Understanding Alimony: What You Need To Know

When people fall in love and get married, it’s often their hope that the union will last ’till death do them part.’ However, many things happen in between, and for one reason or the other, the union comes to a stuttering end.

With this divorce comes financial considerations that may quickly resolve or draw out for a while. One of these financial talking points is alimony.

What’s An Alimony?

If you part ways with your loved one today and you’re the well-to-do spouse, you’ll likely pay a set amount to support your ex-spouse post-divorce. That’s the alimony (or spousal support, depending on who you ask).

Before we go on, note that alimony isn’t a substitute for splitting up your things after a divorce. Usually, they both happen together. So, when you’re talking about who gets the matrimonial home or other stuff you both own, alimony is not part of the conversation but will feature eventually. The point? To aid the financially weaker spouse to maintain a relatively stable lifestyle post-separation.

So, join us with this guide as we dissect alimony to help you better understand what it’s all about.

Who Gets Alimony?

To determine who between you and your ex gets alimony, the following factors come under the microscope:

• Duration Of The Marriage

Longer marriages often result in alimony awards. This is especially true if your ex-spouse has become financially dependent on you over the years.

• Each Spouse’s Financial Status

The court looks at both parties’ financial situations. We’re talking income, assets, and debts, etc. The point? To assess the need for support.

• Future Earning Potential

This considers the ability of each spouse to earn income post-divorce. A spouse with limited job prospects due to time out of the workforce may be more likely to receive alimony. Yes. If your spouse sacrificed their career to become long-term homemaker, you may have to pay alimony to help maintain a reasonable standard of living after divorce.

Types Of Alimony

Alimony comes in various shades:

• Temporary Alimony

This type of alimony is for a season and a reason, i.e., it comes into the picture during the divorce proceedings and ends once the divorce is finalized. The point? To maintain the living standard of the lower-earning spouse during the legal process. It’s what happens before a more permanent arrangement is set in stone.

• Permanent Alimony

Permanent means just that. It’s awarded in some divorces and generally continues until the recipient remarries or either spouse dies. Permanent alimony is pretty common in marriages that have run the test of time, and one spouse has a significantly lower earning capacity. The point? To provide ongoing financial support to maintain a similar lifestyle to that experienced during the marriage.

• Rehabilitative Alimony

Your ex-spouse wants to become a chef so she can start her pastry restaurant and make a living. Then rehabilitative alimony may be on the cards.

This type of alimony aims to support them to become financially independent, usually through education or job training. It’s often granted in shorter marriages where one spouse needs time to develop skills or education for self-support.

However, it doesn’t last forever. Only until your ex becomes self-sufficient.

• Reimbursement Alimony

If you contributed to your ex-spouse’s university or college dreams and paid for those professional certificates, then you may be due for some reimbursement alimony. 

This one focuses on repaying a spouse for significant contributions to the other spouse’s education or career advancement during the marriage. Why? Your investment may just have been the wind beneath your ex-spouse’s earning potential wings.

How’s Alimony Calculated?

The calculation of alimony takes into account not just one factor but a few of those.

• Each Spouse’s Earnings

This looks at the current and potential future income of both parties. More often than not. It’s you who earns way better than your ex that may have to pay alimony.

• Lifestyle During The Marriage

A caviar lifestyle or a simple Bohemian one? No matter. Your alimony will reflect your lifestyle during the marriage. The point? Both parties maintain the lifestyle they had during the marriage even after they’ve parted ways.

• Contributions To The Marriage

The question “What do you (or did you) bring to the table?” also has a place in law. In this case, Lady Justice focuses on the financial and non-financial contributions. If your ex-spouse stayed with the kids while you were out there racking achievements and certifications, their sacrifices will reflect on the alimony decision.

• State Law Variations

What’s considered mainstream in one state may not be true in another. In California, for example, the length of the marriage packs a serious punch when it comes to alimony. Here, you’ll pay alimony for half the length of the marriage if you didn’t last beyond ten years. If you did, then the ball is in the court’s court.

Texas, on the other hand, turns a deaf ear to marriages that last less than ten years (except in some cases where domestic violence was a feature in the relationship). And even for those who passed the tin period, there are limits to the amount of alimony to be paid out.

So, know your state and know your laws.

Modifying Or Terminating Alimony

Alimony (often) doesn’t last forever. Also, these orders are often not set in stone. Significant changes in your life and your ex-spouse’s and the alimony can come to an end or change.

• Significant Income Change

A new financial windfall like a raise or perhaps a lottery win? Or maybe a job loss or retirement? Expect a change in alimony payments to reflect the new situation.

• Cohabitation Or Remarriage

If (or when) your ex-spouse meets someone else and they start cohabiting or get married, the alimony arrangement comes to an end. The assumption is that the financial support from the new relationship reduces or eliminates the need.

• Other Significant Life Changes

Severe illness? Disability? These can also be grounds for modifying alimony terms. Remember, the whole point of the modification is to accommodate the new financial realities of both parties.

Tax Implications

The recent years have brought a lot of changes to tax implications for alimony payments. Previously, alimony was tax-deductible for the payer and taxable income for the recipient. But not for those agreements made post-2018 in the United States.

These changes mean that alimony payments are now just like child support: not deductible for the payer and not taxable for the recipient. This is the point where you need the wisdom of a financial advisor or tax professional. These pros can help you come to terms with the impact of these laws on your alimony situation.

Alimony And Retirement

Retirement funds, including pensions and 401(k) plans, also feature in alimony decisions. The court may view these assets as potential sources for alimony payments, especially when you guys have been married for a long time. Also on the radar are social security benefits, particularly if your spouse is entitled to benefits based on your earning record.

Length of the marriage? Your ages? The specifics of your retirement plans? All these come into the picture when talking about retirement and alimony. Keep a keen eye on this, especially if you’re approaching those retirement days.

Career And Alimony

You and your ex-spouse agreed that they should stay home and watch the kids while you grind and provide. Or maybe they put their undergraduate on hold to let you complete that MBA, before you realized that it couldn’t work out between you? All these choices feature in alimony decisions.

The court terms these decisions non-monetary contributions because, in one way or the other, they often impact the earning potential and career trajectory of the spouse making such sacrifices. That’s why they benefit from the court-awarded alimony to offset the lost income and opportunities.

The Legal Process

Alimony decisions aren’t a slash right – slash left, and it’s over. It follows a legal process with several very important stages.

• Negotiations

You and your attorney on one side, your spouse and their attorney on the other. This is often the first step. The point? To reach a mutual agreement on alimony. This stage encourages a collaborative approach and can lead to a more amicable resolution.

• Mediation

The two of you cannot agree? Okay. The next stop will be the mediation stage. Here, a neutral third party can step in. Their role? To facilitate discussions and help both of you to find common ground and reach an agreement.

• Court Proceedings

If the negotiator finds it difficult to bring you to an agreement, Lady Justice takes up the case. Here, each party lays all their cards on the table. That’s their financial status, needs, and other relevant factors. The judge then makes the final decision on alimony.

Financial Planning Post-Divorce

Effective financial planning after divorce is crucial for both parties, whether you’re adjusting to receiving alimony or budgeting for its payment. Here are some tips to help manage finances post-divorce:

• Create A New Budget

Post-divorce life often means new financial realities. Create a detailed budget that accounts for your new income level, alimony payments (received or paid), and living expenses. This helps in managing your finances more effectively.

• Adjust Lifestyle As Needed

Depending on whether you’re receiving or paying alimony, you might need to adjust your lifestyle to align with your new financial situation. This might mean cutting back on non-essential expenses or finding ways to supplement your income.

• Invest Wisely

If you’re receiving alimony, consider investing a portion to help grow your wealth and provide financial security in the long term. If you’re paying alimony, focus on investments that offer stability and align with your revised financial goals.

In Closing

As difficult as seeing the love you’ve shared for a long come to an end, being prepared for the financial complications that come post-divorce is a good idea. We’ve shared with you the ins and outs of alimony and how it may change your financial situation

Now, keep your financial advisors and your legal experts close during the entire period. Their wisdom may go a long way in making sure you get a fair settlement and end things with dignity and respect between you and your ex.