Alimony and how to minimize your spousal support payment

Two sets of hands over Alimony paper

The focus of this blog is how to minimize your spousal support payment. It is a companion blog to March’s blog on maximizing your spousal support payment.

As previously mentioned, litigating spousal support cases is exorbitantly expensive and detrimental to the existence of an amicable relationship with your former partner post-divorce. On the other hand, mediation assures that you will be able to control both the amount alimony as well as the duration.

The factors for awarding alimony are discussed in March’s blog. This blog will discuss the duration of alimony and minimizing your payment. The only way to control the duration of alimony is to agree to lump-sum, modifiable alimony. This type of alimony payment awards a monthly payment for a set period of time at which time alimony automatically terminates. For instance, you may agree to pay $1,000 per month for 60 months. That would be quantified as $60,000 lump sum non-modifiable alimony, payable at the rate of $1,000 per month for five years.

The alternate to lump-sum non-modifiable alimony is indefinite modifiable alimony. The court must award indefinite modifiable alimony in a 20-year marriage. There are some advantages to modifiable alimony. If the payee remarries or even moves someone into the home, alimony is terminated. If the payee starts earning any income or significantly reduces their monthly bills, alimony can be reduced or terminated. And if the payor’s income decreases or ends due to job loss, alimony can be reduced or terminated.

However, the risks of modifiable alimony are significant. Indefinite alimony may continue until either the payor’s death or the payee’s death. It can continue after retirement. Once retirement age is reached, then retirement accounts and social security can be used to equalize income if there is significant disparity. There is also the significant risk that the payee becomes ill and alimony may then increase to account for the payee’s reduced income or increased medical expenses. Finally, there is the risk that the payee’s increased income or increased bonuses can result in an increase in spousal support.

If indefinite alimony can be avoided, it should be. And while you may think your former spouse will inevitably request modifiable alimony, the risks to her are high as well. The key is convincing your spouse to agree to this form of alimony.

Therefore, you, as the higher income earner, should request lump-sum non-modifiable alimony. With this form of alimony, you know exactly the amount for which you are liable and exactly when it will end. You can earn more income and retain it without fear of an increase in spousal support. You can retain all bonuses and you can protect assets, retirement and social security. Alimony can never increase and when the term is reached, whether five or ten years, it cannot be reinstated.

How then do you minimize your exposure? You may wish to review the March blog to educate yourself on spousal support factors. The longer the marriage, the more likely the support. In any marriage over ten years, you may find yourself liable for spousal support for one-third to half the length of the marriage in amount determined by the Alimony Guidelines (See March blog). To reach an agreement for lump sum non-modifiable support, you may end up paying 20 – 33% of your gross income to your former spouse.

You may wish to consider the idea of a tiered spousal support award. You may pay more at the beginning while children are young or while your former spouse finishes school or gets reacclimated to the workplace after which time, the amount decreases. Alternatively, you may agree to less in the beginning because you may also be paying child support and the amount increases after a couple of years to replace the loss of child support to your former spouse. In either event, it can be calculated into a lump-sum amount and it is still defined as non-modifiable, which is the key.

Another alternative is that lump-sum non-modifiable alimony can actually be paid in a lump sum by way of an asset. Offer the payee more equity from the house, or more in retirement in exchange for that monthly spousal support obligation.

Finally, bring budgets to the mediation, one for each of you showing how your spouse’s obligations can be met with less support from you. And remember that spousal support is no longer a tax deduction. If you run the alimony guideline worksheet, remember to reduce the number by the proper percentage to account for the loss of tax savings.