4 Types of Alimony You Need to Know About
Alimony is usually designed to help the lower wage-earner transition into self-sufficiency
The ability to support yourself during and after divorce can be a huge concern. There is only so much income to go around, and supporting two households on a couple’s existing income stream can be a huge challenge.
When one spouse is considering separation and subsequent divorce, one of their first questions usually revolves around the monetary support that they may be required to pay (if they are the higher wage-earner), or that they may be entitled to receive (if they are the lower wage-earner). Spousal support, maintenance, and alimony are all words for the same thing: one spouse paying support to the other spouse, while the divorce is finalized, and then post-divorce.
Alimony originates from English common law. Under that system, women gave up their personal property rights upon marriage. Their husband held title and retained the right to his wife’s property, but in exchange had a responsibility to support her even if the marriage dissolved. This “old-fashioned” premise is no longer the case, and over the years expectations about marriage have changed. Laws have changed concerning the issue of property rights. Women are educated and have gained greater opportunities in the workplace, two-income families have become more the norm, and shared parenting duties are more common.
A Different Alimony Statute for Every State
Every state has different alimony statutes in effect, which vary from the type permitted to the regulations that must be met to determine whether or not one party will receive (or pay) alimony. To determine the laws in your state, click here. States use various terminology such as spousal support or maintenance in reference to the issue of alimony. Today, we see alimony awarded less frequently – and when there is a payment, it tends to be in smaller amounts and for shorter periods of time. It is designed to help the lower wage-earner to get through the divorce process and transition into self-sufficiency.
When and if alimony is awarded, there are four possible classification types:
- or permanent.
Rehabilitative alimony is a short-term, temporary financial award designed to help a dependent spouse until he or she can become self-sufficient. The purpose of these payments could be to obtain a college degree, gain new job skills, or cover expenses until he or she finds employment. Usually the court awards rehabilitative alimony for a fixed amount of time, typically one to five years. It is not intended to equalize the financial situation between spouses, but is a way to help the dependent spouse become self-supporting in order to maintain a reasonable standard of living.
Modifiable alimony is a payment that can be changed by either increasing, decreasing, or ceasing the payment. This typically occurs when there is a material change in circumstances of one of the spouses. A modifiable arrangement allows either spouse to go back into court and ask for a change. Issues that would qualify for a change would be the payor spouse becoming unemployed, the recipient spouse becoming disabled or chronically ill and unable to seek employment, or the recipient spouse coming into an unexpected windfall of cash such as winning the lottery or receiving an inheritance.
Non-modifiable alimony provides a specific fixed amount to be paid for a specified period of time and cannot be changed. There are good and bad aspects of non-modifiable support. It can provide security for the recipient because he/she will continue to receive payment even in the case of remarriage, but it can also create a hardship for both parties should a disability or loss of employment situation arise.
Permanent alimony is typically used when there is a marriage of long duration, advanced age of spouses, or when the recipient spouse is disabled or has chronic illness or other health issues. The term is misleading because it does not necessarily mean that the alimony payment lasts for the rest of one’s life. The amount continues to be paid until the occurrence of a terminating factor. Some examples of terminating factors can include: cohabitation or remarriage of the payee spouse or death of the payee spouse. Also the level of support can change or terminate if the ability of the payor or the needs of the recipient change significantly.
According to the IRS (Publication 504 – Divorce or Separated Individuals), a payment to or from a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and five criteria are met:
- The payment is in cash.
- The instrument does not designate the payment as not alimony.
- The spouses are not members of the same household at the time payments are made.
- There is no liability to make any payment (in cash or property) after the death of the recipient spouse.
- The payment is not treated as child support.
Each state may also have additional alimony language they require.
Over the last decade, the nationwide trend toward alimony has been on the decline. States continue to pass new reforms to rules used to determine post-divorce support awards. One thing most people agree on is that alimony is unpredictable and not guaranteed in every case. The trend toward self-sufficiency of each party is becoming more prevalent.
Donna M. Cheswick has been in the financial services industry for her entire career. She is a Certified Divorce Financial Analyst® (CDFA®) and Divorce Mediator with Cheswick Divorce Solutions LLC.