Spousal Maintenance/Alimony in Divorce
"Alimony" is the term used in many states for financial support paid to a ex-spouse after a divorce. In other states the term "alimony" has been replaced with the term "Spousal Maintenance" or "Spousal Support" or "Family Support." The terms, however, are synonymous.
In most states, fault has no affect on divorce issues such as alimony and spousal maintenance. As a result, in most states, issues such as dating, infidelity or even abuse are not factors considered in determining whether to award spousal maintenance.
Unlike child support statutes, there are no percentage guidelines to determine when spousal maintenance or alimony is appropriate or at what level. As a result, trial courts have broad discretion in deciding whether to award maintenance and in determining its duration and amount. It is for this very reason that spousal maintenance often becomes one of the most contested issues in divorce proceedings.
Currently, spousal maintenance awards are generally granted if the spouse seeking maintenance demonstrates that he or she:
1. lacks sufficient property, including marital property apportioned as part of the divorce to provide for the reasonable needs of the spouse considering the standard of living established during the marriage, especially, but not limited to, a period of training or education; or
2. is unable to provide adequate self-support, after considering the standard of living established during the marriage and all relevant circumstance, through appropriate employment, or
3. is the custodian of a child whose condition and circumstances make it appropriate that the custodian not be required to seek employment outside the home.
In determining the amount and duration of spousal maintenance, state statutes require that Courts address all relevant factors. Most statutes also specifically identify specific issues that should be considered in determining awards of spousal maintenance:
• The financial resources of the spouse seeking maintenance
• The amount of time that is necessary for the spouse seeking maintenance to acquire necessary skills or education to find appropriate employment
• The age and physical and emotional health of the recipient spouse
• The standard of living established during the marriage
• The length of the marriage
• The contribution and economic sacrifices of a homemaker including loss of seniority, retirement benefits and other employment opportunities foregone while working at home
• The financial resources available to the spouse from whom maintenance is sought
Awards, Denials and Modifications of Maintenance
If the parties are unable to resolve disputes related to spousal maintenance, after a trial that considers the factors set out in the previous section, a court may:
1. award spousal maintenance
2. reserve spousal maintenance (not award maintenance currently but leave the matter open for further review)
3. deny spousal maintenance
Awards of spousal maintenance may be "temporary" or "rehabilitative", designed to rehabilitate the spouse so that he/she may become self-supporting, or "permanent."
No matter whether spousal maintenance is awarded, denied or reserved after a trial, the issue may be always be readdressed and spousal maintenance modified upon a showing that there has been a substantial change in circumstance making the original award (or denial) unreasonable or unfair.
From a practical standpoint, it is unlikely that a Court denying spousal maintenance would later change that determination absent compelling circumstances. A compelling circumstance may include a critical illness befalling the party seeking maintenance which renders that person incapable of working or providing for their own support. There would also have to be a showing that the person from whom maintenance is sought has the ability to contribute.
Temporary awards of spousal maintenance usually dictate factual presumptions on which the award is based. For example, maintenance may be awarded for a period of five (5) years at a certain level predicated on the recipient enrolling in and completed educational courses and finding employment in that period of time. Either party may bring the matter back before the Court if the recipient becomes self supporting at an earlier date or, through no fault of his/her own, fails to find employment within the designated period. Orders setting forth detailed educational and employment time lines on which the maintenance award is based tend to favor the person paying spousal maintenance since the recipient must demonstrate good cause why the time lines were not followed or achieved to extend the spousal maintenance beyond that period.
Waivers of Spousal Maintenance
There are only one way to preclude the Court from having jurisdiction to award spousal maintenance. Most state statutes relating to spousal maintenance awards specifically allow the parties to enter into a private agreements that preclude or limit spousal maintenance awards. These agreements may take the form of properly executed prenuptial agreements or agreements reached as part of the divorce proceedings.
Spousal Maintenance Buy-outs
In most cases, the interests of persons asked to pay spousal maintenance are better served by offering an immediate buy-out of spousal maintenance in return for a waiver that would preclude the court from modifying spousal maintenance in the future. This buy-out may occur as part of a property settlement that favors the party seeking maintenance.
To determine what amount to offer or accept as a buy-out, it is important to consider two factors:
• the present value of the asset
• the tax consequences
Present value refers to the value of a dollar today as compared to the value at some point in the future. Remember, a dollar paid today is more valuable than a dollar received next year or even next week since the money properly invested would gain interest over that period. As a direct result, a buy-out of spousal maintenance will always be less than the total value of the spousal maintenance paid over time.
Imputation of income is a harsh result where the Court requires a party to pay spousal maintenance (or child support) based on earning capacity rather than true income. For example, if one party quits a job and reduces his/her income voluntarily or if a party fails to seek gainful employment though able-bodied, the Court may base that person’s income on earning capacity. Oftentimes, the parson’s prior work history plays a pivotal role in determining what they have the ability to earn.
To award maintenance based on earning capacity, the court must determine that an obligor is underemployed in bad faith.
Evidence that may be presented to demonstrate bad faith or earning capacity include:
• Past Income information
• Past employment history
• Educational history
• Documents or awards related to education or work achievements
• Documents demonstrating that previous employment was voluntarily terminated
Evidence that may be presented to rebut allegations that a person is self-limiting his or her income in bad faith include:
• Documents demonstrating that the termination of prior employment was involuntary (eg. Documents indicating that the person was fired or was required to quit for medical reasons)
• Any documentation of efforts to seek substitute employment (eg. Job applications, rejection letters, newspaper ads)
• Documentation that job skills are outdated for a job similar to the one that was terminated
Tax Consequences of Spousal Maintenance
In deciding whether to “buy-out” the other party’s spousal maintenance, it is important to consider the tax consequences.
Property or proceeds exchanged as part of a property settlement is not taxable event. The proceeds paid are not deductible to the payor or taxable to the recipient. By contrast, the payment of spousal maintenance is a taxable event. Spousal maintenance is tax deductible by the person paying. It is not included as income for the obligor giving that party a dollar for dollar offset against his/her earnings. By contrast, spousal maintenance that is paid is included as taxable income by the person that receives it.
It is also important to note that attorney’s fees incurred by a party seeking spousal maintenance may be tax deductible as an expense incurred for the production of income. You may wish to speak with your attorney regarding that issue.
To determine the skill level of a spouse seeking spousal maintenance, it may be necessary to have a vocational evaluation performed. If requested by a party, it is likely that a Court will require the party seeking spousal maintenance to cooperate with such an assessment.
A vocational evaluation is conducted by a Qualified Rehabilitative Consultant (QRC). During the evaluation stage, the QRC will administer a series of questionnaires designed to highlight the vocational strengths and weaknesses of the party being tested. With theses test results, the QRC examines the fields of employment in which the person examined is likely to have the most success. The evaluation also analyzes the past work and educational history of the individual as well as that person’s employment goals.
After the evaluation has been performed, the QRC drafts a report that identifies the fields in which the tested person has demonstrated strengths. The report then analyzes the field to determine what additional education is necessary, if any; the likely period of time for completing that education; the costs associated with the education; and the likely wage that the tested person is likely to achieve after education and training.
The results of a vocational evaluation may be challenged at trial. However, these independent experts hold great sway with the Court in determining the amount and duration of spousal maintenance awards.
How to Present Your Maintenance Case
As previously stated, some relevant factors considered by the court in deciding whether to award spousal maintenance include the finances of the parties, the education levels of the parties, the work histories of the parties, the health of the parties and the standard of living the parties established during the marriage. In order to properly document these issues at trial you should provide the following:
• A written history of employment for both parties including a job description, the name of the employer, the wage paid and period of time worked
• A written history of each party’s educational background including schools attended, years attended and degrees or certifications achieved
• Tax returns for each year of marriage including W-2 and 1099 forms for each party
• A written chronology of vacations taken during the marriage
• Photographs and post cards of vacations taken during the marriage may provide a pictorial history to supplement the written history
• A written list of assets and luxury items owned at any time during the marriage (even if not presently owned) including the date that each item was acquired, its value and the date of disposition. You should include items such as jewelry, recreational vehicles, real estate, condos, interests in businesses or corporations, and time shares
• Financial documents verifying the value of luxury assets
• Financial account records demonstrating the value of each item
• Checking account registers and credit card statements demonstrating the spending habits of the parties
• A written list of necessary monthly expenses
ABOUT THE AUTHOR: Maury D. Beaulier
Maury D. Beaulier is a recognized leader in divorce and family law. He is a sought after speaker and has appeared on National programs on a myriad of family law and father’s rights issues.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.