Key Variables In Alimony Calculations

Alimony (also referred to as maintenance) is a provision for payments to be made from one ex-spouse to the other after the termination of the marriage. The factors considered in the determination of alimony vary from state to state and, often, from case to case. The statutory variables (that is, variables enacted by law) that should or can be considered by the courts in the determination of alimony are numerous. The divorcing parties can also bring their own variables into arguments for and against alimony in their particular case. Consequently, so many variables exist that there is no set formula for the determination of alimony. Below is a discussion the variables typically considered in alimony calculations in most cases:

1. Income disparity

It is very common for the individuals in a marriage to have significant differences in their ability to make money. These differences can be due, for example, to disparities in education, intelligence, motivation or gender. Differences in earning ability also can also be caused by one spouse sacrificing his or her career so that the other spouse can advance his or her career (by relocating, for example). A common denominator that accounts for a disparity in earning power in numerous cases is the essential biological difference between men and women. Women bear children, and men do not. The decision to have children often coincides with a decision that one parent, usually the mother, will leave the workforce to bear and care for the children.

This interruption in the career or the education of the mother will have a detrimental effect on her ability to earn income in the future. Other factors that account for earning power disparity include: field of study or occupation, geographical location of the parties, and connections. Some occupations earn more than others. Some occupations will advance faster and further because of demand in a certain location. Sometimes, “who you know” or who you are related to may take a person further in his or her career than any other single factor. Finally, in addition to all of these reasons is the fact that men, on average, make more money than women for the same or similar work. While the impact of this factor has been mitigated by attempts at social and legal reform, there is still a difference between pay for men and women.

Because of the large number of factors that can cause the disparities between the earning capability of a husband and wife, the actual difference is not often quantified. Rather, the possibility of a difference will be recognized and efforts made to reduce the difference with alimony or maintenance.

2. Financial status of the person requesting alimony

If one spouse cannot provide for himself or herself through employment or the use of financial assets, alimony is indicated. Courts are often reluctant to cast persons onto the public doles if funds for spousal support are available.

3. Length of marriage

The duration of the marriage is often a factor considered by courts. A marriage of short duration is less likely to have alimony awarded than one of long duration.

4. Condition of child

If a parent is the custodian of a child who has special needs, alimony can be awarded to provide for the parent who is caring for the child. For example, a mother with a mentally disabled child who cannot be left alone must make provisions for the care of the child. In some circumstances, outside care for the child may not be available, or the cost of such care may equal or exceed what the mother could make in the workforce. In such cases, the financially logical approach is to provide support for the mother so that she can care for the child.

5. Loss of career

If a spouse surrenders his or her career in deference to the career of the other spouse, an argument can be made that alimony should be paid to compensate the deferring spouse for this sacrifice. For example, assume that a wife surrenders her position as director of nursing in a hospital when her husband has to relocate to advance in his career. Assume also that instead of the position of director of nursing, the wife must accept a job as ward nurse. It can be argued that the difference in pay between the positions is a financial loss that should be compensated for by means of alimony. These same types of arguments can be raised when a wife or husband leaves the work force to care for the couple’s child(ren).

6. Property division

The assets received by a spouse in the division of the marital estate may significantly influence whether or not alimony is awarded. If, for example, a spouse is awarded hundreds of thousands of dollars of income producing assets in the course of the divorce, an argument for alimony based upon need may not be viable.

7. Financial condition

Related to the assets received in the divorce are considerations related to the overall financial condition of a spouse. For example, if a spouse has separate property that makes him or her independently wealthy, a successful argument for maintenance is unlikely.

8. Rehabilitation

Some statutes (laws passed by the legislature) can be interpreted as being rehabilitative in nature. That is, support is designed only to provide spouses with enough time and money to improve their financial condition to the point of being able to care for themselves. In these cases, plans of rehabilitation, including costs and estimates of time, are considered in the determination of alimony. For example, assume that a nurse has been out of the workforce for ten years. In order to have her license reinstated it will require $6,000 in education fees and two years. Alimony could be provided to cover the costs of re-education and to support the nurse during retraining.

9. Ability to pay

Considerations of alimony must encompass the ability of the payer-spouse to respond to the obligation. An award of alimony that exceeds an individual’s ability to pay is likely to return a couple to litigation. The post-divorce budget process can be used to alleviate problems in this area.

10. Physical condition, mental condition, age

The physical condition, mental condition, and age of a spouse are considerations in determining alimony. A spouse who is physically disabled may have a difficult time entering the workforce and supporting him- or herself. A spouse who is mentally ill or emotionally unstable also may have difficulty finding employment. Plus, in spite of laws and regulations disallowing it, age discrimination can be a very real barrier to older spouses attempting to re-enter the workforce.

11. Standard of living during the marriage

The standard of living that the couple was able to enjoy during their marriage is another factor in determining alimony and/or its amount. The argument goes that, to the extent possible, the standard of living of the couple after the divorce should be similar to the standard of living that they enjoyed while they were together. A high standard of living would suggest a higher award of alimony.

From an economist’s point of view (as well as a host of others), however, maintenance or replacement of a standard of living after divorce is problematic. Divorce creates two economic units instead of one. Two economic units are more expensive to maintain than one economic unit. The loss of economies of scale and the duplication of costs ensure that even if the couple shared their total income equally, they would not be able to live as well divorced as when they were married. Alimony (maintenance) arguments are often raised in conjunction with a spouse’s desire to retain the family residence and the accompanying standard of living.

For example, the wife contends, “I can keep the house if he pays me $3,000 per month in alimony.” In divorces with relatively high incomes or significant financial assets, this may be a reasonable assertion. However, in many cases (if not most), the family residence represents the best house the parties could buy at their income level and credit rating. This means that the couple’s income was very possibly just meeting the obligations of living and buying the house. Arguing that one party can maintain the house for the other party and provide for himself or herself at the same time may be wholly unrealistic. Consequently, while standard of living can be a consideration, it should not be the sole definitive factor.

12. Taxability of payments

Taxability of payments is a consideration in the establishment of alimony. Payments designated as alimony or maintenance generally are a deduction from income in the determination of taxes for the paying spouse. They are an addition to income in the determination of taxes of the receiving spouse. This provision often shifts income from a person in a higher tax bracket to a person in a lower tax bracket, thus providing a legitimate reduction of total taxes paid by the ex-spouses. This tax benefit may encourage agreement to alimony by the spouse being asked to pay.