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.
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.
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.
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.
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.
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.
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.
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.
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:
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.
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.
There are several ways in which alimony may be modified.
Non-Modifiable Alimony
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.
Escalator Clause
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.
Changed Circumstances
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.
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.
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.
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.
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.