James Nolletti is a New York attorney who provides his clients peace of mind. Assertive and client-centered, Mr. Nolletti and his team of professionals are dedicated to providing prompt, efficient, and exceptional legal services. In this podcast, James discusses how the courts in New York determine spousal support, and whether or not payments can be increased or decreased.
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Hosted by: Diana Shepherd, Editorial Director, Divorce Magazine
Guest speaker: James Nolletti is a White Plains divorce lawyer and founder of Nolletti Law Group. James has over 30 years of experience providing excellent service to individuals going through divorce who have complex issues and significant assets.
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Read the Transcript of this Podcast Below.
Maintenance and Spousal Support in New York
Diana Shepherd: Are alimony, spousal support, and maintenance the same thing? Which is the correct term to use in New York State?
James Nolletti: Maintenance, spousal support, or alimony all refer to payments made by one spouse to the other either during or after a divorce to assist with their living expenses. In New York State, the domestic relations law refers to all monetary support paid by one spouse to the other spouse incident to a divorce as “maintenance.” On a federal tax return, however, it’s still referred to as “alimony.” Post-divorce maintenance is usually set for a certain duration to afford the recipient spouse time to gain the skills or training necessary to become self sufficient – hence the term maintenance.
I understand that there’s a relatively new law for spousal maintenance in New York State that applies to all divorces filed on or after January 25th, 2016. Can you tell us how that works?
The New York state legislature has created a default formula for courts to use as a guideline when calculating the amount and the duration of spousal maintenance. This statutory formula takes into consideration the incomes of each spouse and the duration of the marriage.
Actually, there are two different formulas: one for the situation where the payor spouse is also paying child support, and the other used when the payor spouse is either not paying child support or is receiving child support from the other parent. An income cap of $175,000 per year is applied under the formula. But it’s important to note that the result of the formula is a guideline, and that courts have the discretion to adjust the amounts depending upon the facts and circumstances of the case, which include marital lifestyle.
So what factors does the court consider when setting the amount and the duration of spousal maintenance?
The court considers the practical needs and responsibilities of each party moving forward. For example, if the parties have young children and the custodial parent cannot re-enter the workforce without additional school or training, the duration of maintenance may exceed the guidelines. Conversely, if the non-moneyed spouse has the training and ability to work, income may be imputed despite the fact that the spouse is not currently in the workforce.
In addition, if the parties had a high standard of living during the marriage, and one party has a much higher earning capacity than the other, a court may likely pierce the income cap when applying the maintenance formula.
Is it better for a wealthy person to pay maintenance in one large lump sum at the time of the divorce, or should they make monthly support payments?
Generally speaking, when a wealthy spouse makes a lump-sum payment to the non-moneyed spouse, it’s paid as a distributive award – which has no tax consequences for either party. One of the more useful tools in resolving support-related issues is the tax deduction benefit available to a spouse making a stream of maintenance payments in accordance with the requirements of the internal revenue code.
Since maintenance is paid by a spouse with a higher earning capacity – and presumably a higher tax bracket – to a spouse with a lower earning capacity and lower tax bracket, there’s a tax savings incentive that enables a moneyed spouse to make a higher support payment with a net savings that is not available if a distributive award is made. The payor can deduct from their taxes the maintenance paid to the lower-earning former spouse.
Maintenance paid over several years likely enables the paying spouse to maximize his or her tax benefit. And oftentimes, we can structure settlement terms within the tax rules such that the least amount of taxes will have to be paid.
If an ex-spouse who is paying spousal support or child support experiences a substantial and unanticipated change in their circumstances – such as losing their job, or an illness, or a disability – can he or she apply to have spousal or child support reduced?
In any New York divorce proceeding resolved after 2010, the payor of child support may apply for a reduction in support if his or her income is reduced by 15% or more, or three years have elapsed since the payments began, or there’s a substantial change in circumstances such as a disability of the payor spouse. With respect to spousal maintenance, the payor may apply for a reduction of support if a substantial change of circumstances occurs, or if the recipient spouse gets a higher paying job or inherits a large sum of money or something similar that would reduce the need for support.
If the substantial change for the payor were positive – such as a large inheritance, lottery win, or substantial salary increase – could the recipient ask for the amount of spousal or child support to be increased to reflect the payor’s improved financial situation?
Yes. With respect to child support, both parties are entitled to revisit it if either party’s income changes by 15% or more, support can go up or down. This means that the recipient of maintenance may seek an award of an upward modification if the payor’s income increases. Likewise, if the recipient’s income increases by 15% or more, the payor may be entitled to a reduction in his or her support payments, again, with respect to spousal support as opposed to child support.
Both parties have the right to revisit support when there’s a substantial change in circumstances. So, the payor certainly has the right to revisit his or her support obligations if the recipient no longer needs the level of support that is being provided.
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