alimony definition

What is alimony?

Alimony — also known as a “spousal” or “alimony” payment in some parts of the United States — is a periodic sum awarded to a spouse or ex-spouse following a separation or divorce. Payment structures and requirements to meet alimony payments are established by a legal decree or court order.

The central theses

• Alimony payments are legally required money transfers from one ex-spouse to another to support the other’s lifestyle.
• Benefits are usually granted when one spouse earns more than the other.
• Failure to pay or fail to make child support payments may subject the payer to civil or criminal charges.
• The Tax Cuts and Jobs Act (TCJA) eliminated the alimony tax deduction for divorce settlements entered into on or after January 1, 2019.

How are maintenance payments determined?

Child support payments are a legal obligation whereby one spouse makes periodic payments to the other – former or current – ​​spouse. Benefits are usually granted when one spouse earns more than the other. When a couple is legally separated or divorced, both parties can agree on the terms of maintenance for themselves. However, if they cannot agree, a court can establish the legal obligation – or alimony – for one person to financially support the other. Some of the things a judge will consider are:

• The amount each party can reasonably earn each month
• The reasonable costs incurred by each party
• If the alimony can enable the receiving party to maintain a lifestyle close to that which the couple had during the marriage
• The length of the marriage
• The age and health of each spouse
• The earning capacity of each spouse
• The financial situation of each spouse
• The economic and non-economic contributions made by each spouse to the marriage
• All economic opportunities lost due to marriage
• Any other factor that a judge deems relevant in determining whether alimony should be awarded – and how much

Alimony payments may not be granted if both spouses have similar annual incomes or if the marriage is relatively recent. A judge—or both parties—can also set an expiration date at the beginning of the alimony writ, after which the payer is no longer obligated to financially support their spouse.

Certain types of child support payments available may vary from state to state. For example, in California there are five:

• Temporary Maintenance—Paid while divorce is pending, may include divorce costs and day-to-day expenses, and ends once divorce is finalized.
• Perpetual Upkeep– Paid monthly and runs until the death of a spouse or the remarriage of the lower-income spouse.
• rehabilitation maintenance— Paid while the lower-income spouse attempts to improve employment opportunities through education or training or while looking for a job and ends either after a certain period of time or when the payee becomes self-employed.
• reimbursement of alimony—Paid to reimburse a lower-income spouse for expenses such as tuition or professional training, it is discontinued.
• Lump sum alimony— Paid in lieu of a property settlement, it is ordered when a spouse does not want any property or valuables from their marital property.

As shown in the alimony types above, alimony termination is flexible and open to negotiation. Other situations that could be used as grounds for stopping payments include retirement, children no longer dependent on a parent’s care, and a judge’s determination that a recipient is not making good faith efforts to be independent to become.

Failure to pay or fail to make child support payments may subject the payer to civil or criminal charges.

Child support payments do not include child support, payments in kind, voluntary payments, or money used to maintain the payer’s property.

Requirements for alimony payments

According to the Internal Revenue Service (IRS), child support payments must meet the following criteria:

• Spouses must file separate tax returns.
• Support payments must be made by cash, check, or money order.
• Payments are made to a spouse or former spouse under a deed of divorce or separation.
• The deed must state the payments as alimony.
• The spouses must live separately.
• There is no maintenance obligation after the death of the recipient.

Taxes on alimony payments

Divorce has its own tax implications, some of which were amended by the Tax Cuts and Jobs Act (TCJA) of 2017, which eliminated the alimony tax deduction for divorce settlements entered into after December 31, 2018. The rules also owe alimony recipients no federal tax on that support more.

These are big changes that will affect how many divorce decrees are structured. The IRS currently allows alimony payments to be tax deductible by the payer for divorce or separation agreements entered into on or before December 31, 2018. However, agreements made before 2019 and later amended to remove the alimony deduction will be subject to the new rules.

Orders made on or after January 1, 2019 no longer entitle to deductions for child support payments under the Tax Cuts and Jobs Act (TCJA).

Instead of cash payments, which are structured into divorce decrees as of 2019, some tax advisors suggest that the higher-earning partner grant the spouse an Individual Retirement Account (IRA), which is effectively a tax deduction since no taxes were paid on the amounts added to the account.

However, a possible problem here is that the money cannot usually be withdrawn before the age of 59 without incurring a 10% penalty.