Kenneth Carroll: What Are The Rules For Alimony?

Alimony or spousal support is a monthly payment made by one spouse to another in accordance with either a settlement agreement or a court decision. The purpose of alimony is to correct any unfair economic effects caused by a divorce, such as when a stay-at-home parent suddenly needs a source of income after the divorce but has never held a job. Spousal support is generally issued in connection with cases involving divorce or legal separation. Also known as alimony, spousal support is where one spouse pays the other ex-spouse a certain sum of money, usually on a monthly basis. Courts may require this in instances where one party is much more financially stable than the other, and the other party needs assistance in beginning life after the divorce or separation.

Spousal support is issued on a case-by-case basis, and each case will be different in terms of the spousal support analysis. In most cases, only persons who have been involved in a marriage of a longer duration (usually over 5 years) are qualified for spousal support. Also, the court will take into account several factors when making the support determination, including:

• The earning capacity of each spouse
• The assets and property owned by each person
• Whether one party is significantly involved in debt
• Whether the parties were engaged in a shared business
• Each party’s contribution to the relationship (for instance, as a homemaker, or in terms of joint careers/education)
• Whether the parties have worked out spousal support provisions in a prenuptial agreement
• Various other factors, such as mental and physical health conditions
• Certain factors can disqualify a person from child support, such as a history of abuse or a history of certain charges on one’s criminal record.

Spousal support orders that are issued by the court are final and enforceable by law. However, they can sometimes be altered due to unique or special circumstances that become present later on. An example of this is where the spouse receiving support payments begins cohabiting with another partner who begins supporting them financially. Another example is where one party is experiencing extreme hardship. Spousal support can also be terminated for various reasons. It is usually ordered after a divorce when either the spouse mutually agree on the payments or when the judge looks at all the relevant factors and decides that alimony or spousal support is necessary to support one spouse. Spousal support is generally awarded to a spouse who has been out of work during the marriage or makes a lower income and needs the support of the other husband even after the divorce. The judge could order one spouse to pay the alimony payments in one lump sum if the spouse has the ability to do so or make monthly payments. Alimony payments can also be modified depending on the ability to pay. For example, if one spouse gets a significant raise in income or loses their job and cannot pay, then the spousal support is also modified since it changes the ability to pay.

Requirements for Spousal Support

There are several requirements in order to satisfy for payments to be considered spousal support:
• The payments that are being made must be in cash or checks. Assets and paying off debts is not considered payments for support.
• The payments must be provided for in a divorce or a written agreement

• Payments made prior to divorce or agreement for payments are not considered
• Alimony or spousal support cannot be claimed during the same year joint tax returns were filed
• Alimony payments cannot be paid during the time both spouses live in the same residence
• The payments must stop if one spouse marries or dies
Even if the woman is working and there is a substantial difference between her and her husband’s net worth, she will still be granted alimony to provide for the same living standards as her husband’s. If the woman’s not earning as well, Court will consider the woman’s age, her educational qualifications, ability to earn to decide the amount of the alimony. Alimony does not constitute child support. Maintenance for children’s needs is to be provided separately by the father. However, if the mother is earning, she will also have to provide for the child in proportion to her income. Husband is granted alimony only if he has some physical disability that prevents him from earning and the wife is earning.
How much is paid
Monthly payout: Supreme Court has capped monthly alimony at 25% of husband’s gross salary. It can be raised and lowered as per the changes in husband’s salary.
Lump sum settlement: No benchmark on lump sum settlement. It usually ranges from 1/5th to 1/3rd of the husband’s net worth and is a one-time settlement.
Taxability of alimony
Monthly payout: Alimony in the form of monthly/quarterly payouts is treated as revenue receipt and taxed in the hands of the receiver. It is added to her total income and taxed as per the tax bracket. No deductions available for the payer.
Lump sum settlement: Lump sum alimony is treated as capital receipt and hence is tax-free.
Items that belongs to her.

• All kinds of jewellery (gold, silver, precious/semi-precious stones, and alloy), property and other valuables like car, paintings, artifacts, appliances, furniture etc. gifted to the woman at marriage, before marriage and during the course of her marriage. In case of a dispute, a list of all the items signed by two witnesses can be given to make a claim.
• Gifts can come from anyone husband in-laws, parents, friends, relatives and acquaintances.
• Woman’s earnings before or after marriage from employment or business. Any savings or investments made from her earnings.
Items that does not belong to her.
• Any ornaments, like a gold chain or ring, and other valuables gifted to the husband by the wife’s parents at the time of marriage and through the duration of marriage.
• Any movable or immovable asset bought by the husband in the wife’s name without passing it on as a gift.
• Earnings of the woman spent on household cannot be claimed back.
Taxes and Alimony Records
For now, alimony is tax-deductible for the paying spouse and constitutes taxable income for the supported spouse. This is one of many reasons that it’s important to keep adequate records if you’re paying or receiving alimony. Note that individuals paying alimony will no longer be able to deduct their payments for tax purposes, and supported spouses won’t have to include alimony in their gross income. Frequently after a divorce, the spouses dispute, or the challenges, the amounts that were actually paid or received. Without adequate documentation, the payer may lose the alimony tax deduction or be ordered to pay back support if the other spouse makes a claim in court.
Alimony Payer
The person paying alimony should keep:
• a list showing each payment (date, check number, and address to which the check was sent)
• the originals of checks used for payments (keep in a safe place, such as a safe deposit box) be sure to note on each check the month for which the support is being paid, and
• if you pay in cash, receipts for each payment, signed by the recipient.

Be sure to keep these records for at least three years from the date you file the tax return deducting the payments. Some lawyers and tax advisers say you should never throw away these types of records.

Alimony Recipient

The spouse receiving support should make a list that shows each payment received. Include the following information:
• date payment was received
• amount received
• check number or other identifying information (for example, the number of the money order)
• account number on which any check is written
• name of bank on which check is drawn or money order issued
• a photocopy of the check or money order, and
• a copy of any signed receipt you give for cash payments.

Finally, if you secure an alimony order but your spouse refuses to make the required payments, take immediate legal action to enforce the order through a contempt proceeding or an earnings assignment order. Orders to pay monthly alimony have the same force as any other court order and, if handled properly, can be enforced with the very real possibility of obtaining regular payments. If necessary, a court may jail a reluctant payer to show that it means business.

Factors Affecting Alimony

The determination of alimony varies greatly from state to state. Some state statutes give explicit guidelines to judges on the amount and/or duration of alimony. Alimony is awarded only in cases of marriage or civil union of ten years or longer and the payments are limited to three years unless there are special, extenuating circumstances. Furthermore, the amount of spousal support is limited to the lesser of $2,500 per month or 40% of the payee’s gross income. Spousal support is usually not awarded in marriages of less than 10 years and in some states, alimony awards cannot exceed 121 months. In Utah, the duration of alimony cannot exceed the length of the marriage. In these states, the determination of duration and amount of alimony is left to the discretion of the family court judges who must consider case law in each state.

In general, there are four types of alimony
• Temporary alimony: Support ordered when the parties are separated prior to divorce. Also called alimony pendent lite, which is Latin, meaning, “pending the suit”.

• Rehabilitative alimony: Support given to a lesser-earning spouse for a period of time necessary to acquire work outside the home and become self-sufficient.

• Permanent alimony: Support paid to the lesser-earning spouse until the death of the payer, the death of the recipient, or the remarriage of the recipient.

• Reimbursement alimony: Support given as a reimbursement for expenses incurred by a spouse during the marriage (such as educational expenses).

• Amount and duration

• The longer the length of cohabitation and the greater the disparity between each party’s incomes, the larger an award of spousal support will be and the longer the duration will be. As stated above, spousal support calculations are complex. There are no tables to use as in child support calculations. Lawyers use special software designed specifically to calculate the entitlement, amount, and duration of support. After information is input into a computer, the software will provide a range for the spousal support amount and duration.

• Although there is no set formula to determine the exact amount and duration of spousal support, there are guidelines, referred to as the Spousal Support Advisory Guidelines, which provides ranges for both. The Spousal Support Advisory Guidelines calculates the ranges taking into account the factors set out above. Although the courts are not required to abide by the Spousal Support Advisory Guidelines, they are required to take them into account when deciding on the issue of spousal support.

• Depending on the means and needs of the individual receiving support, the court will generally award an amount of spousal support somewhere within the range provided by the software. The longer the relationship, the greater the presumption that the parties should have an equal standard of living.

• Similarly, the length of the relationship will be taken into account when determining how long spousal support should be paid for. Awards for spousal support can be for a limited term or indefinite.

The fact you have to pay alimony to your ex-spouse doesn’t amount to a finding that you are a bad person. Consider it part of the cost of entering a marriage that you probably thought would last until death parted you. Alimony has been the law for more than 100 years, and while it is ordered somewhat less frequently these days, there is no sign that courts are going to stop making alimony orders for good.