If the stats are right, chances are many of us will end up in child support negotiations at some point. According to the American Psychological Association, more than 90 percent of people in western cultures marry by age 50. And in the United States, 40 to 50 percent of married couples eventually divorce.
Negotiating alimony (also known as spousal support or alimony) in a divorce can be stressful, overwhelming, and emotional for both parties. Here are some key points to consider when deciding alimony, plus tips to help you determine a reasonable amount of alimony — and enter negotiations well-informed.
Don’t skip your research
There is a wealth of information online to help divorce parties resolve the many questions surrounding alimony. Taking the time to review some of the information available can be a helpful starting point. Not only do child support laws vary from state to state, you don’t want to leave money on the table (or, conversely, come into child support talks with completely unrealistic expectations).
One of the most comprehensive websites to start with is MaritalLaws.com, which not only provides an overview of state child support laws, but also offers a child support calculator that allows users to enter information such as gross and net payer and payee salary and the duration of the Marriage to develop an approximate alimony.
The NOLO website covers what child support payments are, how taxes affect them, and more. Additionally, NOLO’s sister site, DivorceNet, covers how to best assess a spouse’s resources and your needs.
Negotiate like your life depends on it, because it usually does
In addition to understanding the laws and parameters involved in child support negotiations, it’s important to think realistically about your needs when it comes to such financial assistance, says Jeffrey Knipmeyer, a director at Nottage and Ward, LLP, a based family law firm in Chicago.
“The basis for any support, whether alimony or child support, is a calculation of the standard amount to which one is entitled by law, based on the income and financial possibilities of each party,” explains Knipmeyer. “However, for most people, the needs of this party are a better measure of the support needed.”
In theory, statutory benchmark calculations of alimony would suffice to meet the spouse’s needs. In reality, however, this is rarely the case, Knipmeyer continues. Therefore, it is important that you and your attorney (if you have one) truly understand the need for money and actively negotiate to meet that need, rather than just accepting indicative calculations.
When thinking about child support numbers, it’s also important to understand what your financial situation was like during the marriage, which makes up the marital lifestyle, and what it’s like outside of marriage. Understanding the gap between these two different scenarios should help you come up with an ongoing support number.
“Having an accurate budget for your day-to-day expenses can be invaluable,” said Sarah Jacobs, co-founder and owner of Jacobs Berger, LLC. “It’ll take some of the stress out of it knowing you have a clear picture of what you’ve spent during the marriage and what you’ll need going forward.”
Maintenance for stay-at-home parents
Chicago-based attorney Derek Bradford, founding partner of the law firm Bradford & Gordon, says stay-at-home parents often have their own unique concerns when it comes to divorce and alimony.
“I can’t tell you how many householders, especially mothers, are afraid to get divorced because their spouses have threatened to ‘take it all’. The reality is, that can’t really happen,” says Bradford. “Current law in Illinois, which is similar in most states, says that everyone has an obligation to try to become financially independent. Most moms will eventually have to find employment. But for families who have the means, child support (or child support payments) can give mothers more time to stay at home with their children.”
Is alimony taxable?
When it comes to taxes and child support, there is good news and bad news. Federal tax laws related to child support payments changed on January 1, 2019, Jacobs says. At that point, the alimony tax deduction was abolished, which isn’t great if you’re the one affected by the abolition. The law also eliminated taxation of alimony for the recipient, meaning those who receive alimony are no longer taxed on income (that’s the good news). However, these changes only affect federal taxes.
“Each federal state may deal with it differently at the state level,” adds Jacobs. “For example, alimony payments are still tax-deductible in New Jersey for state tax purposes.”
Options for negotiating and structuring alimony payments
Going directly to court is not the only way to negotiate maintenance. And it might not be the best way. Mediation may present a more palatable alternative for some; This approach offers the support of a professional mediator who can work with both parties to structure an agreement that works for everyone involved, says Erik Wheeler of Accord Mediation.
In addition, as with maintenance negotiations, there are different approaches to structuring the final settlement. As the website NOLO explains, choices include receiving a one-time lump sum payment, recurring monthly payments, or even a transfer of ownership.
“People sometimes get stuck negotiating a fixed amount, but there are many other options,” explains Wheeler. “For example, if the payer anticipates that cash flow will be tight for the first two years after the divorce but will improve later, the payments could be structured as a lower monthly payment for the first two years and then increased for subsequent years .”
“Or depending on your financial circumstances, you might want to consider paying a lump sum alimony. This can be paid out at the very beginning or it can be paid out later,” Wheeler continues.
Those who don’t have enough cash or assets to pay alimony but have equity in a home might also consider a home payout refinance to pay the lump sum settlement. Alternatively, Wheeler says, you may be able to negotiate reduced alimony in exchange for a different division of the other marital property.
There are many good reasons why you should consider a lump sum upfront alimony, adds attorney Gabrielle Hartley.
“For example, if you’re divorcing someone who is likely to do their best to evade payment, or who has inconsistent income, it may be in your best interest to receive an upfront payment,” Hartley explains. “Also, alimony usually ends when you live together or remarry. However, if you either take an upfront payment or specifically state that the alimony is non-changeable, you can ensure payment regardless of your change of circumstances.”
Keep the big picture in mind
Finally, when it comes to crafting a child support agreement that both parties are reasonably comfortable with, it is important to take a broad perspective, one that includes all elements of the division of assets, not just spousal support.
“Don’t look at one aspect in a vacuum,” explains Jacobs of Jacobs Berger. “When a client of mine is just focused on support, whether it’s alimony or child support, I try to gently guide them to look at the whole financial picture, which includes equity in a home, retirement accounts, college savings and more can. “
When creating this type of 360-degree view, it can be helpful to have an experienced family law attorney who has relationships with financial advisors and similar professionals.
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