Alimony and Spousal Support
What is Alimony?
Alimony and spousal support or maintenance is money paid from the supporting spouse to the dependent spouse for the dependent spouse’s support. Alimony can be made in either a lump sum payment or in multiple payments over time. Alimony can be awarded for a set period of time or may continue for an indefinite term. In some cases, but not frequently, alimony can be permanent. This is often referred to as lifetime support.
How is Alimony Determined?
Spousal Support may be ordered by the court or you and your spouse may agree to an alimony term and amount. Alimony is still frequently awarded throughout the United States. Alimony laws vary by state but generally, the court must determine whether there is a supporting spouse, dependent spouse, the standard of living the parties had during the marriage, amount of support needed, the payor spouse’s ability to pay the necessary support, and the term of support. In some states, there is a set formula for determining the amount and duration of support as commonly found with child support and in other states, it is in the discretion of the court. You can use our alimony calculator to see an estimate of alimony based on formulas around the country.
If it is determined that alimony has to be paid, there will be terminating factors. Depending on the state, support may terminate based on the following events:
- The spouse receiving support payments remarries,
- The spouse receiving support payments cohabitates with another person not related by blood or marriage,
- Either spouse dies,
- A set amount of time determined in advance by agreement or by the judge, or
- A change in circumstances such as the spouse receiving support making a significant amount more in income or the supporting spouse making significantly less income.
Supporting and Dependent Spouse
The first step in determining whether alimony will be awarded is to determine whether there is a supporting spouse and dependent spouse. A “supporting spouse” is a spouse, whether husband or wife, whom the other spouse depends on during the marriage to pay most of the household expenses. Should an alimony award be made, the supporting spouse is the spouse responsible for making the payments. The supporting spouse is sometimes referred to as the payor spouse.
The second term is “dependent spouse”. A “dependent spouse” is a spouse, whether husband or wife who is dependent on the other spouse during the marriage to pay most of the household expenses. The court is concerned with whether or not one spouse is actually dependent on the other to maintain his or her same standard of living that the spouse became accustomed to during the last few years of marriage prior to the couple’s date of separation. The court will try to maintain the dependent spouse’s marital lifestyle.
Standard of Living
The court will look at the lifestyle you lived in the last few years prior to separating to determine your standard of living. All expenses are included in this analysis. Once the court determines the amount of money that is needed to maintain the dependent spouse’s lifestyle the court will look at whether the supporting spouse makes enough money to pay.
Does the Supporting Spouse have the Ability to Pay?
Now that we have discussed supporting and dependent spouses, another very important concept with respect to alimony remains. That concept is called “ability to pay”. Ability to pay is very important to court-ordered alimony. Typically, a court can award alimony to a spouse if it finds that there is a supporting and dependent spouse, but only if the court determines that the supporting spouse has the ability to pay the dependent spouse. The court will carefully review both parties finances. Based on the information provided to the court, the court will decide if the supporting spouse has the ability to pay alimony.
Types of Support:
Post-separation support or temporary support: Post-separation support is described as the money that a supporting spouse pays to the other spouse in response to an agreement between the separated parties, or in response to the order of a judge for support until a final decision on calculating alimony is made. Post-separation support is a temporary type of alimony and is not intended to be permanent support.
Alimony, Spousal Support or Maintenance: These are all terms commonly used to describe the money that a supporting spouse pays a dependent spouse.
Waiver or Bar:
Alimony and post-separation support may be waived and expressly barred by an express provision in a valid premarital agreement, separation agreement, or marital contract executed by spouses who are separated and contemplating reconciliation. In some states, the entering of a divorce judgment prior to a claim for alimony will waive any claims the dependent spouse may have had.
In some states, marital misconduct such as having an affair will bar the dependent spouse’s claim for alimony.
Tax Consequences of Alimony:
Support awards made after 12/31/2018, are subject to the new tax rules under the Trump tax plan. Awards made prior to then are grandfathered in under the old laws. For awards made prior to the new tax law going into effect, spousal support payments are taxable as income to the dependent spouse and deductible to the supporting spouse. Under the new law, spousal support payments are taxable to the supporting spouse and the dependent spouse does not have to pay income tax on the support payments. Regardless of whether you are paying or receiving support, you should talk with your accountant about the best way to pay taxes and how it impacts other areas of your finances.
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