Alimony in Divorce: Consequences of Alimony Payments

Alimony or spousal support (aliment or maintenance awards) provides financial assistance from a high – income person to a lower income ex-spouse, under a divorce or separation document. In 1979, the United States Supreme Court removed the limitation to husbands, accounting for cases in which the wife is wealthier in regard to paying alimony. The amount received and the amount that is paid has certain tax consequences. Several factors are considered calculating the amount of alimony. Payments will stop or be modified, under certain circumstances. Typically the amount of alimony payment cannot be increased or used to punish a payor or reward a payee spouse, because of any adultery, martial fault or infidelity, unless state legislatures rule otherwise. Certainly, advantageous having a valid antenuptial or premarital agreement, were by both parties, have agreed upon a limit of alimony in the future. Always, preferable to negotiate alimony, rather than having a judge arbitrarily determine, if alimony is justified and any amount awarded.

Internal Revenue Services has guidelines regarding alimony. Those receiving alimony must provide that information, on long income tax Form 1040 on line eleven. Not permissible to submit Form 1040EZ or 1040A. The payment of alimony is written on Line 33a (Form 1040) and social security number of the recipient on line 33b. Payment of alimony to more than one person requires an attached statement on the return, showing an itemization how much is paid to each person including social security numbers. By not providing this information, the IRS may charge a penalty and the deduction may be disallowed. Also, if a spouse refuses to provide his or her ex a tax ID number, a $50 tax penalty could be charged. Payment of alimony is a deductible expense made by cash, check or money order. Also, payment is not treated as a child support (never deductible), and liability to pay alimony is discontinued upon the death of the spouse or former spouse. The recipient pays a taxable income on the alimony based upon the person’s tax bracket. (Example: Fifteen percent tax bracket on $1,000 received alimony payment is equal to $150 taxable amount.) No taxes are withheld from alimony payments, would be advisable to consider making estimated tax payments or otherwise, possible owing the Internal Revenue Service, when filling the return.

A judge considers several factors, whether to grant alimony and any amount. Certain state legislatures have enacted their own guidelines or statues, regarding alimony. These statues judges or courts follow, in regards to their states, when granting, modifying or declining alimony. (Examples of recent legislative reforms regarding alimony: In 2005, Florida State legislatures approved that alimony could be reduced or cut off, when a former spouse decides to move in with a new lover. However, restrictions will not apply, when a spouse moves in with same sex partner after a divorce. As written by the legislatures, this applies if the former spouse lives with a member of the opposite sex. New Jersey legislatures approved alimony laws: When a payee spouse remarries, and if he claims that he can no longer support his former spouse, this factor alone is not sufficient to change the circumstances, justifying a decrease in alimony. Furthermore, declaring personal bankruptcy under chapter seven does not permit, discontinuing alimony obligation. New Jersey courts have enforced under property settlements, provide for the termination of alimony, regardless of economic circumstances, if the recipient (woman) spouse lives with another man. According to the state of Maryland, alimony can be awarded only before the final ending of a marriage. An alimony claim is not acceptable, after a marriage has ended, only during divorce procedure. The Maryland Court of Appeals has noted: “The long standing rule in Maryland … that the right to claim alimony is extinguished at the time of the severance of the marital relationship.” (Regarding case Altman v. Altman). Furthermore, Maryland law follows the Federal Consumer Credit Protection Act regarding withholding of earnings, when alimony is not paid. The Virginia constitution protects debtors from imprisonment, including those that fail to pay alimony.). Also, judges review each party or side, ability to earn money, both now and in the future, their age and health, length of the marriage (longer means more alimony), property valued owned, and conduct of each party. Most important factor taken into consideration, whether one spouse has been economically dependent on the other spouse, during or most of the time or length of the marriage. Also, the standard of living established during the marriage.

A court or judge will decide rehabilitative, permanent, temporary or lump – sum alimony. Rehabilitative alimony designed to allow lower paid or at home spouse, ability to enhance their skills and or gain the necessary education to become self-supporting. Permanent alimony is provided for life and likely to be favored during a long – term marriage. However, upon certain circumstances, the alimony would be discontinued. Temporary alimony payment lasts for a specific period of time, usually one to two years. Applicable in circumstances, when one person may need financial assistance, for short period of time, until being able to handle their financial obligations. A lump – Sum alimony is a one – time payment, often associated to property division. Any type of alimony will be cease upon the death of the payor. The payee should consider purchasing and making payments for life or disability insurance policy, in the amount sufficient to replace the alimony.

Income derived from any inheritance can be considered as determining factor, when calculating alimony award. Besides, a person receiving an inheritance, is a factor for a motion, of either party, requesting a reduction or increase in alimony.

A clause known as an Anti-Lepis, can be inserted into a property settlement agreement, which prevents any modification of alimony, despite any potential change of circumstances in the future. Courts have upheld this type of clause. However, courts will not permit the parties to bargain away the courts equitable powers.

A spouse may file an application for increase in alimony. The courts or a judge will review, grounds for the motion, which requires additional income to maintain a decent lifestyle. The burden of proof has to demonstrate the change of circumstance, in lieu of the fact, of the standard of living during the previous marriage.

A judge may grant or decline alimony based upon information gathered by a financial Certified Divorce Planner (CDP). A CDP is a financial specialist, who has successfully completed an intensive training program, from the institute for Certified Divorce Planners. The information gathered by a CDP, could provide analysis of proposed divorce settlements (including alimony) and by using Divorce Plan Software. A divorce planner software evaluates amount of alimony, can be purchase separately. The software sold by FinPla in Chicago, for about $400 (1 – 800 – 777 – 2108).

In 2005, according to a study conducted by Divorce Financial Analysts, more than half of the 60 respondents reported, alimony payments have gone down, over the last decade. Judges have placed a lower value on the intangible contributions spouses make during a marriage. Many spouses are highly educated and viewed by judges able to get a successful paying jobs, thus less dependent upon receiving alimony payments. However, women in their 50s and 60s, who have never worked are getting credit for their contributions as homemakers, according to Janet Bouma, a divorce planner in the Pittsburgh area. Certified Divorce planner charges between: $75 – $200 an hour.

The payment of alimony contract will terminate upon the death or remarriage of the recipient, as well upon the death of the payor. A modification or reduction of alimony is granted, prevalent upon any number of circumstances, such as income changes upon reaching retirement age, unforeseen events happening, including a spouse losing a business or job or illness changing the earning capacity of one spouse. Also, financial needs maybe modified, when a spouse is living with another person or couples cohabiting, under the context of an alimony agreement. Subsequently, if the payor provides evidence to prove the dependent spouse is using the alimony to support a live-in boyfriend or girlfriend, legal grounds for reduction of alimony or termination.

When alimony payment is not received, maybe enforced by filling a petition to hold the party to comply. If the order of the court is in contempt (“contempt of court”), a judge can order sanctions against the plaintiff or payee. These sanctions include imprisonment for period of time, judgment against the non-complying party, taking and seizure of real estate of the non-complying party, attachment of wages of the non-complying party, payment of reasonable counsel fees and costs by the non-complying party and / or a court order to seize tax refund checks, applied to funds towards payment of alimony. According to Federal Consumer Credit Protection Act, more earnings can be taken for child support or alimony, than for ordinary debts. If the debtor does not have another spouse or child to support, up to 60 percent of after tax earnings can be garnished. However, more than twelve weeks behind alimony payments, when earnings withholding order had been issued, the amount increases to 65 percent. When the defendant has another spouse or child to support, the court can order 50 percent of earnings to be garnished or 55 percent, more than twelve weeks behind payments.