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ALIMONY

HOW TO USE LIFE INSURANCE TO GUARANTEE ALIMONY

The recipient of alimony may wish to seek an agreement or court order to guarantee support in the event of the payor’s death. The usual method of guaranteeing support is to require the payor to maintain an insurance policy on their own life with the recipient as beneficiary. The amount of the policy should be high enough to compensate for the loss of alimony payments. 

To ensure that the insurance policy remains in effect, the recipient may seek to require the payor to provide periodic proof that the policy is still in force. This could be accomplished by having the payor provide an annual copy of the policy showing full payment of premiums for the coming year. The recipient also may seek to have a provision in the policy that would require the insurance company to notify the recipient if payments are not made on time. 

As an alternative to an insurance policy, the parties might agree that the payor will post a bond or that the payor will guarantee to leave the recipient a certain amount of money by will or by a trust to ensure continued support. Another option is to have the payor sign a limited irrevocable assignment of income from his or her pension plan to guarantee the alimony payment. Such a provision would require that alimony payments be deducted from the payor’s pension plan if the payor did not make payments directly. 

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WHAT IS THE CRITERIA FOR ORDERING ALIMONY?

When deciding whether to order alimony based on the need of the recipient, the factors considered by a court are similar to the factors considered by a court when dividing property. 

1. Income and Property of Each Party. The greater the income and property a divorced spouse has, the less likely it is that the spouse will need alimony. Conversely, the less income and property a spouse has, the more they will need maintenance. Payment of care also depends on the ability of one spouse to pay. Alimony is most likely when there is a substantial difference in one spouse’s property and income versus the other. If the spouses’ levels of property and income are similar, alimony is less likely. In looking at the difference in the spouses’ property, courts consider the division of property in connection with the divorce. Some courts order a larger share of the property to the less prosperous spouse to avoid or reduce alimony’s need to the less profitable spouse. 

2. Earning Capacity of Each Spouse. A related factor is a present and future earning capacity of each spouse. If one spouse’s making degree is much larger than the other spouse’s earning capacity, that is a significant factor in favor of alimony payment. To the extent that the spouses’ earning abilities may come closer together by giving the spouse with lower earnings additional time to pursue training, the court may use that as a factor for granting rehabilitative maintenance. 

3. Impairments in Earning Capacity. If a spouse has little or no earning capacity, that is a basis for granting alimony, probably permanent alimony. Common examples of such impairments are advanced age or chronic illness. Some courts will also note that earning capacity may be limited because of the number of years the spouse spent working as a homemaker. During that time, the homemaker spouse delayed or gave up the opportunity to train or build job skills that could produce a higher income. Meanwhile, the other spouse was able to increase earning capacity, in part, because his or her partner was managing the home. In such circumstances, some courts will grant permanent alimony to help make up for earning potentials. 

4. Children at Home. The presence of young children at home is a factor in favor of granting alimony, at least until the children are in school full-time. Even after the children are in school, the court may award alimony so that the parent taking care of the children needs to work only part-time. This factor is more likely to apply if, during the marriage, one of the parents had been serving as a full-time homemaker. If both parents worked outside the home during the wedding, the court is more likely to expect the status quo to continue. (The Census Bureau reports that approximately 60 percent of mothers with preschool children work outside the home.) As with all types of alimony, a key factor is the more prosperous spouse’s ability to pay. If the better-off spouse has only moderate-income, alimony probably will not be ordered, or if it is, the amount will be moderate. 

5. Standard of Living During the Marriage. A commonly bandied phrase about in connection with divorces of more than thirty years ago was “The wife is entitled to be supported in the style to which she has become accustomed.” One does not hear that phrase anymore, but the standard of living of the husband and wife during the marriage is a factor to be considered by the court. If the parties have sufficient money to continue the same lifestyle when they are separate as when they were married, the court may grant sufficient alimony (and property) to accomplish that. But the reality in most cases is that the money will not go as far as it did during the marriage since it costs more to support two households than one. It is to the party’s advantage seeking alimony to present testimony and exhibits reflecting a prosperous lifestyle. Displays might include pictures or videos of the family home, possessions, and vacations, perhaps accompanied by copies of receipts and checking account records reflecting the level of the family’s expenditures. If the couple’s relatively high lifestyle during the marriage were supported, in part, by incurring debt, the court would not expect that one party must continue to incur debt to help the other. 

6. Duration of Marriage. The longer the marriage, the greater the likelihood of alimony, mainly if there is a significant difference in the parties’ earning power. In short-term marriages, maintenance is less likely (unless there are young children at home). Alimony usually will not be granted for a time period that is longer than the marriage. Still, it is possible in some circumstances, such as the chronic disability of the person seeking support. 

7. Contributions of the Spouse Seeking Support to the Education or Career of the Other Spouse.  A spouse who helps put the other spouse through school or a training program can use that as a factor to gain alimony, even if the maintenance is not necessary for the recipient’s day-to-day support. Spouses who actively support their partners’ careers, such as through frequent entertaining or through working at no wages in the family business, also can use that as a factor in seeking alimony. 

8. Tax Consequences of Property Division and Alimony. If the payor of alimony receives a tax benefit from the property distribution, that can be a factor in favor of maintenance. Conversely, if the payor of care must pay additional taxes because of the property division, that could be a factor for paying less alimony or no alimony. Maintenance is generally deductible to the spouse producing it and is treated as income to the spouse receiving it (unless the parties agree otherwise). Suppose the husband and wife are in different income brackets, the tax treatment of alimony results in a net savings of tax payments when considering the husband and wife’s combined tax payments. The amount of money the payor will save in taxes by deducting alimony from taxable income will be greater than the amount of additional taxes the recipient will pay on the maintenance, which is treated as taxable income. 

9. Fault. In most states, fault is not a factor in deciding whether or not to grant alimony.  In those states, the legislatures and courts wish to focus on economic factors in deciding who receives maintenance, and if so, how much. As with property division in these states, the courts do not want to get in the middle of trying to determine who is more at fault. Thus, if one spouse had an affair or was considered mean to the other spouse, it will not be a factor in setting alimony. In approximately twenty states, however, fault is a factor. In some of those states, proof of responsibility by the spouse seeking maintenance completely blocks that spouse’s claim to care. In other states, fault is a factor that can be considered in setting alimony, although the presence of responsibility by the spouse seeking maintenance does not necessarily preclude alimony. 

10. Premarital Agreements. As with the division of property, a valid premarital agreement can be a trump card that determines the level of alimony that will be paid in the event of divorce. Through the premarital agreement, the parties have entered into a contract by which they waive their rights to have alimony determined by the court’s usual rules. In many states, a premarital agreement that gives no alimony or very low alimony to the less wealthy spouse will not be honored if the less affluent spouse will be left with no reasonable means of support. In that circumstance, the spouse who lacks self-support capacity is likely to be granted some alimony. 

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DIVORCE LUMP SUM ALIMONY

Lump-sum alimony, or alimony in gross, refers to alimony that is a fixed payment that will generally be made regardless of circumstances that would be a basis for the termination of other alimony types. For example, lump-sum alimony, or alimony in gross, normally would be paid even if the recipient remarries. Depending on the wording of the agreement or order, payments could also be made to the recipient’s estate in the event the recipient dies. 

This type of alimony usually is instead of a property settlement. Depending on how the alimony is structured, it could provide a tax advantage to the payor by deducting the payor and income to the recipient. Lump-sum alimony, or alimony in gross, could be used as a type of reimbursement alimony to ensure that one spouse is paid back for certain expenditures, even if the recipient remarries, cohabits with someone, or does not otherwise need the alimony for day-to-day support. 

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DIVORCE: REIMBURSEMENT OF ALIMONY

As the name implies, reimbursement alimony is designed to reimburse one spouse for expenses incurred by the other. If, for example, one spouse helped put the other spouse through college or a training program and the couple divorced soon after the training program is complete, the spouse who supported the family during that period might obtain reimbursement alimony as a payback for the resources spent. 

A classic example is a nurse who marries a medical student and supports the family while the medical student finishes medical school (and perhaps a residency program). If the couple divorces soon after the medical student completed training, the nurse would probably be entitled to reimbursement alimony to compensate for the training program’s resources. In this case, reimbursement alimony is not necessarily given because the nurse needs funds for day-to-day support (since the nurse seems to be self-supporting). Instead, the alimony is given as an equitable payback for supporting the spouse through medical school. 

Alternatively, a court could choose to give the supporting spouse a substantial majority of marital property in compensation. But in many cases in which one spouse has just completed a training program, the couple has not accumulated many marital assets. So reimbursement alimony is given as an alternative. Reimbursement alimony can be paid over a period of time. 

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DIVORCE AND PERMANENT ALIMONY

Permanent alimony continues indefinitely. The main bases for teasing payments of permanent alimony are the death of the payor, the recipient’s death, or the remarriage of the recipient. The cohabitation of the recipient with a member of the opposite sex also is a common basis for the cessation of permanent alimony. Generally, cohabitation needs to be of a permanent or near-permanent nature, with the parties living together sharing living expenses. A few overnight visits usually do not constitute cohabitation to stop alimony payments. 

Unless an agreement between the parties says otherwise, permanent alimony payments can be adjusted upward or downward based on a change of circumstances. If the recipient gains employment at a well-paying job or receives a significant amount of money from another source, that might be a basis for reducing alimony payments. If the recipient incurs unexpected medical expenses (that are not covered by insurance), that might be a basis for increasing alimony payments if the spouse paying alimony has the ability to pay more. 

A drop in income by the payor, including at retirement, can be a basis for reducing alimony. Courts may examine the reason for a drop in income, and if the drop in income of the payor is in good faith or not through the fault of the payor, the court is more likely to approve a reduction in alimony. If the drop in income seems to have been engineered by the payor to create a basis for reducing alimony, the court is more likely to disapprove of a reduction in alimony. 

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What is Alimony Maintenance?

Alimony and maintenance are terms that refer to payments from one spouse to the other spouse for the benefit of the spouse who is receiving payment. Some states use the term alimony; other states use the term maintenance; both mean the same thing. Only about 15 percent of divorces or separations involve payments of alimony. (For simplification in the rest of this section, we will use only the term “alimony,” but wherever “alimony” is used, “maintenance” could be substituted.)

The overwhelming majority of alimony awards are from the husband to the wife, but in appropriate circumstances (such as a husband who takes care of the children and home while the wife works outside the home), payments from the wife to the husband also can be ordered. The United States Supreme Court has held that it is constitutional for a state’s statute to allow alimony payments only to the wife; if payments to the wife are permitted, payments to the husband must be permissible. All states allow courts to order alimony. (For many years, Texas laws prohibited courts from ordering alimony, but those laws have been repealed.) There are several types of alimony, each of which is designed to meet particular needs. 

For information on serving legal papers, click here or call (800) 774-6922. Representatives are available Monday-Friday 8 am – 8 pm EST.  If you found this article helpful, please consider donating.  Thank you for following our blog, A space dedicated to bringing you news on breaking legal developments, interesting articles for law professionals, and educational material for all. We hope that you enjoy your time on our blog and revisit us!  We also invite you to check out our Frequently Asked Questions About Process Servers by clicking here.

All About Alimony

By: Paula Lennon

Takeaway: Alimony is a simple concept, but the details can get very, very complicated.

Alimony is the payment of money by one spouse to another upon separation or divorce. It is often just referred to as spousal support or maintenance. The purpose of alimony is to allow the lower-earning spouse to support him or herself.

Sounds simple enough, right? Actually, it’s quite the opposite. The method of calculating payments and the length of the support period will depend on many factors, including the state in which you live. In many states, no alimony is awarded if both spouses are in a position to support themselves. For relatively short marriages where there are no children, the courts often refuse to award alimony. However, if there are preschool children, the courts will usually award alimony to the spouse with physical custody of the children. Here we’ll take a basic look at alimony and how it works.

How Alimony Is Calculated

There are some factors that all judges take into account to determine alimony. These include the length of the marriage, the incomes and ages of each spouse, the marital standard of living during the marriage, the presence of children, and the assets available to each party after the divorce.

  • The court will calculate each spouse’s net income by subtracting mandatory deductions from the relevant spouse’s gross income. Mandatory deductions include income taxes, Social Security payments, and health care costs.
  • The court will consider both spouses’ ability to earn. If a spouse has the potential for earning, the likely amount of that earning will be taken into account.
  • If a spouse has in-demand skills and can take up employment, the courts will pay attention to this. It may be unreasonable to expect a spouse with custody of young children and no day-care facilities to work away from home. However, the courts are aware that many employment opportunities exist for particular skills which can be done from home, for example, virtual assistants, writers, transcriptionists, customer service agents, etc. A skilled spouse who does not attempt to seek employment may find that the amount of alimony is limited and the length of alimony payments shortened.
  • Age matters. Each spouse’s ages and the ability to find work or train for a new job are significant matters. A judge will order more alimony for an older spouse and has no job skills than for a younger spouse who can get an education that will lead to a self-supporting role.
  • If the lower-earning spouse has medical or physical conditions that make it hard or impossible for them to work, this should be highlighted.
  • If one spouse worked and supported the other spouse through school, they might be eligible to receive compensation in the form of alimony for all the years worked while the other spouse was trained and educated.
  • The courts will allocate debt amassed during the marriage between the spouses based on who gained most from the asset associated with the debt. If the court orders a spouse to pay a large portion of the marital debts, it will usually be balanced by reducing the amount of alimony that the spouse is ordered to pay.
  • If the difference in income between the spouses is substantial and the marriage existed for a long time, a judge will order alimony. If the marriage lasted less than 10 years, the likelihood of paying or receiving alimony is less than if it was more than 10 years. (Learn more in 5 Things to Know About Personal Bankruptcy and Divorce.)

Can I Challenge Alimony Payments?

This depends on the state in which you live. A set formula usually determines spousal support and alimony payments; however, there are circumstances in which the alimony can be challenged.

  • In some states, alimony will automatically end when the spouse receiving it gets remarried or begins cohabiting with a new partner. Therefore, a paying spouse can bring this to the attention of the court.
  • A paying spouse can ask the courts to reduce or end the alimony if the lower-earning spouse becomes self-supporting before the end of the court-ordered support period.
  • The lower-earning spouse can ask the courts for an extension of alimony if they are unable to become self-sufficient before the end of the support period.
  • If you are the would-be recipient of alimony and suspect your spouse is not reporting all income, you will need to obtain proof of that fact. You can testify what your spouse told you about their earnings or ask witnesses to testify about your spouse’s earnings. It also may be possible to demonstrate that earnings have been underreported by proving that the marital lifestyle enjoyed over the years was paid for with earnings that would not have been possible on the amount of income declared by your spouse. If the judge agrees, not only could your alimony increase, but your spouse could also be sanctioned for contempt of court.
  • The paying spouse could challenge how much spousal support you need, for how long, and why you need it. For example, on the basis that the once-dependent children have now grown, or the medical conditions that the receiving spouse said was an obstacle to them working no longer exists.
  • If the paying spouse’s circumstances change, their income has significantly reduced due to illness or redundancy; they can request an alimony modification order.

Legal Advice

Talk to family law attorneys or divorce lawyers in your area about alimony awards in situations similar to yours. Alternatively, you may be able to find a divorce mediator if you and your spouse are amicable. The mediator can help you reach an agreement on alimony without incurring legal fees or going to court. Spouses have been known to agree to the alimony payments after they understand what a court would normally award.

A lawyer can also give you information about how to receive alimony or spousal support before your divorce is final and how much you are entitled to. Discuss with your attorney the tax ramifications of alimony payments or spousal support. Unlike child support, the person receiving spousal support is obliged to pay tax on it. It is a deduction to the person making the alimony payment.

If you are a do-it-yourself type person, it may be possible to file for divorce through a family court or a domestic relations office without hiring a lawyer.

For information on serving legal papers, contact a New York Process Service, call (800) 774-6922. Representatives are available Monday-Friday 8 am – 8 pm EST.  If you found this article helpful, please consider donating.  Thank you for following our blog, A space dedicated to bringing you news on breaking legal developments, interesting articles for law professionals, and educational material for all. We hope that you enjoy your time on our blog and revisit us!  We also invite you to check out our Frequently Asked Questions About Process Servers.