Alimony is but one financial aspect of divorce and there are many for which you should have a qualified divorce financial professional review.
Alimony is a generic term that actually refers to three types of support payments made by the higher earning spouse to the lesser earning spouse:
- Spousal Support – Awarded to the lesser earning spouse pre-divorce and before either party files a divorce complaint. Can be awarded even if the parties are living in the same house so long as they are separated, i.e., living separate and apart
- Alimony Pendente Lite – Support after the divorce complaint is filed and before the divorce is final
- Alimony – Payments mad once the divorce is finalized for a set period of time per the divorce settlement
Spousal support and alimony pendente lite are calculated in the same way. Alimony is determined by a number of factors but it is often calculated with the same formula.
No Minor Children: Spousal support and alimony pendente lite is calculated before child support and it’s based on net income. If there are no children, the amount is the difference between 33% of the obligor’s (higher earning spouse’s) and 40% of the obligee’s (lower earning spouse’s) net income. For example,
Obligor’s Monthly Net Income is $15,000; 33% is $5,000
Obligee’s Monthly Net Income is $10,000; 40% is $4,000
Difference = $1000 = Monthly Support
With Minor Children: The same basic formula but the percentages are changed to 25% and 30%, respectively. To illustrate,
Obligor’s Monthly Net Income is $15,000; 25% is $3,750
Obligee’s Monthly Net Income is $10,000; 30% is $3,000
Difference = $750 = Monthly Support
Additionally, there will be a separate amount calculated for child support that will be added to the monthly alimony.
Post-Divorce Alimony Considerations
Many courts will use the formulas above but the amount may be modified based on a number of factors, the most important of which are:
- Difference between spouses’ earnings
- Ages and health of the parties
- Sources of income
- Expectancies, e.g., inheritances
- Financial needs of the parties
- Marital misconduct (rarely considered)
Duration of Post-Divorce Alimony
How long alimony will be paid is a discretionary decision that is based on the factors above. The rule of thumb, though, is 1 year for every 3 years of marriage. So, if a couple has been married for 20 years, the lesser earning spouse would expect to receive alimony for 6 – 7 years. If, however, if the lesser earning spouse is near retirement at the end of that period, the court may extend until he or she is able to collect Social Security and/or access retirement funds.
The vast majority of men and women view alimony with disdain—who wants to have to write a check to their ex-spouse month after month? Likewise, does anyone like waiting for and worrying about the monthly check they’re expecting from their ex? What happens if the payor dies, loses their job, or becomes disabled? Is he or she going to be obsessing about whether their ex is cohabitating with a new partner? One alternative is to add an offset to the distribution of the assets equal to the present value of the expected alimony payments. So long as there are sufficient assets to cover the amount, this is a win-win for both parties and eliminates the ongoing angst of monthly payments.
Read more on divorce financial considerations here.
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