TO LISTEN TO EPISODE 14, CLICK HERE.
Hi, everyone, and thank you so much for tuning in to the Divorce Field Guide. My name is Ani Mason, and I’m a divorce lawyer and mediator, and I’m also the creator of this podcast.
Today, we are in Episode 14 and we are going to be talking about financial support payments in the context of divorce. Specifically, we’re going to be talking about child support and about spousal support, which sometimes is referred to as “alimony” or “spousal maintenance,” and I’ll use those terms interchangeably.
The big distinction to draw, for our purposes, is child support is one thing, and then spousal support, or spousal maintenance, or alimony is something separate all together. Actually, let’s talk about what child support and spousal support are.
Both child support and spousal support are ongoing payments. They’re not a one-time payment, as would happen with a division of assets. They’re ongoing payments, made from one spouse to the other spouse, either during or following the divorce.
The key distinction between them that I want to point out for you is really what their purpose is.
The purpose of child support is to support the minor children of the marriage or, if you’re not married, child support is still relevant in the exact same way – it’s to support the children of the relationship. It is paid from what I will call the “non-custodial” parent, the person with whom the children are living less of the time, to the custodial parent, or the parent with whom the children are living more of the time.
I will say it’s regardless of income level, the fact that payments are made. Certainly, the income levels of both parents will impact the amount of child support payments. The gist is child support is to support children.
Spousal support or spousal maintenance is meant to support a spouse, and, specifically, it’s meant to be paid by the higher-earning spouse to support the lower-earning spouse.
For spousal support, income levels are everything. If your incomes are the exact same, it’s hard for me to imagine a situation in which there would be spousal maintenance, but there would certainly be child support, or very well could be child support, if you had children in common.
Similar to what I said in the past episode, in Episode 13, with regard to the law, I want to make this caveat at the outset that I don’t know the law of child support or spousal support in your location. The law is different in every state, and I am not going to try in this episode to tell you what the law of child support is in your location, or what the law of spousal maintenance says. That is a question for you to take to your attorney or your mediator for them to clarify for you, and they certainly should be able to.
What I want to do instead is give you a very general overview of the typical issues and components of discussion that will come up in a negotiation around child support and around spousal maintenance.
Let me first give you a basic explanation of, when we’re talking about support payments, how do they work and what are they for, how do you figure out what the amount is.
CHILD SUPPORT STRUCTURE
With regard to child support, again, I don’t know what the appropriate amount of child support would be in your particular case, but I can tell you, generally, that a child support award is typically composed of one or two components.
The first is some regular or recurring amount, whether it be weekly or monthly, of payment that is static, that’s the same month to month. It’s predictable. You know what you’re responsible to pay, or you know what you’re entitled to receive, and it is, if you have a settlement agreement, it’s included in your agreement, or it’s what the judge orders you or your spouse to pay to the other, depending on with whom the kids are primarily residing.
Then, another component of a child support award can be a percentage of responsibility, an apportionment of responsibility, for particular child-related expenses. For instance, health-related expenses, like the cost of a health insurance premium for the kids or the cost of, say, anything that’s out of the insurance network – like dental work, if you don’t have dental insurance – the cost of medical expenses, basically, that aren’t covered by insurance. Another big-ticket item that’s sometimes shared percentage-wise would be, for instance, the cost of child care, like a nanny to watch the kids while both you and your spouse work, or educational expenses, and that’s a very broad category.
The gist is there are some types of expenses that may be either bigger-ticket items or they can change maybe month to month or maybe year to year. So, instead of pegging a fixed child support number that’s paid weekly or monthly, you may, instead, agree to or be ordered to share by certain percentages. So maybe you split things 50/50 or 75/25 or 100/0. That depends entirely on your situation.
Then, many child support agreements or awards are actually a hybrid of those two components. What I mean by “hybrid” is that there’s a component of child support agreement that involves a weekly, or bi-weekly, or monthly payment that’s the same, and it’s recurring. Then, there are certain expenses, whether they be bigger-ticket items or whether they be, I don’t know if it’s right to say less predictable items, more variable items that are broken out separately and about which you say, “Okay, we’ve got $X a month in child support that we’ve agreed to, and then we will share health-related expenses, for example, 50/50 or one of us will be 100% responsible for them,” or whatever you agree to.
SPOUSAL SUPPORT STRUCTURE
With regard to spousal support, and again the same goes as I said for child support, I don’t know, in your particular situation, what a reasonable amount of spousal support would be, but spousal support agreements or awards are more typically in the format of that regular, recurring payment. They are not so much or so commonly in the format of an apportionment of responsibility for bigger-ticket or variable expenses.
What you may see is, as part of a spousal support award or agreement, one spouse is responsible for or commits to pay the entire mortgage expense or pay the entire health insurance premium or COBRA cost. You would less commonly see, again, for spousal support, the spouses being assigned 75/25 responsibility for the cost of the lower-earning spouse’s groceries for instance. That’s less common.
HOW LONG CHILD SUPPORT LASTS
Let’s talk in terms of how long would child support or spousal support be paid for. That’s going to vary, really, in each case, but speaking to child support, the length of child support depends on the age of your children.
The states are really different here. So, for many states, child support ends, by law, at age eighteen, when your child turns eighteen. In other states, and New York is among those, child support ends at age twenty-one. That’s a big difference.
In your divorce agreement, you and your spouse, within reason, within some limitations can agree to… I’ll say, you and your spouse can agree to extend that age or elongate child support payments. It’s going to be harder for you and your spouse to agree that you’re going to stop child support, say, at age 15.
Courts tend to be pretty protective of child support payments, and they look more closely at them than they look at spousal maintenance payments, I think, with a view to the court feeling that it has a vested interest in making sure that the children of a marriage are protected and sufficiently provided for.
What’s common, for instance, in New York, where child support would end, by law, at age twenty-one, and that often happens when a kid is in their junior spring or their senior fall of college, couples may agree to extend child support until the end of the kid’s senior year, so it’s not cutting off in July between their junior and senior years, which seems like kind of a random time.
At the same time, in New York, by law, it does end at twenty-one, so if you can’t come to another agreement, whatever that age is in your state, your child support would end when your children reach the age that the law dictates in your particular state.
HOW LONG SPOUSAL MAINTENANCE LASTS
Then, with regard to spousal maintenance, how long does it go for? Well, you and your spouse have more control there. Again, this is if you are coming to agreements between you.
The law may give you some direction. Typical factors that impact the duration or the length of a spousal maintenance award would be the length of your marriage, the length that a spouse was out of the workforce, or, related to that or the flipside of that, how long it’s anticipated to take for the lower-earning spouse to be able to support themselves financially, to be able to be back in the game work-wise and working to support themselves.
The law in your particular state, usually, will give some guidelines or some direction as to length of spousal maintenance, but it may also not. Actually, it was only in 2015, in New York, that we had any guidelines whatsoever on the length of spousal maintenance. We had rules of thumb that we followed and that cases were typically settled along the lines of, but we didn’t actually have any guidance in the statute until just very recently. You may or may not find guidance in the law in your particular state. You, I would imagine, would find, if not in the law, some guidance in what’s common practice in our state in terms of the length of a spousal maintenance award.
CHANGING YOUR CHILD SUPPORT OR SPOUSAL SUPPORT
Then, I wanted to talk about the idea of, you agree to an amount of child support, and you agree to an amount of spousal maintenance, or a court awards an amount of child support and spousal maintenance. Let’s say that your kids are very, very young, and your spousal maintenance award is supposed to last for quite a long time as well.
Well, over the course of five or ten years, a lot of things can happen, and a lot can change. There’s a question, always, for spouses who are negotiating a divorce agreement, which is, to what degree do you want to address, in your agreement, future changes that might come up and how those would impact what you’ve agreed to with regard to child support and spousal maintenance?
For some people, they do not wish to address what changes might come up in the future, financially or otherwise, that would trigger either a discussion and a reassessment of support or would trigger, actually, like, a formulaic recalculation of it. They won’t address it at all, and that leaves it for them to figure out, at the time that the change occurs, “Okay, what are we going to do?”
By the way, typically, the law in your particular location will speak to the circumstances under which you are entitled to go back to court and ask for a reassessment of child support or a reassessment of spousal maintenance. That’s another area where you want to check in with your mediator or your attorney and understand, what does the law in our state say about this? If we have agreed to particular numbers of child support and spousal maintenance in our contract, and we don’t say anything else, what does the law say about what could happen in the future that will allow either of us to reassess either child support or spousal maintenance?
For other people, they don’t want to leave it up to whatever the law says, and they want to tailor their agreement a bit more and anticipate some of the changes that might come down the pipeline, whether they would want those changes, and, if so, how, to impact their support amounts.
Passage of Time
A very common change that is addressed is just the passage of time. After a certain number of years, do you want a provision to reassess your support amounts? You may or you may not.
Keep in mind, as a lot of people do, consider that there is inflation, so oftentimes an amount of money will lose value over time. The $1,000 a month that you agreed to today may not, probably won’t, feel so valuable in ten years’ time.
What a lot of people do is include, in their agreement, either an agreement to reassess in a certain number of years to make sure that their child support/spousal maintenance still feel viable, and fair, and workable. What is more common is that they may peg a certain percentage increase to their agreed amounts. So you agree to a support amount, and then you say, every other year, or every three years, or annually, or whatever it is, this amount will increase by 1%, 2%, 3%, or whatever the inflationary increase is.
Changes in Income
Similarly, a common trigger that will open up a reassessment in support is a change in income.
Regardless of how much time has passed – maybe only six months have passed since you negotiated your divorce agreement – if either spouse had a dramatic change in their income, they might want to reassess the support numbers that you had agreed to. That can be an increase in income and it can be a decrease in income.
It can also, the particular increase or decrease in income, can also either simply trigger a reassessment, as in, open up the subject and open it up for discussion, but not tell you what it will be, or you can include some kind of formula that says, “Okay. If there is a 20% or greater change in income, we will have a similar, a parallel, change in our support numbers.” That’s one of many options of what you can do.
Typically, I would say, for increases or decreases in income, the trigger, whether it’s an absolute number amount or a percentage, is not going to be…it will be substantial enough that with every little fluctuation in a person’s income, 1% up or down, is not going to bring you back to the negotiating table to talk about support. If you were able to come back to the table whenever your incomes changed by 1% or more, that could be a little crazy-making for both of you.
Because you want some stability with your agreement, but you also want to balance the fact that you can’t foresee the future. You don’t know exactly how the incomes will change, and there might be some time in the future, if your incomes are very different, when the support you’ve agreed to just doesn’t make sense for either of you.
The only other thing I’d say about changes in income is that, typically, for a decrease in income to be considered, it needs to be involuntary. It can’t simply be that you had a job, and it was going fine, you weren’t laid off or fired, but you just decided to leave. And so, yes, your income has decreased substantially by, say, 100% or by a lot percent, and you’re simply receiving unemployment right now. If that’s a change that you opted to make, oftentimes, the decrease in income that it caused would not be taken into consideration in assessing whether or not you should reassess support numbers.
Changes in Expenses
I would say that as opposed to changes in income, changes in expenses do not commonly trigger a reassessment of child support or spousal maintenance. Perhaps, with child support, where you are sharing particular expenses on a percentage basis, you could say that your child support obligation will change as those expenses change, because if you have a percentage obligation, it’s going to go up and down with the particular change in the expense amount.
For spousal maintenance, that’s not really very common, that an increase in the recipient’s expenses would trigger a reassessment of maintenance, or a decrease in the payor’s expenses would trigger a reassessment of maintenance. You don’t see that so commonly.
One thing that you do see with spousal maintenance that you don’t see as commonly with child support is that a big life change, like a re-marriage or potentially moving in and living with another person, could trigger a change and, possibly, an end to spousal maintenance, in a way that is not likely to impact a child support agreement or award.
TAX TREATMENT OF CHILD SUPPORT AND SPOUSAL SUPPORT
Let me say a word about the differences in tax treatment of child support and spousal maintenance.
Child support payments are treated as tax-free income to the recipient. They are not taxable, you do not pay tax on them as the recipient. For the payor of child support, you can’t deduct your child support payments from your taxable income. They are not tax deductible.
What that means – it’s not that no one pays tax on child support – what it means is that the payor of child support earns income, they pay tax on it, and then with that post-tax cash that they have, they transfer that tax to the recipient of child support, if that makes sense. The payor is paying tax, then they’re making a child support transfer, the recipient is receiving the child support post tax having been paid on it. Thus they don’t have to report it as taxable income because tax has already been paid on it.
In contrast, spousal maintenance is reportable taxable income to the recipient and, likewise, it is tax deductible by the payor. The payor of spousal maintenance, let’s say they earn a salary of $100,000, and they’re paying spousal maintenance of $10,000. Before they pay tax on their $100,000 of income, they are allowed to reduce their income by the $10,000 of spousal maintenance that they pay, so that they are only paying tax on $90,000 of income.
Similarly, the recipient spouse, let’s say they earn $40,000 at their job, income as a salaried employee. They not only have to report $40,000 of income, they have to report the $40,000, plus the $10,000 of spousal maintenance, for a total of $50,000 of taxable income.
I am really simplifying that. There are some interesting and complex tax components that are far more in depth than we have the bandwidth to cover in this episode, but I just want to make that basic distinction. Child support is tax-free to the recipient, not deductible for the payor. Spousal maintenance is the opposite. It is taxable to the recipient and deductible by the payor.
TIPS ON NEGOTIATING SUPPORT
I just wanted to share a couple of tips as we’re getting toward the end of our episode.
Temporary Support Payments
First of all, by its very nature, financial support is something that may well be necessary to figure out on a temporary basis before you have completely finalized your divorce agreement.
If you remember back in Episode 9, I had spoken about, really generalizing, agreements or divorce cases will take somewhere between a range of nine months and two years to negotiate all the terms and sign the final contract. Well, if you are someone who is anticipating receiving child support or receiving spousal maintenance, you might imagine, “Well, I couldn’t actually survive financially for two years without any support.”
It’s very common that the spouses will come to some kind of working or temporary agreement while they are negotiating all the terms of their divorce so that both spouses are financially okay during the negotiation.
The payment or receipt of temporary child support or spousal support certainly has legal consequences to it, so, definitely, that would be something to raise with your mediator or your attorney to understand better from a legal perspective. But, just practically speaking, and I want to flag for you that if your process is going to take, say, eighteen months from your first negotiation session all the way to your signed contract, don’t worry. You don’t have to wait eighteen months until you have at least a temporary child support or spousal maintenance agreement figured out.
Oftentimes, people will opt to agree to maintain their financial “status quo,” what they have been doing as a family, while they are negotiating their agreement. It keeps them from having to come up with an exact amount of child support or spousal maintenance, albeit temporary. They can just say, “You know what? We’ll keep putting funds into the same bank account and paying for expenses out of the same bank account.”
All of this absolutely has legal implications, and you should absolutely consult with your attorney or ask your mediator for some guidance on it, but just things that I want you to be aware of.
Importance of Information-Gathering
The second tip or just piece of information that I want to share with you with regard to child support and spousal maintenance is that there is, perhaps, no other area in a divorce where information gathering is so critical. It’s also very important when it comes to the division of assets and debts, but understanding your history of income and your future prospects of income, and likewise, understanding your spouse’s history of income and their future prospects for income: absolutely critical to child support and spousal maintenance discussions.
Similarly, understanding past spending and anticipated future spending or expenses/budgets, is critical to being able to have an educated discussion about what support amounts will work for you.
I want to drill down in a little bit more detail there just to say that for child support, the key expenses for you to familiarize yourself with are your own, both historically and what you anticipate they will be.
It’s helpful if you separate out from your own, your children’s expenses, to the extent that you can. And I don’t mean dividing your grocery budget, but any child-specific or child-only expenses, like, for instance, the cost of private school. It really helps to have a whole separate category for kid-related expenses when you create your own budget, to understand your expenses and to be very explicit about that (1) just so you’re clear about it, but also (2) to avoid double counting of expenses by both you and your spouse.
Then, with spousal maintenance, you definitely need to know your own expenses, but it is also relevant for you to understand your spouse’s expenses.
I say that with the anticipation that you may have some disagreement around spousal maintenance. If you and your spouse are totally in agreement around what spousal maintenance will be, you actually don’t need to understand their expenses, if they’re willing to pay an amount that’s acceptable to you. Vice-versa, you don’t need to share your expenses, if you’re the payor of spousal maintenance, if your ex is okay with the amount that you’re okay proposing. Each person really needs to understand their own expenses.
But, to the degree that you are in conflict around your spousal maintenance amount, it does become relevant to understand what are the other person’s expenses. That’s not for the purpose, by the way, of nit-picking or micromanaging what they spend, but just for educating yourself as to what your global financial picture is and what is doable and reasonable within that financial picture.
That is it for Episode 14 on child support and spousal support. I really hope that you found this episode helpful. Next up, Episode 15, we will be talking about the division of assets and debts in a divorce process. In the meantime, thank you so much for joining me and I will look forward to speaking with you then.