0231: How Does Spousal Support Work? - Part 1

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help.   All right. Today, I want to talk about a very basic and essential topic that is worth your understanding and understanding the nuances of it, and that is spousal support. And when I talk about spousal support, I also mean alimony in there as well. Spousal support or alimony is the same term used interchangeably. Sometimes I'll refer to it as spousal support, sometimes I might say alimony, but know that they are the exact same thing. There's a lot of details that you should know about alimony or spousal support, and I want to make sure you understand the basics of it. Let's start with just a simple definition. What it is, is a court-ordered provision of money for one spouse after divorce, or sometimes separation as well. Spousal support is a very important concept. You may be on the paying end of support, you may be on the receiving end. But oftentimes, people ask, "Well, why do I have to pay support?" or, "Shouldn't I be receiving spousal support?" And you should kind of understand why it exists. Very simply, one spouse pays the other money, usually on a semi-regular basis. And the reason it exists is that most of the time, both spouses don't have equal resources. Usually, one spouse earns more than the other, and to make up for that difference, they have spousal support. Particularly, in a longer marriage where if you've been married for a long time, and if you're getting divorced and one spouse didn't work or barely worked part-time, that income difference can be substantial. Sometimes, in the hundreds of thousands of dollars a year a difference and so spousal support is there to make sure that the lower-earning spouse does not end up without any form of income after the divorce process is over. Why it came into play, if you look up the history of spousal support, why it even exists, is actually, once upon a time, you could get divorced but oftentimes, if we are assuming traditional gender roles, the wife would be left destitute. The husband who has had some sort of profession many, many decades ago before divorce laws evolved would work the job, the wife would stay at home if you think of the traditional family as it used to be. Before spousal support, if a wife were to get divorced, the wife would have no money and they would have to start over with basically nothing. They would be destitute. And so, spousal support was enacted by just about every state to minimize that from happening and keep that from happening in this situation of divorce, like other evolutions in divorce include no-fault divorce laws, which I've talked about on the podcast. It used to be the case where you had to prove a reason that you were getting divorced. Now you can get divorced for any reason at all in any state. Look, there are pros and cons and what not to everything, but just want to give a little bit of context there.   Now, the big question that I get asked a lot is, "How much alimony am I going to get?" And the answer to that is it depends. There are numerous factors that are considered. Now, every state has its own nuances to how spousal support is determined. Some of them, it's a little bit more formulaic. More often, it is almost just whatever you and your spouse agree to or whatever a court decides is the amount of support that's going to be paid, and there are very few guidelines. Particularly, for my California listeners... I work with a lot of people in California, a lot of people in New York... Now, I work with people everywhere but in those two states in particular people, the question is, "How much support am I going to pay?" And the answer is, well, we're going to have to figure it out and negotiate it because it's not a hard and fast rule in terms of spousal support.  So there are a lot of nuances to the spousal support question and what financial status means, and trying to give a bunch of examples is a little bit tricky because everyone's situation is different depending on state and income level and savings and earnings, et cetera. So, I won't try and dive into 50 different examples of ways spousal support might be calculated just based on the financial status question, but something to think about. The next issue is living conditions and lifestyle. Some people who make $500,000 a year spend $600,000 a year, which means they have a lot of debt. I also know families who make $500,000 a year who spend $80,000 a year, and they save a substantial amount of money every year. The point is, is that lifestyles can vary dramatically between families. And if you are in a situation where you or your spouse doesn't spend very much money, there may be the case for lower support amounts going forward. Now, it doesn't apply in every state and every situation, but something to think about. Earning potential, is a very important topic in terms of how the spousal support conversation can go and one that we do a lot of coaching calls around, and that is, the spouse that's receiving support, what is their educational level? Are they able to earn funds on their own? Sometimes the answer is yes, sometimes the answer is no, or sometimes the answer is, well, after a few years, they may be able to. If you are a younger couple, let's just say, in your 40s is a good example, or younger, and you're getting divorced, it's not very realistic almost anywhere in the country to believe that the spouse who's receiving spousal support is supposed to never work again. And so, the question becomes, what is that person's earning potential? Now, if you've never graduated college or don't have any formal education, maybe the answer is, "Well, we're going to assume you can earn a minimum wage job and that's your earning potential." But conversely, if you have a master's degree but have only been out of the workforce for three years, and you can probably get a job with a little bit of extra training or something like that, a six-figure job, then that could be factored into the spousal support calculations. So, there's a lot of question in terms of earning potential that needs to be determined by the spouse. I've also talked in the past on the podcast about vocational experts who will, if there's not an agreement about one spouse's earning potential, can come up with an agreement about earning potential and do an analysis of the spouse's possibilities in the job market. That is something that could factor into the spousal support discussion.   Age. Age is very simple. The older you are, usually the more likely that one spouse will be receiving support and also the more likely it is that that support may be longer. And, that the other spouse isn't expected to go find a high-paying job over time. Because if you're 61 and you're getting divorced and you're expecting to receive support, well, it's most likely the case that you will be receiving support for an extended spousal support for an extended period of time, and they're not expecting you to go rejoin the workforce and get a job, particularly if you've been married for a while, which also brings me to the last point, of the length of the marriage. If you've been married for a long time, 10 years, 20 years, 25 years, 30 years or longer, the longer you have been married, the more likely you're going to receive some form of support and for a longer period of time. Now, it's not always a super clean and easy thing to figure out in terms of timing and how long and how much, but there is a correlation between the length of the marriage and the amount of support you receive. Sometimes I talk to people who've been married for three years or five years, and they want 10 years of support. That is unlikely. You will usually get paid for... Now, every state differs, some states have rules, and you should look up your state's laws, where if you've been married for over 20 years, it's automatically assumed that you're going to get support for the rest of your life. In other states, it's a fraction of the time. But one of the things to think about is how long you've been married and how much support you'll receive. For planning purposes, I use an estimate. If the state doesn't have a law, I usually estimate around a third to a half of the time you've been married for support for planning purposes, both for the payer and for the person receiving. So if you've been married for 10 years, I assume usually somewhere between three and five years of spousal support. Now, every situation is completely different. But if I were doing just a rough guess, a rough calculation, someone were to come to me and say, "Here's the support agreement that's on the table. The state doesn't really have any real guidelines," if it's somewhere in that third to a half of the amount of time you've been married, assuming the couples are younger so meaning, excuse me, early 50s at the latest, but usually 40s or 30s, that would strike me as a reasonable amount of time. But as I said, every situation is different. In the next episodes, I want to discuss some new other nuances of spousal support such as the different types of support, and what special circumstances may exist where spousal support might be longer or unchangeable, and some of the pros and cons of those different options.