In today’s mini episode, we are going to be talking about how to handle it when your spouse low-balls you on a support offer.
This comes up for a lot of people going through a divorce process. They’re negotiating support, and their spouse comes to them with an offer that is…maybe it’s 25% of what they think would be fair, just some really, really low-ball number. How can you approach it in a productive way?
The first thing you want to do is to clarify what your spouse’s understanding is of what would happen with regard to support if you went to court. So, is it the case that you have the same understanding of what would happen if you went to court? But your spouse is simply saying, “I’m not willing to pay that out of court. I'm only willing to offer half of what I think would happen. We have the same sense of what would happen on court. We agree on that, but, I don’t care. I'm not willing to offer that much.”
Or, is your spouse’s understanding of what would happen in court quite different than yours is? And so your spouse thinks, “Well, listen, it’s clear to me that support would be only $1,000 a month if we went to court,” and you think it would be $3,000. You may not be able to resolve that difference of opinion, but it helps to at least clarify for yourself where the breakdown is happening. Is it that they have a different understanding of what their own income is, or what your income is, or what the kids’ expenses are, or what the law says? Where are things breaking down? Number one, I would try to understand that, and see if you can get on the same page about “what the laws says” or what would happen in court.
But then, the second thing that I would do is I would work with a CPA to show a cash flow analysis of, okay, here’s your spouse’s income. Here’s your income. Here’s the proposed support transfer between you, whether it be child support or spousal support/alimony. And then here are all your taxes paid taken into consideration, your state, and your federal and if you have local or city taxes or whatever. If you have consistent and predictable tax benefits like mortgage interest deduction, you can certainly take those into account as well. I would have your CPA run an analysis of what each of you is left with after taxes and after the support transfer has happened, so that you can give your spouse a reality check and yourself a reality check of, okay, does this look fair to us or not? How are we ending up here?’ That can sometimes be a useful way to bridge some of the gap between you and your spouse. In particular, it can be helpful to run side-by-side comparisons of what your spouse is proposing and what it leaves each of you with after taxes, and then what you're proposing and what it leaves each of you with after taxes.
Finally, one thing that can sometimes help bridge the gap when your spouse is offering a support number that’s way lower than feels okay to you, or you are requesting something that’s higher than your spouse is willing to accept, is to talk with a CPA about tax-optimizing your support. So, in a scenario in which you have both child support and alimony available to you, you can work with your accountant to optimize your amounts of child support and spousal maintenance such that you are, overall, paying the lowest possible amount of taxes, which frees up more cash to be available to each of you and can sometimes help bridge the gap between what you want to receive and what your spouse wants to pay.