How is Alimony Calculated and Who Pays It?
September 15, 2014 | Alimony
Since I’ve had a number of alimony cases that I have taken all the way to trial in the past few months, it seems worthwhile to post a bit on some of the aspects of alimony that are an important part of every alimony case. So today, I’ll explain how alimony is calculated.
There are a lot of misunderstandings about how an alimony amount is determined. Many people who are seeking alimony think that they simply get half of the other spouses income. I’ve had a number of women tell me that they thought they would get alimony because they were women or that they couldn’t be made to pay alimony for the same reason. None of these things are true. Gender makes no difference and alimony is not calculated as a percentage of income.
The easiest way to explain how alimony is calculated is to use a hypothetical alimony case. For our case, I’m going to use Ann and Bert as the parties. Ann is a physician and earns $150,000 per year. Bert has a college degree, but he and Ann decided that he would stay home with the kids while she worked on her career and supported the household. Bert hasn’t worked in 5 years but he used to work in human resources and earned $50,000 a year as a salary at his last job.
In our case, first the Court has to determine whether Ann was a supporting spouse. That is, was she the primary source of financial support for Bert during the marriage? Typically, Courts will look at the situation on the date of separation to get an idea of whether a party was a supporting spouse. There are cases that say Courts can look back at the 3 or 4 years prior to date of separation to determine what the financial relationship was between the parties. If Ann is a supporting spouse–meaning she paid most of the bills for her and Bert–then the Court determines whether Bert was a dependent spouse. A dependent spouse actually and substantially depends on the other party to meet his or her financial needs during the marriage. In our case, there’s not a lot of argument over whether Ann was supporting and Bert was dependent. It is pretty clear that she was the sole breadwinner and paid all the bills. In real cases, this supporting/dependent distinction is not always clear and becomes an important issue at trial.
Now that we’ve established Ann as the supporting spouse and Bert as the dependent spouse, it is time to figure out just how much money there is to go around. Both parties do a financial affidavit. In Wake and several other counties, this is a form found on the County’s local Web site. Even if the county doesn’t require a financial affidavit as part of its local rules, it is a very useful tool. It is basically a budget that looks at gross income, net income after taxes and mandatory deductions, and then the reasonable expenses of the parties. The important word here is “reasonable.” If Ann left Bert in a house with a mortgage that cost $1,300 per month and moved into a luxury condo that cost $4,000 per month, she would have a hard time explaining to a Judge that her new condo expense was reasonable. In a situation like that, a Judge could decide that her expense was unreasonable and disallow it, freeing up a couple thousand dollars for payment of alimony.
Once a court determines the supporting spouse’s reasonable expenses, the Judge will subtract it from net income and come up with an amount of surplus income. This is the ability to pay. The Judge then determines what the dependent spouse’s reasonable expenses are, subtracts it from the net income of that spouse and that is what is called the dependent spouses actual need.
So back to our imaginary couple. They do financial affidavits and go to court. The Judge finds that Ann’s net income is $9,000 per month and her expenses are $5,000 per month after she throws out that luxury condo expense as unreasonable. Ann has $4,000 per month in ability to pay. The Judge finds that Bert has no income yet and reasonable expenses of $3,300 per month. Since Bert’s actual need is only $3,300 per month, he gets an alimony award of $3,300 per month.
Now, this is a simplified version of how alimony awards work. There are plenty of complications in a real case that will shift this outcome. Bert would need to go to work unless there was a reason he was unable to do so. Maybe he was getting money from his parents each year that would count as an income. Maybe Ann had a great year at her practice the year prior to separating, but her current year is in a slump and her income is declining. Maybe Bert got an unequal distribution of the marital estate or has lots of separate property that can generate income.
There are a million variations in alimony cases and each one could have a substantial impact on the result. It is always worth consulting an experienced family law attorney to see what might be out there waiting to trip you up, or trip up the other party and affect an alimony award.
If you have questions about alimony, a lawyer at the Palmé Law Firm in Raleigh can help! Call 919-803-4512 or contact us here.