Alimony, also known as spousal support, is a challenging concept. The obligation to pay support to a former spouse is often the most contentious issue in any divorce. One purpose of alimony is to ensure that both parties may continue to live in a reasonably comparable manner to which he or she grew accustomed during the marriage. Unlike child support, there is no standard formula or guideline to use when calculating alimony. Courts look at 14 statutory factors when deciding whether to award a spouse alimony and if so, how much. For instance, these factors include the length of the marriage, the financial needs of the parties, the ability to pay spousal support, and perhaps most importantly, the financial standard of living during the marriage.
The Importance of Determining the Standard of Living
The standard of living of spouses during the marriage will be considered by courts as one of the factors when determining alimony. Courts will examine the income and expenses of both parties. This will include gifts given to family members, which stores were frequented, restaurants dined at, vacations taken, expenses for sports and hobbies and the like. Courts have typically discussed the standard in conjunction with an examination of the parties’ spending habits or their history (if any) of saving money. New Jersey courts have established a form called a Case Information Statement which every litigant is required to file with the Court. It is the Case Information Statement that sets forth the parties’ incomes, assets, liabilities, and average monthly spending in multiple categories. When viewed as a whole, the parties’ total average monthly spending forms the basis of the marital standard of living. For this reason, it is critically important to be as accurate as possible when preparing one’s Case Information Statement.
Alimony is Non-Taxable and Non-Deductible
The Tax Cuts and Jobs Act (“TCJA”) passed in 2017 eliminated the deduction of spousal support payments for payors and recipients are no longer required to report payments as taxable income on their federal income tax returns. At the state level in New Jersey, however, the deduction of alimony payments for payors is allowed and recipients are required to report payments as taxable income on their state income tax returns. When negotiating an alimony obligation, it is important to consider how the alimony will be considered for taxation purposes.
Why the “Rule of Thumb” May Not Be Appropriate
Prior to the enactment of the TCJA in 2017, family law practitioners often employed the “rule of thumb” in calculating a ballpark figure for alimony. This “rule of thumb” calculated one-third of the difference between the high and low gross incomes between the parties. That formula is no longer applicable now because spousal support payments are no longer tax deductible by the payor nor considered taxable income to the payee. More importantly, New Jersey courts have held that the use of the “rule of thumb” is inappropriate in calculating alimony because it fails to take into account the 14 statutory factors our courts are required by law to consider. To reduce the 14 statutory factors to a simplistic mathematical formula does not do justice to the realities facing divorcing families in New Jersey.
How Long One Should Anticipate Paying/Receiving Alimony
The length of the marriage is a major factor that courts consider when deciding how long to award alimony. However, there is no prescribed length of marriage in the law that automatically triggers an alimony obligation, and every case is factually different. If the couple was married for less than twenty years, however, New Jersey law does not allow alimony to continue longer than the actual length of the marriage unless there are exceptional circumstances such as chronic illness of the dependent spouse. If the marriage was for twenty years or more, the new spousal support law provides for “open duration” alimony. Open duration alimony will end upon a change of circumstances such as remarriage, cohabitation or retirement. There is a presumption in the new alimony statute that alimony will terminate upon the obligor spouse attaining full retirement age (which is that age that an individual is eligible to receive full benefits under social security).
If you have a question regarding alimony, contact the attorneys at Donahue, Hagan, Klein & Weisberg for a consultation. Our experienced attorneys will help you determine what, if any, alimony obligation you may be required to pay or may be entitled to receive.