard
shall pay $5000 per month in spousal support upon his retirement.
Spousal support shall cease upon Carol’s remarriage, the death of Carol,
or Richard’s death.
We assess half the costs on appeal to each party.
DECISION OF COURT OF APPEALS AFFIRMED IN PART AND
VACATED IN PART; DISTRICT COURT JUDGMENT AFFIRMED AS
MODIFIED.