Alimony & Spousal Support Part 2
Although spousal support or alimony is intended to be fair according to public policy, the definition of “fairness” is both subjective and circumstantial.
Divorcing spouses may have a huge disparity of income, differences in education, career experiences, etc. due to their backgrounds or decisions as a couple such as one spouse staying home to raise the children.
Often states apply formulas for temporary support during the pendency of the divorce. This only takes into consideration any child support paid, income from all sources for the two parties and any healthcare being paid by either of them. Definitions of “income” vary widely from state to state. In California, income is money received or earned from all sources including dividends, RSUs that vest, interest, trust fund distributions, rental properties, etc.
In California, the temporary support formula often referred to as calculated by the Dissomaster program, cannot be used in court for awarding permanent support. Since mediation practices differ than courts, the Dissomaster formula is often used as a starting point for determining the spousal support in mediation cases. Family Code 4320 lists the thirteen factors that must be considered when awarding permanent support through California Family Court. These factors involve the supported party’s ability to be self-sufficient, their health, standard of living, the parties marital standard of living, the supported party’s assets, nd the supporting party’s ability to pay and standard of living, among other considerations.
While there are no rules regarding formulas that seem “reasonable” in California, there is a general consensus that the supporting party should be incentivized to continue working. This would lead to a higher amount of net income available to the supporting spouse than the supported spouse.
In other jurisdictions, the courts may follow different rules. The American Academy of Matrimonial Lawyers suggests a formula that is typically applicable in many states. The formula takes 30% of the supporting spouse’s gross income less 20% of the supported spouse’s grows income. Similar to the California practice, the supported spouse’s income combined with the spousal support received cannot exceed 40% of the combined gross income of both parties.
Another formula that may prevail in certain jurisdictions is the “one-third” formula. Both parties’ gross incomes are divided by three and then the lower income is subtracted from the resulting one-third amount. The net after subtraction is the spousal support to be paid if greater than zero.
The third prominent formula that is typically applied is the Ginsburg formula. The goal of applying this formula is for the supporting spouse’s income after payment of spousal support to be equal to the total of that person’s income plus the supported spouse’s income divided by 1.8. Consequently, the spousal support then becomes the supporting spouse’s income LESS this net result after division.
Check with your attorney and local jurisdiction to determine the prevalent spousal support approach your state typically applies.
When considering spousal support, it is important to consider the length of time the support is to be paid. California typically will award support for one-half the length of a marriage of less than ten years. If ten years or more, the marriage is considered a long-term marriage and there is no discontinuation time ordered by the court. However, parties often return to court for reconsideration disallowing indefinite spousal support.
In determining spousal support, it is important to consider the support obligation after the division of assets to ensure that the resulting interest, dividends, capital gains, rental income, etc. are taken into consideration in determining the true post-divorce income. With assets, often the CA courts will impute a percentage of return that could be expected from the assets even if they are not invested in that manner at present.
Along with that should be future expectations for both parties regarding their anticipated work tenure (i.e., ageism, layoffs, retirement) and the realistic ability of the supported spouse to find work given their marketable skills and years out of the labor force. With gray divorce (divorce over 50) exceedingly common and growing in the past two decades, it is imperative that these factors and considerations be taken seriously into consideration when determining the amount and length of time spousal support will be paid.
How and when support is paid varies depending upon the settlement or court order. If you are settling outside of court at a settlement conference (or Settlement Officer’s Conference/Judicially Supervised Settlement Conference at court), you may agree to lump sum spousal support in California. The obligation is usually paid upfront in one lump sum after you arrive at an agreement about the amount of support. This amount may be discounted for early receipt because of the time value of money. There are many advantages for both parties regarding agreeing upon a lump sum payout. Both parties must agree, and the court will not award a lump sum payout. The court is only allowed to order periodic payouts (usually monthly).
One other consideration as you settle either in court or proceed with a court order regarding support is the agreement regarding spousal support that is modifiable or non-modifiable support. If modifiable, certain changes of circumstances (supported spouse moving to a lower cost of living, the supported spouse working full-time instead of part-time, or the supporting spouse receiving a major promotion and pay raise) would enable either party to meet with mediation or litigation attorneys to change the amount of agreed upon support within the parameters of the negotiated settlement agreement. Non-modifiable support means that the original support amount remains the same no matter what the circumstances might be in the future including loss of job by the supporting spouse.
It is critical to stipulate in your marital settlement agreements if settling outside of court, the circumstances and parameters for paying support, including modifiability and non-modifiability. Other considerations, may include whether support is paid if cohabitating with a romantic partner or if there is a re-marriage of the supported spouse. The more granular you are in your settlement agreement regarding potential circumstances, the less likely you’ll need to revisit the support issue with attorneys in the future.
As you may have concluded, fairness in calculating spousal support or alimony runs the gamut of whatever factors are considered to be precedence setting, built into the law and then how those factors are interpreted. Parties’ interests and perspectives on the divorce itself and life after divorce are intangibles that weigh heavily in the ultimate agreement regarding support issues. These non-financial considerations should not be taken lightly as there are creative ways to address them that may not necessarily involve spousal support.
This article does NOT constitute legal advice and is for general information purposes ONLY. Prior to making any decisions, seek legal counsel from a licensed attorney.
