CA & MI Spousal Support
One of the most contentious aspects of divorce is the issue of spousal support.
In most states, the payment of spousal support is almost guaranteed for long-term marriages, and these are defined as marriages longer than 10 years.
In California, marriages over 10 years are considered long-term and the courts may not order a termination date for support payments to end. However, that does not mean that the payments are indefinite. They are usually modifiable unless the parties agree otherwise in the marital settlement agreement outside of court. As the lower wage earner spouse is eventually able to make more income, the supporting spouse will motion the court to reduce or modify the support agreement. If the supporting spouse gets a promotion or higher paying position or job, the support can be modified upwards until the cap established by the marital standard of living.
In California, the marital standard of living is an analysis done to determine the maximum amount of income a recipient spouse can receive in support payments post-divorce. A recipient spouse cannot receive more than what was realized during the marriage and that income is reduced for taxes, increased for inflation and adjusted for several other factors to arrive at a net after-tax monthly spendable income. This is what sets the limit on spousal support.
However, support is not solely determined by the marital standard of living, but rather, the court must consider 13 other factors, one of them is the discretion of the court, to determine the fair amount of spousal support to be awarded. The support must be paid in cash and cannot be made in a lump sum payment if the court is ordering support.
In settlements outside of court, however, lump sum payments are very popular especially given the Tax Cuts and Jobs Act changes which disallow a deduction on taxes for the payment of spousal support. And, the recipient does not claim spousal support on federal taxes, but since California is non-conforming to federal regulations, the recipient spouse must pay taxes on spousal support and the supporting spouse may claim a deduction on California taxes.
In Michigan, there is less of a prescriptive calculation for permanent support. Almost two-thirds of Michigan family court judges use a software calculation program to set alimony payments. A program assigns scoring ranges to various factors based on that weigh in determining alimony. The judges use the calculations as guidance to arrive at a reasonable number, not as an exact amount to order for alimony.
the ability of the parties to work.
the source of and amount of property awarded to the parties.
the age of the parties.
the ability of the parties to pay alimony.
the present situation of the parties.
the needs of the parties.
the health of the parties.
the prior standard of living of the parties and whether either is responsible for the support of others.
the general principles of equity (fairness).
These are somewhat common factors in all states used by the courts to determine the amount of spousal support that should be obligated. Circumstances differ for every case and the court has discretion such as, again, the last factor “fairness.”
In most states and especially in California and Michigan, the income of the spouse requesting support is the most significant consideration in calculating the payments. It is heavily weighted (contributing up to 35 percent of the spouse’s overall score in the Michigan software program). This income relates to income from multiple sources including dividends and interest received on assets awarded in the settlement or separate property, rental income from rental property, 1099 income, royalties, capital gains income if not reinvested (CA), etc.
In short to medium length marriages, courts generally award spousal support for a duration of one-half to one-third the length of marriage. In California, for marriages less than 10 years, it is one-half. In Michigan, it could be one-half to one-third for marriages less than 20 years.
In many states, including California and Michigan, if the recipient spouse remarries or cohabitates the spouse’s alimony can be discontinued. In California, the supporting spouse would need to petition the court that the cohabitator is in a romantic relationship with the ex-spouse and is contributing to the household expenses. While death and remarriage are clear cut defining reasons to terminate spousal support, cohabitation puts the burden on the supporting spouse and support may or may not be terminated or even modified by the courts. Of course, in a settlement outside of court, these circumstances may be written into the stipulation to automatically trigger termination of support.
Spousal support in California and Michigan is also governed by case law and they are bountiful. One of the more significant ones in California is the Ostler Smith calculation applied to any income the supporting spouse earns over the base or regular pay. This would include, overtime, bonuses, extra on-call hours, deferred compensation, equity compensation, some partnership distributions, etc.
A calculation is done in a software program to determine the percentage of that additional income that would need to be paid as spousal support as the income is received. Typically, these payments can be made on quarterly, semi-annually, or annual basis. A comparison of W2s, 1099s, and pay stubs along with tax returns at the end of the period agreed are some of the sources used to determine the amount that is due.
In lieu of making spousal support payments, a support buyout or alimony buyout, as referred to above as a lump sum payment may be agreed upon. Assets that would have been awarded to the supporting spouse would be used to make the payment and this lump sum payment usually takes into consideration the number of years and amount of spousal support that would have been paid.
Spousal support is usually fraught with emotions and the complexity of the considerations and calculations require expertise in helping parties determine a fair amount that should be paid. Spending time and money fighting, however, just leaves that much left for each spouse to have for their benefit post-divorce.
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.
