Alimony: Spousal Support and Self-Sufficiency
Alimony is another word for spousal support. You may also know it as separate maintenance payments or rehabilitative support. You are going to be sick of this fact early in this article.
The amount and duration of support depends on a whole host of factors, mostly things like standard of living and income of the spouses. Its purpose is to allow a supported spouse the time and resources needed to develop marketable skills.
In many states, a spousal support order can be modified with good reason. By "good reason," we don't mean that you've reasoned it would be good to have a 60-inch plasma TV, weekly trips to the spa, or that pair of Jimmy Choo shoes!
Spousal support and alimony mean the same thing; they are payments one spouse makes to the other as a result of divorce or separation. To avoid confusion, when you read the words spousal support or alimony, think of the overly explanatory construction: spousal support/alimony. We'll get into the payment details later, like when, how much, and for how long. First, it will help you to get familiar with the terminology.
Child support payments are made by one parent to the other to assist in their common children's health and welfare costs. Alimony is intended solely to provide for the other spouse, which is a separate and distinct type of support from child support. It is not automatic in every divorce. The approach to calculating amounts for alimony and child support differs substantially.
Family support is a combination of child support and spousal support. Family support payments are usually a feature of a dissolution of marriage decree, which is the legal turning point when the judge says, in effect, "poof, you are now divorced."
Separate Maintenance Payments
Separate maintenance is paid, like family support, from one spouse to the other. It includes support for the living expenses of a spouse and children. In the case of separate maintenance payments, the couple is not living together, nor are they in the process of getting a divorce.
This type of support is intended to provide the supported spouse an opportunity to obtain an education or locate a job. The aim is self-sufficiency. This type of support is where our attempt to avoid confusion becomes a little fuzzy.
Rehabilitative support is also sometimes known as spousal support or alimony. Rehabilitative Support is often for a limited time because of the goal of self-reliance. The court does not expect the supporting spouse to be the other's permanent crutch.
Modification of Alimony Payments
Whether or not an order for alimony is renegotiable at a later date varies from state to state. In some cases, dual income spouses who were married for a relatively short time (usually less than 10 years), waive their right to seek alimony from each other. Former spouses can agree to a temporary reduction or deferral of support payments. In some states, once a divorce is a done deal, the court cannot modify alimony arrangements. It's all in the final judgment of dissolution.
In other cases, modification means a trip to the courthouse. The spouse seeking the change bears the heavy burden of proving that circumstances have changed since the original order. There must be a demonstrable, legitimate reason for a modification. It may be job loss, looming bankruptcy, health issues for the paying spouse, or an increase in child expenses for the recipient spouse. It may also be that the recipient has a new live-in relationship and now shares household expenses. The court relies on facts to make such decisions, so preparation is the key to successfully changing a support order.
On Your Own
The best way you and your spouse can save time and money is to amicably negotiate alimony details yourselves. Often the parties to a divorce can negotiate results that are far more satisfactory than those handed down by any court.
While judges have very little discretion to deviate from the child support guidelines in your state, this is not the case with alimony. Calculations used for determining spousal support involve many factors, leaving a whole lot of grey area. An inability to work things out only passes the buck to the judge, who has discretion to creatively resolve your issues. Difficult as it may be, putting emotions aside for now can lead to some positive feelings later as the direct result of a mutually acceptable agreement.
Spousal support should never be taken lightly. Whether you are the recipient or the payer, you need to understand that you should do it correctly the first time. It is critical to understand the specific rules of your state. Your state's website will usually have a link to all the family courts and superior courts. From there, you can download forms. You can also get links to free newsletters and publications developed and written by the courts on the subject.
If you want to pay the least support possible, do your calculations based on net income. Determine whether your secondary income sources and your assets are freely transferable or able be to be liquidated. Again, your calculations will also depend on whether you live in a community property state, a separate property state, or an equal distribution state.
If you want to receive the most support possible, minimize your income and maximize your spouse's. Do your calculations based on gross income. Include secondary income sources and assets. Your calculations will also depend on whether you live in a community property state, a separate property state, or an equal distribution state. Highlight all the contributions and sacrifices you made to your marriage or to promote your spouse's career, while delaying your own ability to earn an income. Put a positive spin on the merits of your case. You need the funds for educational upgrading.
Consider the following: Are you still in school? Are you disabled? Did you stay at home while your spouse worked? Are the alimony payments in line with the standard of living that you enjoyed during the marriage? Do you need to develop new job skills for the job market, which means education and re-training? Were you in an abusive situation that caused secondary problems that interfered with your work life? Is your alimony check contingent on certain actions on your part and, if so, do you understand the ramifications of not meeting those contingencies?
Most states offer some form of free or low cost legal aid. Take advantage of these services to see if the amount you have arrived at is a fair allocation and that your proposed settlement is properly worded to protect your interests.
If you are able to craft your own alimony agreement, it should include: (1) A "cohabitation" clause stipulating that support will end should the receiving spouse have a live-in companion and share household expenses, (2) a COLA clause that provides for periodic cost of living adjustments, and (3) an escalator clause where the recipient automatically shares in an increase of the paying spouse's income.
If you want your support order to terminate, make sure it spells out a given number of months or years. Include proper wording that the spouse receiving the benefit check cannot seek an extension of that stated time period. Lastly, run your crafted agreement by an attorney to see if it passes legal muster and IRS rulings regarding the characterization of spousal support payments, especially if you have scribed creative or unusual arrangements.
Deduct what you can. The individual paying the alimony should understand that it is not only tax deductible, but it may also include those costs needed for child support. If calculated properly, the money to the ex-spouse and the child, coming from one source, may be completely tax deductible.
Most states do not recognize spousal support as an obligatory outcome of divorce, unlike asset distributions and child support. So if you do not want to create undue strain on the family or in the divorce proceedings, you can waive your right to spousal support.
If you have been out of the workforce for some time and need re-training or more education, touch base with your local educational or vocational institutions to see what programs they offer and their cost.
If you are paying both child support and alimony, it is to your benefit to pay more alimony since it is deductible on your federal tax return; moreover, the alimony may end sooner than the child support obligation. On the flip side, if you are the recipient, it is to your advantage to receive a higher child support check because you do not have to claim it as income, and the child support responsibility may continue longer than alimony.
If the thought of maintaining alimony payments is as attractive to you and your spouse as a trip to the dentist, you might agree to instead receive or relinquish more of the property assets. If you negotiate this alternative, make sure to run it by a CPA or family law attorney to analyze the likely tax consequences.