Spousal Maintenance

Spousal Maintenance is a legal mechanism by which the Court acknowledges that two people make up a marriage partnership, and that the earning power of the two people is rarely equal. Sometimes one of those people sacrificed a career, education, or job track in order to fulfill an unpaid role in that partnership. In some cases, an injury or illness contributed to the lesser earning capacity of one of the two partners.

For most divorcing spouses, spousal maintenance is a hot emotional issue. The longer the marriage, the more likely spousal maintenance will be awarded. If you are the wage earner of the family, it is difficult to stomach paying spousal maintenance when you feel that you earned most of the money anyway. While you may feel that your spouse never did much to help you at the office or with the children, your spouse feels that she or he was your “right arm.”

Even if a Court doesn’t favor spousal maintenance, it may allow other provisions in order to even out the spouses’ financial positions – a larger share of the equity in the house or cash savings.

Both men and women are entitled to spousal maintenance if the Court rules as such based on the rules of equitable distribution or other broad criteria such as separate property that may be used for support, the desirability of a parent not working for a length of time, etc.

Spousal maintenance is considered to be an income substitute. You need not have children to be entitled to spousal maintenance. It is determined based on both spouses’ incomes, the factors discussed above and a determination of the relative importance of each of the factors for each case. It is therefore impossible to predict how much spousal maintenance may be awarded in a given case.

Since it is an income substitute, the party who pays spousal maintenance may deduct it on their tax return and the one who receives the spousal maintenance must report it as income. The Internal Revenue Service imposes seven rules if said money is going to qualify as spousal maintenance:

1. Dollars. Do make payments in cash or by check to or for the benefit of a spouse or former spouse.
2. Documents. Do make payments in accordance with a divorce document, such as a marital settlement agreement, separation agreement, court order, or divorce judgment. Payments made pursuant to a temporary order or order pendente lite also qualify under Section 71 of the Internal Revenue Code.
3. Designation. Do include a statement in the divorce document labeling the payments as deductible by the payor and taxable to the recipient. Spouses sometimes intentionally make such payments nondeductible and nontaxable if they have not had a chance to analyze the tax consequences.
4. Distance. Do live apart. Payments must be made after a physical separation.
5. Death. Do terminate payments on the death of the recipient and include that condition in the divorce document. Most payers also have the right to terminate spousal maintenance on the recipient’s remarriage or upon the death of the payer.
6. Dependents. Do maintain a clear division between spousal maintenance and child-related events. If you terminate spousal maintenance upon the emancipation of a child, you run the risk of the IRS reclassifying past spousal maintenance as nondeductible child support. Your past spousal maintenance deductions would be disallowed, and back taxes would then be owed.
7. Declining. Do follow IRS rules against front-loading. Spousal maintenance should not be excessively high or front-loaded in the first three post-separation years. Excessive payments are subject to recapture or being taxed to the payor in the third post-separation year.

Unlike child support, spousal maintenance is completely negotiable. Support typically ends upon the death of either the payor or the recipient, but all other details are subject to your own design when drafting your separation agreement. Some provisions that can be included are:

• Spousal maintenance terminates upon remarriage or (long-term) cohabitation of the recipient
• Spousal maintenance terminates after a specific number of months or years
• Spousal maintenance is for a decreasing amount each year
• Spousal maintenance is not awarded at the divorce, but kept open for modification later
• Spousal maintenance is modifiable in the event of a substantial change in circumstances

Spousal maintenance thus can be tailored to fit your individual situation. In some cases, it may never terminate; in others, triggering events can be specified that will mark a termination. Think about what you want to accomplish through spousal maintenance, then let your attorney negotiate to help you fit those needs.