How to Protect Alimony Interests upon Separation or Divorce
Alimony is financial support provided by one spouse to the other spouse during or after separation or divorce. If a spouse files for legal separation or divorce, he or she has a right to seek alimony. Alimony is usually based on financial and economic considerations rather than marital fault.
The public policy behind alimony is apparent in situations where there is a big economic difference between spouses. Alimony may be appropriate in such situations to help the dependent spouse achieve more financial independence.
In making alimony awards, courts wield significant discretion. Courts must determine how much spousal support should be paid and for what duration. Unlike child support, there is no standardized alimony formula with a set of ready guidelines for the court.
Courts consider relevant factors when awarding alimony. These factors are no longer necessarily contingent upon a finding of marital fault on the part of the supporting spouse:
- Relative earnings of spouses
- Relative earning capacities of spouses
- Ages of spouses
- Physical, mental, and emotional conditions of spouses
- Duration of marriage
- Standard of living of spouses established during marriage
- Abandonment of marriage by either spouse
- Fault or marital misconduct of either spouse through date of separation
- Relative needs of spouses
- Contribution of one spouse as homemaker
- Relative education of spouses
- Time necessary to acquire sufficient education or training to enable spouse seeking alimony to find employment to meet reasonable economic needs
- Extent to which earning power, expenses, or financial obligations of a spouse will be affected by serving as custodian of a minor
- Amount and sources of earned and unearned income of both spouses
- Contribution by one spouse to education, training, or increased earning power of the other
- Property brought to marriage by either spouse
- Relative assets and liabilities of spouses
- Relative debt service requirements of spouses
- Any other factor relating to economic circumstances the court finds to be just and proper
A crucial and overlooked consequence of alimony is taxation. When considering how to factor alimony into a settlement agreement, care must be taken to the special tax treatment required for alimony. Receipt of alimony by the dependent spouse is often deemed a taxable event, while payment of alimony by the supporting spouse is a tax deduction. In some situations, parties are able to agree on tax treatment of alimony. As a result, tax deductions and consequences must be carefully evaluated to ascertain actual costs associated with alimony in a potential settlement. Often, it is prudent to consult the advice of legal, financial, and/or tax professionals in such situations.