Alimony (Spousal Maintenance)

Spousal maintenance may be paid by the higher earner to the lower earner in some, but not all, divorce cases.

As with all issues in a divorce, this is something that you and your spouse may agree upon; in the absence of an agreement, the court will make a decision.

Some of the issues are:

  • Understanding the different terms;
  • Whether it is likely to apply in your case;
  • How long (how many years) it would be paid;
  • Tax implications.

Q: What is the difference between "spousal maintenance" and "alimony"?

They are the same thing. The word "alimony" has fallen out of favor because the original alimony statutes of many states, drafted decades ago, typically had two problems: 1) they usually defined alimony as being payable only from a husband to a wife; and 2) they often presumed that alimony would be paid for the remainder of the wife's lifetime. Obviously, both of these ideas are out of date. If the wife is the higher earner, she may be ordered to pay support to her husband; and when support is paid, it is almost always for a limited period of time - usually a few years. In 2015, it is only in a rare case that a judge would order one party to support the other for the rest of his/her life.

What do the terms "temporary" and "permanent" maintenance mean?

The terms can be confusing, so let's use clear definitions:

"Temporary maintenance"

Amount to be paid by higher earner to lower earner while the case is pending. This is one of the first actions a judge would take on your case; to determine whether temporary maintenance is appropriate. As discussed below, it is based on a formula.

"Permanent Maintenance"

Amount to be paid following trial (or reaching an agreement). This is a confusing term because it sounds like the payor will be paying it forever. No, the term "permanent" is meant merely to contrast with "temporary". So, a settlement agreement might say, "Husband to pay Wife permanent maintenance of $2,500 per month for 3 years." This sounds like an internal contradiction: it's permanent, but only for three years? You can disregard the word permanent in this context. Note that I avoid this term in my paperwork because I think it is unhelpful and confusing.

"Non-Durational Maintenance"

This is the term that means "lasting forever." Non-duration means the maintenance lasts until either party's death. In modern times, this is very rare. For older couples, the Court may order maintenance until the receiver-spouse turns 65 and is eligible to collect Social Security.

Would temporary maintenance be awarded in my case? How much?

The statute was revised and went into effect in late 2015. It is a improvement on the old statute because by default, it is capped at 175,000 of respective gross income. Previously, the statue automatically applied to 524,000 of gross income, including year-end bonus which may or may not be a sure thing. Under the prior statute, medium-to-high earners were frequently saddled with maintenance obligations they simply could not meet with their paycheck. It was a big problem and fortunately, the Legislature has corrected it.

Here are a few sample results under the new formula (assuming no kids):

You: 50,000; Spouse: 0; Monthly Payment: $833
You: 100,000; Spouse: 0; Monthly Payment: $1,667
You: 150,000; Spouse: 0; Monthly Payment: $2,500
You: 175,000; Spouse: 0; Monthly Payment: $2,917

You: 50,000; Spouse: 50,000; Monthly Payment: $0
You: 100,000; Spouse: 50,000; Monthly Payment: $625
You: 150,000; Spouse: 50,000; Monthly Payment: $1,458
You: 175,000; Spouse: 50,000; Monthly Payment: $1,875

You: 100,000; Spouse: 75,000; Monthly Payment: $0
You: 150,000; Spouse: 75,000; Monthly Payment: $937
You: 175,000; Spouse: 75,000; Monthly Payment: $1,354

You: 150,000; Spouse: 100,000; Monthly Payment: $0
You: 175,000; Spouse: 100,000; Monthly Payment: $833

Maintenance calculator (PDF):
Temporary Maintenance Calculator (official NY courts website)

Bear in mind, temporary maintenance is tax-deductible by the Paying spouse and taxable to the Receiving spouse. More on that below.

Would maintenance be awarded in my case?

Prior to 2015, whether maintenance would be awarded following trial was really a crapshoot; the judge had discretion to order what he/she felt was fair, based on a long list of factors.

While the judge still has discretion, he/she is now subject to the guidelines. The guideline amount is the same as temporary maintenance amount, so that's easy enough to understand.

But how long will it last? The guideline duration depends on the length of the marriage. Here is what the statute says:

Marriage up to 15 years: 15% to 30% of length of marriage
Marriage of 15 to 20 years: 30% to 40% of length of marriage
Marriage of over 20 years: 35% to 50% of length of marriage

That's a little confusing, so here are some examples:

Length     How long you have to pay
5                9 months to 18 months
8                1.2 to 2.4 years
10               1.5 to 3.0 years
12               1.8 to 3.6 years
18               5.4 to 7.2 years
25               8.75 to 12.5 years

These are merely "guidelines"; but if you wish to deviate, you will need to convince the judge why.

What is the tax impact of maintenance / alimony?

This is a pretty simple one: deductible by the payor, taxable to the payee (receiver.)

So, if the Husband is ordered to pay the Wife $5,000 per month, then at the end of the year, he can deduct $60,000 on Line 31(a) of his 1040. Meanwhile, the Wife will need to enter $60,000 as income on Line 11 of her 1040. Yes, the IRS will cross-check to make sure someone is paying the tax.

Obviously, this has the effect of minimizing the overall tax burden, assuming the Wife reports a lower taxable income than the Husband.

Thus, in an appropriate case, alimony taxation can be used to favorably carry out a distribution of assets. This is a little tricky and you have to be sure not to run afoul of the rather convoluted "Alimony Recapture" rules. If I think your case is a good candidate for re-structuring asset distribution as alimony, I'll be sure to let you know.

Why isn't alimony as important as it used to be?

Mostly because of the statutes authorizing "equitable distribution of marital property" that were passed in nearly every state about 30 years ago. These statutes authorize a judge to order that property in one spouse's name (for example, a home, or an investment account) be given to the other spouse. In the old days, the judge lacked the power to do this, no matter how much he may have wanted to. So the old model was based upon one spouse, usually the husband, using his resources and his career to "take care of" the other spouse on an ongoing basis - usually, for the rest of his life.

With equitable distribution, the idea is to make a "clean break." Thus, a judge's thought process goes something like: "Husband and Wife, I am giving each of you half of the marital property. If you're both self-supporting and don't have any kids, there is no need for either of you to ever speak to the other again. If one of you does need help getting back on your feet, then your spouse is going to pay you X dollars per month for Y years. When that ends, good luck."

In sum, the old model was based upon the husband paying the wife a monthly sum for the rest of her life. The new model is based upon splitting up the assets and encouraging each party to move on with their life as soon as possible.

So, while spousal maintenance can still be an important issue, it is no longer the primary issue.