Divorce

HEALTH INSURANCE AFTER DIVORCE

Direct payment of a former spouse’s health insurance normally is not part of an alimony agreement or order, although the recipient certainly may wish to use some of the alimony payments to purchase health insurance if the recipient is not already covered. 

When a couple divorces, the health insurance policy covering the family (if there was such a policy) no longer covers both spouses. The policy covers only the spouse who had insurance through work or through an individual policy. Children who were covered under a family policy generally are still covered under the policy after a divorce. 

A federal law passed in the 1980s requires most employer sponsored group health plans to offer divorced spouses of covered workers continued coverage at group rates for as long as three years after the divorce. The divorced spouse of a worker must pay for the coverage, but the coverage is available. 

WHAT IS THE CRITERIA FOR ORDERING ALIMONY?

The factors considered by a court when deciding whether to order alimony based on need of the recipient 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 she or he will need alimony. Payment of alimony also depends on the ability of one spouse to pay. Alimony is most likely when there is a substantial difference in the property and income of one spouse versus the other. If the spouses’ levels of property and income are similar, alimony is less likely. In looking at the difference in property held by the spouses, courts consider the division of property in connection with the divorce. Some courts order a larger share of property to the less prosperous spouse in order to avoid or reduce the need for alimony to the less prosperous spouse. 

2. Earning Capacity of Each Spouse. A related factor is the present and future earning capacity of each spouse. If one spouse’s earning capacity is much larger than the other spouse’s earning capacity, that is a significant factor in favor of payment of alimony. To the extent that the earning capacities of the spouses 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. 

DIVORCE – LUMP-SUM ALIMONY

Lump-sum alimony, or alimony in gross, refers to alimony that is a fixed payment which generally will be made regardless of circumstances that would be a basis for termination of other types of alimony. 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 also could be made to the estate of the recipient in the event the recipient dies. 

This type of alimony usually is in lieu of a property settlement. Depending on how the alimony is structured, it could provide a tax advantage to the payor by being deductible to 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 ALIMONY

Reimbursement alimony, as the name implies, 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 divorces soon after the training program is complete, the spouse who supported the family during that period might be able to obtain reimbursement alimony as a payback for the resources spent. 

A classic example is the 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 probably would be entitled to reimbursement alimony to compensate for the resources used during the training program. In this case, reimbursement alimony is not necessarily being given because the nurse needs funds for day-to-day support (since the nurse would seem to be self- supporting). Instead, the alimony is given as an equitable payback for supporting the spouse through medical school. 

DIVORCE AND PERMANENT ALIMONY

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

Unless an agreement between the parties says otherwise, payments of permanent alimony 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 an other 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. 

WHAT IS REHABILITATIVE ALIMONY?

Rehabilitative alimony refers to alimony that is given to a spouse so that the spouse may “rehabilitate” herself or himself in the sense of acquiring greater earning power or training in order to become self- supporting. Rehabilitative alimony also might be given to a parent who is staying home with young children until such time as it is considered appropriate for the parent to work outside the home. 

There is no uniform time at which parents automatically are expected to work outside the home, but when the youngest child is in school full-time is a common time for the parent to resume work. (Of course, in many families, intact and divorced, the parents work outside the home when the children are preschoolers. And in some families, one parent stays home as long as the children live at home.) 

DIVORCE – RESUMPTION OF UNMARRIED NAME

A woman who divorces may resume her unmarried name or keep her married name as she wishes. She can even change her name to something completely new, as long as she is not doing so for fraudulent purposes. Court proceedings generally are not necessary in order to change a name. 

If a woman is changing her name, she should notify government agencies and private companies that have records of her name. Examples of places to notify: the Internal Revenue Service, Social Security Administration, Passport Agency (within U.S. State Department), Post Office, state tax agencies, driver’s license bureau, voter registration bureau, professional licensing agencies, professional societies, unions, mortgage companies, landlord, banks, charge card companies, telephone companies, other utilities, magazines and newspapers to which she subscribes, doctors and dentists, and schools and colleges that she attended or that her children attend. 

DIVORCE – ALIMONY/MAINTENCE

Alimony and maintenance are terms that refer to payments from one spouse to the other spouse for the bene- fit 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.)

DIVORCE AND EFFECT OF BANKRUPTCY

A property settlement might be dischargeable in bankruptcy or it might not be dischargeable, depending on the facts of the case. A discharge in bankruptcy means that all of a debt or a portion of a debt no longer has to be paid, because a federal court has declared the debtor to be bankrupt. 

Prior to 1994, many former spouses of persons who declared bankruptcy after the divorce found themselves out of luck when seeking to collect what was due. A wife, for example, may have agreed to a divorce based on a promise from her husband that three years after the divorce, he would pay her a certain amount of money as part of the property settlement. If after the divorce was finalized, the husband declared bankruptcy, the wife might never collect the amount that was due. 

DIVORCE AND ALLOCATION OF DEBTS

In addition to dividing property, most couples also have debts to divide. Sometimes the debts will exceed the assets. The court, or the parties by agreement, will divide whatever property the couple has and then allocate the responsibility of each party to pay off particular debts. (The wife pays off MasterCard; husband pays off Visa, and so on.) 

If the debts were jointly incurred, both parties remain ultimately responsible for them. If the spouse who was supposed to pay a particular bill does not, the creditor still can look to the other spouse to collect the amount due. For example, if during the marriage the husband and wife applied together for a MasterCard, both signing the application and both promising to make payments, both are liable to MasterCard, even if only one spouse made the charges. 

If a court or a settlement agreement requires a wife to pay the MasterCard bill, but she does not and MasterCard collects from the husband, the husband can sue the wife for the loss, or he may be able to deduct his loss from future payments he may owe his wife (such as alimony, if there is any). 

Given the potential for continued joint debts, even after a divorce, it is important to limit one’s liability for the other spouse’s debts. Thus, it is best to close joint credit card accounts or other joint accounts as soon as a divorce is pending (unless the party has a great deal of faith in one’s soon-to-be ex-spouse). If it is not possible to close an account because there is an outstanding debt that cannot be paid off immediately, it is prudent for a spouse to notify the creditor that he or she will not be responsible for any additional debts beyond current outstanding balances.