Property Division in Lieu of Alimony

[Ed: Originally published on Facebook.]

Yesterday we talked about the interplay of alimony and property division. Often it can make sense to pay more alimony in exchange for a more favorable property division. Note the reverse can be true, in a sense – the court can adjust its property division to make up for the fact it may not be able to award alimony.

Alimony is typically not available to a spouse who is guilty of a fault issue – for example, adultery. In other words, if a spouse has an extramarital affair, and that is the cause of the divorce, then that spouse cannot be awarded alimony in most cases.

Notwithstanding what the parties could get at trial, keep in mind that divorcing spouses could almost always agree to do whatever they want. So even where a spouse cannot get alimony at trial, the other spouse may be better off agreeing to pay alimony anyway. Every case is different, but the moral of the story is this – when considering property issues, don’t forget about alimony as an option, and think about making alimony and property division work together to achieve a good outcome for both parties.

Alimony in Lieu of Property Division

[Ed: Originally published on Facebook.]

Alimony and property division often intersect. One is an award from the CURRENT estate, and the other is an award from the FUTURE estate. Sometimes, the current estate is relatively modest, but one spouse has a substantial amount of “separate” property, not subject to being divided or awarded to the other spouse. Alimony can help offset that to some degree.

In fact, alimony should often be part of any final settlement negotiations. Even if the other spouse “doesn’t deserve” (or even can’t legally get – more on that tomorrow) alimony, the high-income earner may want to seriously consider paying alimony anyway in exchange for a more favorable property division. There are several reasons for this, but often-overlooked is the fact that paying alimony can provide a significant tax savings, as it is a “page 1” deduction, meaning the alimony paid is deducted dollar-for-dollar from the payor’s adjusted gross income.

To take a simple example, suppose the couple only has the husband’s 401(k) to split, and there is $90,000 in it at the time of the divorce. Typically the 401(k) would be split so that the wife would receive $45,000 in 401(k) money, but in many cases, the wife would rather have – or may actually need – the cash. If she cashed in that 401(k), after taxes and penalties she might have $25,000-$30,000. But, if the husband was to agree to pay $2,000/month for 2 years in exchange for being able to keep his 401(k) intact, that might provide some much-needed cash flow for the wife, which she may value more.

Why Do We Have Alimony?

[Ed: Originally published on Facebook.]

We’re looking at alimony this week. Historically, alimony was awarded as a recognition that the traditional role of the husband was to be the “breadwinner” outside the home, while the traditional role of the wife was to care for the home and/or the children. Women in general did not have the employment opportunities they have today, and divorced women had an even harder time. Alimony allowed the courts to achieve some measure of fairness by making the husband provide support for his former wife.

In many ways, this view of alimony can seem out-of-place in our modern world. Women have employment opportunities they did not have before, and sometimes the wife actually out-earns the husband. But remember yesterday we talked about alimony being an allowance out of one spouse’s future estate. In many cases, where one spouse has significantly higher earning potential, that has usually been made possible at least in part because the other spouse contributed so much to the marriage. In this way, it can be helpful to see alimony as recoupment of an “investment” in the earning capacity of the other spouse.

What is “Alimony”?

[Ed: Originally published on Facebook.]

This week we’re going to explore the concept of “alimony”. We start with a basic definition – alimony is support (almost always money) paid by one spouse to the other. If you see references to “spousal support”, that’s alimony. You may occasionally see older references to “alimony for the support of minor children”, but generally that term has fallen into disuse in favor of the simpler, more modern phrase, “child support”.

A more analytical definition of alimony is that it is the allowance out of the FUTURE estate of one spouse, for the support of the other spouse. This is an important concept because it is contrasted with property division, which is an allowance out of the CURRENT (marital) estate. (For more information about property division, check out our posts from a few weeks ago.) Tomorrow, we’ll take a closer look at the interplay between alimony and property division.

What is a “Meretricious” Relationship, and Why Do I Care?

[Ed: Originally published on Facebook.]

“Your Post-Divorce Compass” doesn’t tell you anything about dating or your social life after divorce. But if you receive alimony, you should be careful about just how far your new dating relationship might go. Most people know alimony goes away if the recipient remarries, but you may not know that alimony can also go away if you “voluntarily cohabit in a meretricious relationship”. So what the heck is a “meretricious” relationship?

Basically this means you’re living with your boyfriend or girlfriend, just the same as you would live with your husband or wife. It doesn’t mean dating, and it doesn’t mean he or she spends the night occasionally – although you should be careful about that for other reasons. So you can live your life without worrying about losing your alimony; just be careful when things get serious enough that you consider moving in together.