Tag Archive for: alimony

Alimony

Alimony is support paid to an ex-spouse following the divorce decree. The amount of alimony is based on the incomes of the parties but may also be affected by the distribution of other marital assets, if any. The length of alimony is directly attributable to the length of the marriage. For example, a party may expect approximately 1 year of alimony for every 3 years married. For marriages of over 25 years, an indefinite term of alimony may be appropriate. Unless otherwise stated by agreement, alimony may be subsequently modified due the changed circumstances of either party. The changes must be substantial and of a continuing nature. Parties to a private agreement may stipulate that alimony is non-modifiable in amount, duration, or both.

If a court is making a decision on an alimony award they must consider the factors listed in Section 3701 of the Domestic Relations statue. The factors to be considered by the court include: (1) The relative earnings and earning capacities of the parties; (2) The ages, and the physical, mental and emotional conditions of the parties; (3) The sources of income of both parties including but not limited to medical, retirement, insurance of other benefits; (4) The expectancies and inheritances of the parties; (5) The duration of the marriage; (6) The contribution by one party to the education, training or increased earning power of the other party; (7) The extent to which it would be inappropriate for a party, because said party will be custodian of a minor child, to seek employment outside the home; (8) The standard of living of the parties established during the marriage; (9) The relative education of the parties and the time necessary to acquire sufficient education or training to enable the party seeking alimony to find appropriate employment; (10) The relative assets and liabilities of the parties; (11) The property brought to the marriage by either party; (12) The contribution of a spouse as homemaker; (13) The relative needs of the parties; (14) The marital misconduct of either of the parties during the marriage; however, the marital misconduct of either of the parties during separation subsequent to the filing of a divorce complaint shall not be considered by the court in its determinations relative to alimony. Adultery can serve as a bar to alimony.

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Allocation of Support

Allocation is the identification of separate portions of a support award where a party receives both child support and some form of spousal support simultaneously. Child support and alimony payments have different tax consequences. Child support is not tax deductible by the payor or taxed as income to the payee. The exact opposite is true of alimony. Alimony can be claimed as a tax deduction for the payor and must be claimed as income by the payee. Parties can reach a mutual agreement to allocate a support award however they see fit. Where support is calculated pursuant to the guidelines, the Order will spell out what portion of the support award is child support versus what portion of the support award is alimony.

Child support is payable to the custodial parent until the child is 18 or graduates high school, whichever is later. Child support is subject to modification based on a change in circumstances such as different income for the parents, different expenses for the child or a different custody schedule. Alimony is support paid to an ex-spouse following the divorce decree. The amount of alimony is largely based on the incomes of the parties but may also be affected by the distribution of the other assets, if any. Unless otherwise stated by agreement, alimony may be subsequently modified due the changed circumstances of either party. The changes must be substantial and of a continuing nature. As previously alluded to, an alimony provision within an agreement between the parties may not be modified in the absence of a specific provision allowing such a modification within the agreement.

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Alimony and Tax Implications

Alimony is support paid after a divorce has finalized. Alimony is deductible from the party paying alimony and taxed as income to the party receiving it if it meets certain requirements established by the Internal Revenue Service. For starters, you need to make sure the specific terms of your alimony award are spelled out in a settlement agreement or court order. Second, alimony is intended to be a cash payment. There is some flexibility here however in that payments of bills on behalf of the recipient are still treated as “cash” payments to the recipient. For example, alimony can consist of payments to upkeep a property such as mortgage payments, taxes and insurance though only half of the payments would be deductible.

Alimony can include payments to a third party if designated that it is in lieu of alimony. Additionally, alimony can consist of payment of life insurance premiums for the other party. It is important to note that the parties cannot file a joint return when alimony is being paid and should not be residing in the same household. Finally, alimony must terminate upon the death of the receiving party so any payments required after death would not count as alimony. Child support, noncash property settlement, and payments on the property of the partying paying alimony or use of that party’s property do not count as alimony. Alimony can be direct pay to the recipient or via wage garnishment through Domestic Relations. The method of payment has no bearing on the tax implications for the parties.

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Proving Cohabitation

Alimony is support paid to an ex-spouse following the divorce decree. The amount of alimony is largely based on the incomes of the parties but may also be affected by the distribution of the other assets, if any. Unless otherwise stated by agreement, alimony may be subsequently modified due the changed circumstances of either party. The changes must be substantial and of a continuing nature. Generally, the length of alimony is directly attributable to the length of the marriage such that the longer the marriage, the longer the term of alimony one may expect.

In Pennsylvania, alimony will terminate upon remarriage or cohabitation of the party receiving alimony with an unrelated partner. It may be difficult to prove there is in fact a cohabitation relationship as the party seeking to terminate alimony. Case law establishes that you need to show more than just some overnight visits. Starting points may include if both the party receiving alimony and their partner receive mail at the same address, if any utilities for the home are in their name, or if they have been added to the lease or mortgage. A private investigator may also be utilized to observe the comings and goings and report back as to whether the parties staying together is a regular occurrence as opposed to an occasional visit. This option can become very expensive since you will need to hire the investigator over a period of time to establish a pattern of conduct.

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Veterans Benefits in Divorce

Former military members may be eligible to receive a number of different veterans benefits from the Department of Veterans Affairs (VA). Possible benefits include disability compensation, pension benefits, life insurance, educational benefits and more. Veterans benefits cannot be divided as an asset in a divorce case. This is due to the Uniformed Services Former Spouses’ Protection Act (USFSPA). The Pennsylvania Divorce Code confirms this rule. Under 23 Pa. Section 3501(a), discussing the definitions for marital benefits, veterans benefits exempt from attachment, levy or seizure are defined as non-marital.

VA disability payments are non-marital as are any military disability retirement payments. When discussing which benefits should be classified as non-marital, the statute goes on to draw a distinction as it relates to benefits received in lieu of military retired pay. Specifically, veterans benefits may be considered marital to the extent that a service member has waived military retired pay to receive the veteran benefit. This is because military retired pay is subject to distribution as a marital asset so any benefit received in exchange for their retired pay should be treated the same way. Veterans should also be aware that disability payments can be considered as income for an alimony award.

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Lump Sum Alimony

Alimony is support paid to an ex-spouse following the divorce decree. The amount of alimony is largely based on the incomes of the parties but may also be affected by the distribution of the other assets, if any. Unless otherwise stated by agreement, alimony may be subsequently modified due the changed circumstances of either party. The changes must be substantial and of a continuing nature. As previously alluded to, an alimony provision within an agreement between the parties may not be modified in the absence of a specific provision allowing such a modification within the agreement. Generally, the length of alimony is directly attributable to the length of the marriage. For example, a party may expect approximately 1 year of alimony for every 3 years married. For marriages of over 25 years, an indefinite term of alimony may be appropriate.

The court can only Order alimony in the traditional vein of a monthly support award. This monthly support award is tax deductible for the party paying alimony. It is also taxable income for the party receiving it. Parties who are seeking to negotiate a settlement agreement can weigh the pros and cons on a lump sum alimony award as opposed to a month-to-month obligation. A potential con is a change of circumstance down the road where the support may have increased, decreased or been terminated altogether. A benefit would be getting it over with right away as well as the discount for present cash value. The payor must have the resources to afford a lump sum payment as well whether that been separate assets or through sacrificing some of their portion of the marital estate. You should consult with your attorney and accountant on whether a lump sum alimony award or a traditional alimony award would work best for you.

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Alimony in a Divorce

If you expect to receive alimony in a divorce, you will want to make sure that any agreement specifies the terms on which it is modifiable. Alimony is normally modifiable in amount provided you state that in your agreement, but not modifiable in duration. In Pennsylvania, however, if your spouse dies or you remarry or you live with another person unrelated of the opposite sex, alimony terminates at that time, unless you specify otherwise in an agreement. Since alimony does terminate in death, it is important to consider life insurance in your divorce plan or agreement. Many agreements will provide that until your alimony terminates that it is secured by a life insurance policy equal to or more than the remaining amount of money that you anticipate that you will receive over the course of the alimony term. In some instances, you may want to consider a buyout of alimony if you are paying alimony. This means that instead of making monthly payments on alimony, you lump sum the payment upfront and usually ask for a reduced amount since the money is being paid immediately. In this case, however, you may lose the deduction on your tax return depending on how the agreement is drafted since normally alimony is deductable by the payor and taxable to the payee. In addition, you will not be entitled to any of the payment back should your spouse remarry or cohabitate, but you will not be subject to an increase if your income goes up. There are many options to consider when paying or receiving alimony that should be considered in any divorce settlement. You should consult both an attorney and a certified public accountant.

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Veterans Benefits and Support

Former military members may be eligible to receive a number of different veterans benefits from the Department of Veterans Affairs (VA). Possible benefits include disability compensation, pension benefits, life insurance, educational benefits and more. The former service member may also be entitled to additional benefits for dependents. Where the service member is also responsible for paying child support, certain benefits can be garnished to ensure the support obligation is met. The first step is to correctly categorize the benefit to determine if it is subject to garnishment. The second step is establishing a need on the part of the party seeking support and other dependents as well as a failure by the veteran to supply the need. Thirdly, the VA must be assured that there will not be an undue hardship on the veteran as a result of the garnishment.

Procedurally, the party seeking the garnishment must apply for an apportionment. The form asks for information on the total income, sources of income, and expenses for the veteran as well as the custodial parent. The VA will review the request for apportionment and determine if it is appropriate. In either event a formal decision will be rendered. The final decision can be appealed to the Board of Veterans’ Appeals. The state child support agency will need to be involved with apportionment requests. Copies of the current support order and records of any arrears owed and former payment history will need to be supplied to the VA to review as evidence when making its determination on whether garnishment is appropriate and a reasonable amount to be garnished.

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Fault Grounds for Divorce

Most divorces proceed on the basis of no-fault or irretrievable breakdown of the marriage based on mutual consent after ninety days or two year separation, however, fault grounds for divorce can still be utilized. Under 23 Pa CS 3301(a), the fault grounds for divorce are listed and include(1) desertion for the period of one or more years; (2) adultery; (3) cruel and barbarous treatment; (4) bigamy; (5) imprisonment for a term of two or more years; and (6) indignities to the point of life being intolerable and burdensome. The party alleging fault must prove its existence and must also establish they are the “innocent and injured spouse.” 

23 Pa CS 3301(b) discussing another ground for divorce infrequently used: institutionalization. This provision allows a divorce on the ground that insanity or serious mental disorder has resulted in the other spouse’s confinement in a mental institution for at least 18 months without reasonable prospect the spouse will be discharged. “A presumption that no prospect of discharge exists shall be established by a certificate of the superintendent of the institution to that effect and which includes a supporting statement of a treating physician.” There is often no benefit to pursuing fault grounds for divorce over no-fault grounds as fault is not a factor to be considered in equitable distribution (division of property). However, the laws of support do address fault grounds in two instances: as a defense to paying spousal support and as a bar to receiving alimony.

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Alimony 101

Alimony is support paid to an ex-spouse following the divorce decree. The amount of alimony is largely based on the incomes of the parties but may also be affected by the distribution of the other assets, if any. Unless otherwise stated by agreement, alimony may be subsequently modified due the changed circumstances of either party. The changes must be substantial and of a continuing nature. As previously alluded to, an alimony provision within an agreement between the parties may not be modified in the absence of a specific provision allowing such a modification within the agreement.

Generally, the length of alimony is directly attributable to the length of the marriage. For example, a party may expect approximately 1 year of alimony for every 3 years married. For marriages of over 25 years, an indefinite term of alimony may be appropriate. If the parties include alimony as a part of their own settlement agreement, they are free to set the amount and length of the alimony as they so agree. Adultery by a party will act as a bar to alimony.

The duration of alimony should be limited to a reasonable period of time for the purpose of allowing the party seeking alimony to meet his or her reasonable needs by obtaining appropriate employment or developing an appropriate employable skill. A party seeking a longer or shorter duration of alimony can petition the court to modify its order based on the factors of Section 501 (c).

The factors to be considered by the court include: (1) The relative earnings and earning capacities of the parties; (2) The ages, and the physical, mental and emotional conditions of the parties; (3) The sources of income of both parties including but not limited to medical, retirement, insurance of other benefits; (4) The expectancies and inheritances of the parties; (5) The duration of the marriage; (6) The contribution by one party to the education, training or increased earning power of the other party; (7) The extent to which it would be inappropriate for a party, because said party will be custodian of a minor child, to seek employment outside the home; (8) The standard of living of the parties established during the marriage; (9) The relative education of the parties and the time necessary to acquire sufficient education or training to enable the party seeking alimony to find appropriate employment; (10) The relative assets and liabilities of the parties; (11) The property brought to the marriage by either party; (12) The contribution of a spouse as homemaker; (13) The relative needs of the parties; (14) The marital misconduct of either of the parties during the marriage; however, the marital misconduct of either of the parties during separation subsequent to the filing of a divorce complaint shall not be considered by the court in its determinations relative to alimony.

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