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.
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 his or her own life with the recipient as beneficiary. The amount of the policy should be high enough to compensate for the loss of alimony payments.
In order 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 in the event that payments are not made on time.
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.
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.
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.
Permanent alimonycontinues 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.
Rehabilitative alimonyrefers 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.)
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.)
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.
Takeaway: Timing is crucial when it comes to divorce and bankruptcy proceedings, as is knowing what to expect when the cases are closed.
In many cases, personal bankruptcy and divorce go hand in hand. Money is one of the top reasons that couples fight; therefore, money is one of the top factors in a divorce. Sometimes, couples cannot resolve their issues about money, and one or both spouses decide that the marriage is irretrievably broken. In this event, one or both spouses may file for a divorce to have the marriage dissolved. Unfortunately, if the spouses have accumulated a significant amount of joint marital debt (or they live in a state where marital debt is divided equally, regardless of whose name the debts are in), filing for divorce may only make the money problems much worse.