Spousal Support Post-Divorce

    The amount, type, and duration of spousal support varies from couple to couple. Some forms of alimony are designed for the short term, while others are permanent.

    Temporary

    Temporary support is paid during the separation phase while the divorce is being negotiated. It’s used to help the lower-earning spouse pay expenses during divorce proceedings. The amount of temporary support does not always reflect the amount awarded in the final divorce decree.

    Rehabilitative

    Temporary rehabilitative support is used for the short term to “bridge the gap” until the receiving spouse can complete education or training and reenter the workforce to become self-supporting after divorce. Rehabilitative alimony is paid until the recipient has completed the goals outlined in the alimony order, and that timeframe will vary.

    Permanent

    Permanent alimony is typically granted for longer marriages (10 years or more.) It’s issued on the premise that the recipient is unlikely to return to the workforce and will need long-term support. This type of spousal support usually ends when the payor passes away or the recipient remarries.

    Lump Sum

    Some couples decide a single, lump sum payment is preferable to ongoing payments. This helps simplify the process and may allow the recipient to meet a large financial objective like going back to school or putting a down payment on a new home.

    It’s possible to receive more than one type of spousal support at a time. Alimony payments can also change after divorce if either spouse experiences a major life change like a job loss, cohabitation, or remarriage.

    Alimony: Needs and Ability

    There is no one-size-fits-all formula to calculate spousal support. The amount and duration of alimony depend on several factors.

    Considerations for calculating alimony include:

    • The length of the marriage
    • The age and overall health of both spouses
    • The number and ages of children
    • The lifestyle during the marriage
    • The paying spouse’s ability to pay
    • The recipient spouse’s need

    Think of need as the difference between the recipient’s income and their expenses. Spousal support is meant to fill that gap. Ideally, both spouses will come to a fair agreement through mediation with the guidance of a Certified Divorce Financial Analyst (CDFA).

    Of course, it’s not uncommon for exes to disagree about what constitutes a “need” or whether the paying spouse has the resources to meet that need. Full financial disclosure is essential to accurately assess both parties’ income and expenses, earning potential, and lifestyle to arrive at a fair and reasonable arrangement.

    It’s also important to consider the tax implications of different support options. For divorce agreements executed after 2019, alimony payments are not tax deductible or included in the recipient’s gross income. Other options may offer more tax benefits, like paying alimony in a lump-sum from an IRA, for example.

    Discuss the pros and cons of various spousal support arrangements with your CDFA to determine a fair and practical solution for both you and your ex.

    Child Support

    Child support is used to meet the children’s basic needs after a divorce. Typically, the non-custodial parent pays child support and these funds go to pay for food, clothing, house, medical care, and other expenses.

    Child support is not tax deductible. Payments are calculated according to state guidelines. Although it’s possible to receive alimony and child support simultaneously, payments may be reduced if they exceed more than half of the paying parent’s wages.

    Contact EP Wealth for Your Divorce Financial Planning Needs

    EP Wealth CDFAs collaborate with your divorce attorneys to move toward a fair settlement that reflects your needs today and prepares you to meet the future head-on.

    Financial planning for divorce doesn’t have to feel overwhelming. We’re here to answer your questions and, discuss your options Locate an advisor near you.

     

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