Spousal Maintenance Part 3 – Post-Divorce
Spousal maintenance, also known as alimony, is a court-ordered award to one former spouse from another. It begins after a divorce has been made final.
Courts have discretion in deciding whether or not to make an award of spousal maintenance. It’s a complicated subject because of ever-changing gender and marital roles.
For an overview of alimony/spousal maintenance, please read “Spousal Maintenance Part 1 – What Is It?”
How Divorce Spousal Maintenance Works
First, it’s important to know that NYS Domestic Relations law provides guidelines, not rules, for spousal maintenance.
- Nothing in NYS law prohibits divorcing spouses from entering into validly executed agreements which deviate from the maintenance guidelines.
- Judges are not required to scrutinize agreements concerning temporary and post-divorce maintenance for compliance with the new spousal maintenance guidelines.
- Nothing in the act affects the validity of agreements made prior to the effective dates of the legislation. The portion of the statute that pertains to temporary maintenance was effective October 26, 2015. The portion of the statute referencing permanent maintenance took effect on January 25, 2016. Temporary maintenance and post-divorce spousal maintenance finalized prior to the relevant dates are not affected by this law.
2018 Federal Law Eliminates Alimony Tax Deduction Starting Jan 1, 2019
We all know taxes are already a complicated subject. While I summarize some key points here, I urge you to download and refer to IRS Publication 504: Divorce or Separated Individuals for information applicable to your own situation.
“NYS alimony tax laws changing in 2019“
The federal Tax Cuts and Job Acts (TCJA) law effective Jan 1, 2019 has made a significant change concerning spousal maintenance (alimony). For payments required under divorce or separation instruments reached after December 31, 2018, the tax deduction for alimony payments is eliminated.
- The alimony payor can no longer deduct alimony from income on their tax return.
- The alimony recipient no longer declares alimony as income on their tax return.
- Already-existing divorces and separations as well as divorces and separations that are executed on or before Dec 31, 2018 are not affected.
- Under a special rule, if taxpayers have an existing (pre-2019) divorce or separation decree, and they have that agreement legally modified in 2019 or later, then the new rules don’t apply to that modified decree, unless the modification expressly provides that the TCJA rules are to apply.
Other changes enacted via this law that may affect your divorce agreement in 2019 or later to discuss with your attorney, divorce mediator, and/or financial planner are:
- Tax benefits associated with the family home.
- Impact of these changes on existing pre- and post-nuptial agreements.
Other Tax Considerations
Please consult with the suitable professional to determine whether the TCJA law impacts your situation concerning the following topics. These may or may not apply to your situation depending on when your divorce or legal separation was approved by the court.
- Recapture Taxes: IRS regulations that govern the manner in which SM can be paid are referred to as recapture. In summary, SM can not be reduced by more than $15,000 between the second and third years and become significantly different from the first year. For instance, if the first year SM was $35,000 annually and the second year it dropped to $10,000 annually, the IRS may disallow the tax-deductible treatment or recapture the taxes owed due to the SM. The intent is to avoid a property distribution (such as a buy-out of a home) to become a tax-deductible benefit. For more information, please see my article, “Divorce and the IRS: The Alimony Recapture Rule.”
- SM Instead of Child Support: The IRS has been alert concerning parents paying SM in lieu of child support. Often, when child support (which is not tax deductible to the payor) is calculated, if there is a gap in income that precludes a comparable standard of living for both parties, the gap may be made up in SM. One issue that is also scrutinized is the situation in which SM is paid and then stops coincident to when child support might also have ended.
- Filing Taxes: In order for the payor to claim the SM deduction (and be declared as income by the payee), each spouse must file their respective income taxes separately, even if you are legally separated and may still be eligible to file as married filing jointly.
- Quarterly Taxes: If your SM is above a certain threshold (check with your accountant, but often around $8,000 or more annually), it is prudent to file quarterly estimated taxes on the SM, just as you would if you had your own business. This way you will avoid a large and unexpected tax liability, and you can avoid paying penalties if quarterly taxes should have been paid.
When Spousal Maintenance Begins
Temporary spousal maintenance, if any, ends when the NYS judge presiding over the divorce issues the Judgment of Divorce or upon the death of either party, whichever occurs first. If spousal maintenance is to be provided by one spouse to the other, that judgment will include the amount and duration of spousal maintenance payments.
How Post-Divorce Spousal Maintenance Is Determined
The concept of SM is gender-neutral. However, because men still earn more than women, on average, and men generally remain in the workforce after children are born, it seems that SM is awarded mostly to women.
When determining SM, three important aspects are considered:
- The spouse lacks sufficient property/assets, including marital property/assets, to provide for his/her needs.
- The spouse is fully or partially unable to support himself/herself through appropriate employment or is the custodian of a child whose condition or circumstances make it appropriate that the custodian not be required to seek employment outside the home.
- Maintenance shall be in such amounts and for such periods of time as is just, without regard to marital misconduct and after considering all relevant factors.
Eligibility for Spousal Maintenance
In determining the amount and duration of post-divorce spousal maintenance, New York State courts also consider:
- The age and health of the parties;
- The equitable distribution of marital property and the income or imputed income on the assets so distributed (not considered for temporary spousal maintenance);
- The present and future earning capacity of both parties, including a history of limited participation in the workforce;
- The need of one party to incur education or training expenses;
- The termination of a child support award before the termination of the maintenance award when the calculation of maintenance was based upon child support being awarded which resulted in a maintenance award lower than it would have been had child support not been awarded;
- The existence and duration of a premarital joint household or a pre-divorce separate household;
- Acts by one party against another that may have inhibited or continue to inhibit a party’s earning capacity or ability to obtain meaningful employment. Such acts include but are not limited to acts of domestic violence as provided in section 459-A of the Social Services Law;
- The reduced or lost lifetime earning capacity of the payee as a result of having foregone or delayed education, training, employment, or career opportunities during the marriage;
- The care of the children or stepchildren, disabled adult children or stepchildren, elderly parents or in-laws provided during the marriage that has inhibited or continues to inhibit a party’s earning capacity;
- The tax consequences to each party;
- The standard of living of the parties established during the marriage;
- The contributions and services of the payee as a spouse, parent, wage earner and homemaker, and to the career or career potential of the other party (not considered for temporary spousal maintenance);
- The wasteful dissipation of marital property, including, by either spouse, transfers or encumbrances made in contemplation of matrimonial action without fair consideration;
- The availability and cost of medical insurance for the parties; and
- Any other factor which the court shall expressly find to be just and proper.
The NYS Income Cap in Spousal Maintenance Guideline Calculations
The income cap used in the temporary maintenance guideline calculation also applies to post-divorce maintenance guideline calculation.
- There is a Cost-Of-Living Adjustment(COLA) provision which adjusts the alimony payor’s income cap every 2 years. As of Mar 1, 2022, it is $203,000.
- Unlike the NYS Child Support Standards, which take into consideration “Combined Parental Income Amount,” the spousal maintenance guidelines apply only to the alimony payor’s income up to the income cap.
I provide more details on the calculation of the guideline amounts for both temporary maintenance and spousal maintenance in the article, “Spousal Maintenance Part 4 – Calculations.”
Duration and Modification of Spousal Maintenance Payments
If SM is applicable, the most common question is: “How long will it be paid, and what conditions might end or modify the payments?” In most cases, SM is set for a specific length of time, known as durational.
The 2015 law established the advisory schedule shown below (see highlight #8 in this article) for post-divorce maintenance in New York. In mediation, couples may create agreements that differ from the guidelines. The courts retain the option of awarding “non-durational” support, meaning no end to spousal maintenance, if appropriate.
|Length of the Marriage
|Advisory Percentage of Length of Marriage for Which Post-Divorce SM May Be Payable
|Zero to 15 Years
|15% to 30%
|15 to 20 years
|30% to 40%
|More than 15 to 20 years
|35% to 50%
In Monroe County NY, the general (informal) practice for durational SM is one-third of the length of marriage; that varies considerably based on circumstances. In some very unusual circumstances, SM may be for the lifetime of the receiver. This is called non-durational maintenance and may be appropriate when one spouse is older, and unlikely to find employment, or has an illness.
Specific Guidelines Regarding the Termination of Spousal Maintenance
- The remarriage of the spouse receiving SM. Today remarriage is often extended to include the idea of cohabitation where the receiving spouse lives full time with another person and presents him or herself as economically and socially as married. The notion of cohabitation is often challenged and is subject to lots of interpretation. It is useful to have specific language in an agreement to avoid conflict in the future.
- The death of either party. Death of the payor ends the obligation to make payments. It’s often prudent to make provisions for a life insurance policy to fund the balance of the obligation naming the recipient as the beneficiary, especially if the recipient is very dependent upon the funds.
Factors That Influence the Duration or Amount of SM
- Social Security Eligibility: In most cases, the paying spouse is not “obligated” to earn at their current level beyond his/her full Social Security age. For instance, if Bob is earning $100,000 and is age 60, his income would be expected to stay about the same (for purposes of SM) until age 67 (or the age he achieves his full SS payment level).
- Change in Employment: Many couples include language regarding circumstances that would involuntarily affect earnings, such as a lay-off or disability.
- Recipient’s Income: The earning potential of the receiving spouse is often considered. Provisions are included for when/if that party earns over a certain agreed-upon threshold. For instance, if Sally earns over $30,000 annually, perhaps the SM she receives would be reduced by 25 or 50 cents for every dollar earned over that threshold. This provides motivation for Sally to work and also provides for her to still have a safety net of funds.
Links to Spousal Maintenance Series
- Spousal Maintenance Part 1 – What Is It?
- Spousal Maintenance Part 2 – Temporary
- Spousal Maintenance Part 3 – Post-Divorce (This post)
- Spousal Maintenance Part 4 – Calculations
Additional Divorce Spousal Support Resources
- New York Divorce and Family Law from DivorceNet.com by Nolo
- IRS Publication 504: Divorce or Separated Individuals (For use in preparing federal income tax returns)
- IRS Publication 17: Chapter 18 – Alimony: Tax Guide for Preparing Federal Income Tax Returns
- Special Types of Spousal Maintenance: There are other options to meet specific needs.
- Spousal Maintenance in New York State: Frequently asked questions about maintenance in New York State
Resources on NYS Spousal Maintenance Law
- NYS Maintenance and Child Support Tools These are tools NYS makes available to the public. They are adjusted as the law changes and the income cap is increased according to the Social Security cost-of-living-adjustments (COLA). Visit “Spousal Maintenance Part 4 – Calculations” for more information on calculating TSM and SM.
- 20 Factors Considered by NYS Courts in Deciding Spousal Maintenance
- Domestic Relations Law – Section 236: The full text.
- “NY Makes Radical Change in Spousal Support Law“
- “New York State Overhauls Spousal Maintenance Formula“
- “New York Divorce Essentials“
- “Frequently Asked Questions: Spousal Support & Maintenance“
Photo Credit: ©Can Stock Photo
This blog and its materials have been prepared by BJ Mediation Services for informational purposes only and are not intended to be, are not, and should not be regarded as, legal or financial advice. Internet subscribers and online readers should not act upon this information without seeking professional counsel.