The Basics of Alimony: Everything You Need to Know
Courts always consider a person's ability to pay when setting his alimony obligation.14 min read
Ability to Pay
Courts always consider a person's ability to pay when setting his alimony obligation. A court looks at the payer's gross income from all sources (wages, public benefits, interest and dividends on investments, rents from real property, profits from patents and the like, and any other sources of income), less any mandatory deductions (income taxes, Social Security, health care and mandatory union dues). The result is the payer's net income.
In most states, deductions for credit union payments and wage attachments are not subtracted when calculating net income. Thus, if John makes $2,000 per month, and income tax, Social Security, unemployment insurance benefits and other government deductions reduce his income to $1,500, this is his net income. The fact that $300 more is withheld to pay a credit union loan does not further reduce his net income for the court's purposes. The reason for this rule is that the law accords support payments a higher priority than other types of debts, and would rather see other debts not paid than have a spouse go without adequate support.
Ability to Earn
When a court computes the amount of alimony to be paid by a spouse, both parties' ability to earn is usually taken into account. Actual earnings are an important factor in determining a person's ability to earn, but are not conclusive where there is evidence that a person could earn more if she chose to do so. Some states, however, set alimony payments based only on actual earnings - that is, the ability to pay.
Example: Jane Doctor, who has earned $100,000 a year for the past three years while married, quit her job when she and her husband separated in order to become a TV repairperson with an annual income of approximately $20,000. During the divorce trial, Jane's husband, Lionel, requested alimony for himself. Because Jane abruptly changed her income, the court imposed a larger alimony obligation on Jane than she can afford earning $20,000 a year. The court has reasoned that Jane can return to the world of medicine if she needs to and that her ex-husband should not be penalized because of her employment decision. In some states, however, the court would reason that ability to earn is too speculative and would set alimony on the basis of Jane's $20,000 income.
Ability to Be Self-Supporting
The ability of an ex-spouse to support herself is normally considered by a court when setting the amount and duration of alimony to be paid to that spouse. A court looks to whether the ex-spouse possesses marketable skills and whether she is able to work outside the home (having custody of pre-school children and not having access to day care could make this impossible). The ability to be self-supporting differs from actually being self-supporting. If a spouse has marketable skills and is able to work outside the home, but has chosen not to look for work, the court is very likely to limit the amount and length of alimony.
In many states, no alimony is awarded if both spouses are able to support themselves. If, however, one spouse was dependent on the other for support during the marriage, the dependent spouse is often awarded alimony for a transition period or until she becomes self-supporting. If a spouse receiving alimony becomes self-supporting before the time set by the court for the alimony to end, the paying spouse can go to court and file a request for modification or for a termination of alimony. Conversely, if at the end of the support period the ex-spouse does not have the ability to support herself, she may request an extension of alimony, which may be difficult to obtain. For example, New York courts may extend alimony only to keep the supported spouse from going on to welfare. (General Obligations Law Section 5-311.)
Side Note - Financial Statement: A financial statement is a court paper which requires a party to specify her monthly income and expenses. The court often requires each divorcing spouse to fill out a financial statement so that the court has a complete picture of the parties' financial situations before making a decision on alimony and other financial matters.
Standard of Living During Marriage
When a court sets alimony, it often considers the family's pre-divorce standard of living and attempts to continue this standard for both spouses, if feasible. Mrs. Rockefeller, therefore, would be entitled to more alimony than most divorced spouses. If only one spouse worked outside the home, and in many marriages where both spouses worked outside the home, it is usually impossible to continue the same standard of living for both people after the spouses have gone their separate ways. Maintenance of the same standard of living is therefore more of a goal than a guarantee.
Length of Marriage
When a marriage is relatively short - approximately three years or fewer- -and no children were born or adopted, courts often refuse to award alimony. If there are children under school age, however, alimony may be awarded to the parent given physical custody because the court wants to enable the custodial parent to care full-time for the child.
Tax Consequences of Alimony
For federal income tax purposes, alimony paid under a written agreement or court order is deductible by the payer and is taxable to the recipient. Child support, on the other hand, is tax-free to the recipient but not deductible by the payer.
In the past, when ex-spouses had more flexibility in negotiating the amount of child support and alimony, many ex-spouses agreed to greater alimony and less child support because of the resulting tax advantage to the payer. Because all states determine the basic child support obligation by formula, however, shifting the amounts of child support and alimony to take advantage of tax deductions is increasingly difficult.
Upon divorce, the court allocates debts incurred during marriage between the spouses based on who can pay and who benefits most from the asset attached to the debt. If the court orders a spouse to pay a large portion of marital debts, it often reduces the amount of alimony that spouse is ordered to pay.
Professional Degree or License
Some spouses support their mates financially as well as emotionally through professional, graduate or trade school. When they divorce, alimony is rarely awarded to the spouse who supported the couple. Yet, she often made sacrifices (such as delaying her own education) in order to support the other. Some states try to compensate the spouse who put the other through school in the alimony award. For more information on this topic, see "When One Spouse Puts the Other Through School" in the Property and Debts chapter.
Agreement Before Marriage
Before a couple marries, the parties may make an agreement concerning certain aspects of their relationship, including whether alimony will be paid in the event the couple later divorces. These agreements are also called ante-nuptial, pre-nuptial or pre-marital agreements. They are usually upheld by courts unless one person shows that the agreement is likely to promote divorce (for example, by including a large alimony amount in the event of divorce), was written and signed with the intention of divorcing or was unfairly entered into (for example, a spouse giving up all of his rights in his spouse's future earnings without the advice of an attorney).
The Uniform Pre-Marital Agreement Act provides legal guidelines for people who wish to make agreements prior to marriage regarding ownership, management and control of property; property disposition on separation, divorce and death; alimony; wills and life insurance beneficiaries. The statute expressly prohibits couples from including provisions concerning child support. Pre-marital agreements are permitted in states that haven't adopted this uniform statute, but are subject to different guidelines in those states. The Act has been adopted in 18 states - Arizona, Arkansas, California, Hawaii, Illinois, Iowa, Kansas, Maine, Montana, Nevada, New Jersey, North Carolina, North Dakota, Oregon, Rhode Island, South Dakota, Texas and Virginia.
Lump Sum Support
In several states, a spouse may pay his total alimony obligation at the time of the divorce by giving the other spouse a lump sum payment equal to the total amount of future monthly payments.
States which allow lump sum support include:
- Alaska (Statutes Section 25-25.24.160(3))
- Florida (Statutes Annotated Section 61-08)
- Kansas (Statutes Annotated Section 60-1610(b)(2))
- Louisiana (Civil Code, article 160)
- Maine (Revised Statutes Annotated Section 19-721)
- Michigan (Compiled Laws Annotated Section 552.23)
- Nevada (Revised Statutes Annotated Section 125.150)
- New Mexico (Statutes Annotated Section 40-4-7)
- North Carolina (General Statutes Section 50-16.1)
- Ohio (Revised Code Section 3105.18)
- Oregon (Revised Statutes Section 107-105)
- South Carolina (Code of Laws Section 20-3-130)
- Virginia (Code Section 20-107.1)
- West Virginia (Code Section 48-2-15), and
- Wyoming (Statutes Annotated Section 20-2-114).
Alimony in Gross
This is another term for lump sum support.
Occasionally, alimony obligations are paid less frequently than monthly. This is called periodic support. Traditionally, periodic support was paid until the recipient died or remarried. Today, however, because alimony is usually paid for a fixed period, periodic support is more like lump sum support divided over a few periodic payments.
Integrated Property Settlement Agreement
Upon divorce, couples commonly enter into a divorce agreement which divides marital property and may set alimony. The agreement is called integrated if the property settlement and alimony payments are combined into either one lump sum payment or periodic payments. Integrated agreements are often used when the marital property consists of substantial intangible assets (for example, future royalties, stock options or future pension plans) or when one party is buying the other's interest in a valuable tangible asset (for example, a home or business). In addition, if a spouse is entitled to little or no alimony, but is not financially independent, periodic payments may help that spouse gain financial independence.
Modification of Alimony
There are several ways in which alimony may be modified.
In many states, divorce agreements or decrees (court judgments) may state that alimony amounts and periods are non-modifiable, which means that they cannot be changed once they are established.
Agreement to Modify Alimony
After a final decree of divorce is filed with a court, former spouses may agree to modify the alimony terms. This modified agreement (also called a stipulated modification) may be made without court approval. If one person later reneges on the agreement, however, the other person may not be able to enforce it unless the court has approved the modification. Thus, it is advisable to obtain court approval before relying on such agreements. Courts routinely approve agreed-upon modifications to alimony.
Cost of Living Adjustment (COLA) Clause
A COLA clause in an alimony order means that payments are to increase annually at a rate equal to the annual cost of living increase, as determined by an economic indicator (such as the Consumer Price Index). Some judges include COLAs in their orders when setting alimony. This eliminates the need for any requests for modifications from the recipient based on the change in the cost of living.
An escalator clause sometimes is included in a divorce agreement or decree to provide an alimony recipient with an automatic specified share of any increase in the payer's earnings.
Temporary Modification of Alimony
When the needs of an ex-spouse receiving alimony change temporarily, or if the payer's ability to pay is temporarily impaired by illness, loss of job or other condition, a court may modify an existing alimony order for a specific period of time to account for the temporary condition. At the end of the set period, the temporary modification terminates and the alimony reverts to the prior terms unless an order for permanent alimony is obtained. Although desirable, a temporary modification of alimony may not be easy to obtain without a lawyer's assistance.
When parties are unable to agree on a modification of alimony, the party wanting the change will have to file a request for a modification of alimony with the court. She must usually show that circumstances have changed substantially since the time of the previously issued order. This rule encourages stability of arrangements and helps prevent the court from becoming overburdened with frequent and repetitive modification requests. Below are several examples of a change of circumstances.
- Change in law. When a law affecting alimony is amended or a new law enacted, this by itself can sometimes constitute the changed circumstance necessary to file a request for modification of a prior alimony order.
- Cohabitation. In some states, an alimony recipient who begins cohabiting (usually living intimately with a person of the opposite sex but a few courts have applied this rule to women who begin living with female lovers) is presumed to need less alimony than originally awarded. If the recipient objects, it is her burden to show that her needs have not decreased.
- Cost of living increase. When inflation reduces the value of alimony payments, the recipient may cite her increased cost of living as a changed circumstance and request an increase.
- Decrease in income/decreased ability to pay/loss of job. When an ex- spouse paying alimony suffers a decrease in earnings, she may be able to obtain from the court a downward modification of alimony. The modification may be temporary or permanent, depending on her prospects for new work or increased hours.
- Decreased need for alimony. When a former spouse's need for alimony decreases or ceases, the court may reduce or terminate the alimony if the paying spouse files a request for modification. Such a request can be made if the alimony recipient gets a job, an increase in pay or sometimes if she begins intimately living with someone of the opposite sex (cohabiting).
- Disability. Disability in family law generally means the inability to earn enough income to support oneself through work because of a physical or mental condition. A temporary disability suffered by a person paying alimony may warrant a temporary decrease of alimony. A permanent disability may warrant a request for modification of alimony based on changed circumstances. Similarly, if a recipient of alimony becomes disabled, a court may order an increase if her earnings decreased or her expenses increased (for example, health care or child care) as a result.
- Financial emergency. A financial emergency occurs when a person is unexpectedly required to lay out money (for example, to pay sudden medical bills). When a person who pays alimony suffers a financial emergency, he may file a request with the court for a temporary decrease of alimony. When a person who receives alimony suffers a financial emergency, she may ask the court for a temporary increase.
- Hardship. Hardship means suffering or adversity. If compliance with a legal obligation would cause a hardship on a person or his family, he may be excused from the obligation. For example, a payer's inability to meet an alimony obligation without great economic suffering himself is a hardship. If a court finds this hardship substantial, the payer may be relieved of all or a part of his support obligation for a temporary or indefinite period.
- Increase in income. When an alimony recipient's income increases, her ex-spouse may file with the court a request for modification of the alimony, claiming that the changed circumstance means his ex-spouse needs less alimony. Whether the court will agree depends on the particular facts of the situation. When the paying spouse's income increases, alimony may stay the same if the recipient's needs are being met. If her ex did not have the ability to pay enough alimony to meet her true needs before the increase in income, however, a court might grant a request for a modification based on the increase.
- Medical emergencies. Medical emergencies that require large expenditures of money are the kind of temporary and catastrophic circumstances that may support a temporary modification of alimony. If the recipient suffers the emergency, the payer may be required to temporarily increase payments (if he is able). Likewise, if the payer is the one with the emergency, his duty to support may temporarily be eased by the court.
- New support obligation. When an ex-spouse paying alimony assumes a new legal support obligation (for example, adopts, remarries or has a child), the court may reduce the earlier alimony order if it would be a hardship to pay the prior alimony and meet the new obligation. On the other hand, if the new support obligation is voluntarily assumed (for example, helping to support stepchildren when there is no duty to do so), rather than required by law, a court is unlikely to order a reduction.
Retroactive Modification of Alimony
In theory, courts are supposed to refuse to retroactively modify an alimony obligation. This means if a person is unable to pay support, he may petition the court for a reduction, but even if the court reduces future payments, it should hold him liable for the full amount of support due and owing. Many courts, however, do not follow this rule. Although the courts will state that they refuse to make retroactive modifications, they frequently excuse the payers from some of the arrearages. The courts' reasoning is that if the recipients survived the months (or years) without the support, they truly can get by without it.
Arrearages or Arrears
Each installment of court-ordered alimony is owed and to be paid according to the date set out in the order. When an ex-spouse ordered by a court to pay alimony does not comply, the overdue payments are called arrearages or arrears. Because the majority of people ordered to pay alimony don't, and a growing number of women who are awarded (but not paid) alimony are poor, many (but unfortunately, not enough) courts are becoming more strict than they were a few years ago about enforcing alimony orders and collecting alimony arrearages.
No federal laws have been passed specifically to aid in the collection of alimony. The Child Support Enforcement Act of 1984, however, gives states the option of allowing their district attorneys to pursue alimony arrearages when seeking back owed child support. In addition, a number of states are using enforcement laws such as wage attachments and contempt of court proceedings to collect alimony arrearages.
Revised Uniform Reciprocal Enforcement of Support Act (RURESA)
This law (or its predecessor, the Uniform Reciprocal Enforcement of Support Act), was enacted by every state. It permits an ex-spouse who is owed alimony to collect it by using the court in her state to enforce her alimony order against her ex living in another state. The court in the state where the recipient lives contacts a court in the other parent's state, which in turn requires her ex to pay.
As a practical matter, this procedure often falls short of its stated goals. District attorneys commonly give RURESA and URESA alimony cases low priority. If any time and effort goes into collecting support by the D.A.s, it is usually to collect child support. (See Child Support chapter for more information on RURESA.)
A wage attachment is a court order requiring an employer to deduct a certain amount of money from an employee's paycheck each pay period in order to satisfy a debt. Wage attachments are often used to collect alimony or child support arrearages and to secure payment in the future.
Termination of Alimony
- Automatic Termination. Alimony usually ends automatically when the recipient remarries, when either ex-spouse dies, or when a condition set out by the court order occurs (for example, a recipient becomes self-supporting or begins cohabiting. Alimony may also end at a specific date set by the court's alimony order. If periodic payments are part of a divorce agreement or an integrated property settlement agreement, however, the alimony may continue even after the recipient remarries.
- Cohabitation. In a few states, cohabitation brings about a termination of alimony, if the paying spouse can show that the recipient spouse and new lover live together, share expenses and are generally recognized as a couple. All state laws of this kind specifically apply to heterosexual cohabitation. Two California courts applied the spirit of the law to a case in which a woman receiving alimony moved in with her lesbian lover. And although Minnesota does not have a statute authorizing the reduction of alimony because of cohabitation, an ex-wife's alimony was terminated in a case where her husband proved she had "entered into an apparently stable relationship with a woman." (5 Family Law Rptr. 2127 (1979).)
- Remarriage. When an alimony recipient remarries, there is usually a termination of alimony on the theory that the recipient is now obtaining additional income from the remarriage. When the alimony payer remarries, the recipient is unlikely to be able to obtain an increase in alimony unless she can show an increased need which happened to coincide with or predate the payer's remarriage.
Side Note - Extension of Alimony: Although alimony is usually set for a limited amount of time, the period is usually extended by the court if the recipient presents evidence of changed circumstances. The recipient must file a request for a modification of alimony before the existing alimony expires. This is because once there is a termination of alimony, the court cannot reinstate it.
Example: As part of Jody and Tim's divorce agreement, Tim is to pay Jody $400 per month in alimony for three years or until she obtains a job, whichever comes first. Jody and Tim agree that the purpose of the alimony is to give Jody adequate time to learn a skill and find work. Six months ago, Jody completed a computer course in which she learned how to program. En route to a job interview, however, she was in a car accident and has been laid up ever since. The three-year period ends in two months. Jody has filed a motion requesting an extension of the alimony until she is well enough to interview and work. Because she did her best to obtain a skill and find a job, the court is likely to grant her an extension until she gets a job.
If a divorce agreement or decree states that alimony amounts and periods are non-modifiable, however, a judge cannot extend alimony beyond the termination date.