In this episode, I wanted to speak in a bit more depth about the concept of modifying or changing your agreements around support. When you and your spouse have come to agreements about the amount of child or spousal support that will be paid and/or the structure of those payments, do you want to create a mechanism (and if so, how?) for how those payments might change, those amounts or that structure of support might change in the future?
Let me back up and say that typically, the law will set forth some guidelines and rules for how to modify support (child support, spousal support) in the future. If you didn’t address the topic of modifying support in the future in your negotiation, and you didn’t address it in your contract, and you didn’t address it in your divorce papers, you just submitted everything to the court and said, “We’ve agreed on X for child support and Y for spousal maintenance. And that’s it. End of story,” there is most likely still, and certainly in New York there is, law that applies to your case that says under what circumstances could you apply to a court and ask them to change the child support that you’ve agreed to, ask them to change the spousal maintenance that you’ve agreed to.
If you say nothing in your contract, it’s not to say that you can never change support. In fact, usually, the law will set out different rules for when you can ask to change support and then for how it would be changed at that time. Now, you may want to, once you understand what the default law says, you may say, “I don’t really like that, and I’d like to change it.” And typically, you can do that in your contract. You can make it easier to change child support or spousal maintenance in the future, or you can make it harder to change those support amounts or the support structure in the future, depending on what your preference is.
Now, very, very broadly speaking, if you had a crystal ball and you knew that your income was only going up substantially into the future, it’s better for you financially to lock in support today based on a lower income number for yourself. In contrast, if you had a crystal ball and you saw, “Oh, man, my income is just only going to go down in the future,” it’s to your benefit to leave it more open, to leave support more open to modification in the future because if you’re modifying support at a time when your income is lower, that tends to be financially better for you than modifying support at a time when your income is higher.
Now, that said, most people don’t feel like they know with certainty what is going to happen to their income in the future, and so they can feel torn in two directions when it comes to the topic of whether or not to make it easier or harder than the law already makes it to modify their child support or spousal maintenance in the future. The thing I want to add to that consideration for you is that there are two levels of speaking to child support or spousal support modification in the future. One is to say, “If X, Y, Z happens in the future, if our incomes go above or below this, if this amount of time passes, if, if, if, then we will renegotiate support at that time.” That is clear about under what circumstances you’re allowed to renegotiate support or you have a right to renegotiate support, but it leaves unclear, it leaves open how you would negotiate that new amount at that time. That definitely puts more work on your plate in the future because it may be clear to you that “Yes, either one of us or both of us have the right to request a change in support, but we don’t know what that new amount should be and we’re going to have to renegotiate that from scratch at that time in the future.”
Whereas you can also clarify, “In these three circumstances, if any one of these three things happens, either of us is allowed to request a change in child support or spousal support, and here is how that change will be calculated.” So you set forth now the formula for the future, the parameters, the structure for recalculating support. That’s putting more on your plate today to figure out what formula would be fair in the future to use or what mechanism would be fair in the future to use for modifying support, but it helps you in the future in adding more certainty to what’s going to happen, what number you’re going to end up with because you know what formula or what structure already you’re going to be using to come up with that modified support amount in the future.
Then there are cases where people already know that they want to reassess support and recalculate it every year or every other year, and nothing more has to happen. Incomes could be exactly the same. In which case, you probably wouldn’t go through the exercise of recalculating support because you’d get the same result. But you don’t have to show a big change in income. And in fact, you could, and some people do include in their contract the affirmative obligation to recalculate support annually, biannually, based on your most recent incomes. If that’s the case, then you will almost always set forth in the agreement the formula that you’re going to follow when you recalculate support. You would not say… I’ve never at least seen a couple say “Yeah, we’re going to renegotiate support every year, every other year, and TBD at the time what we’re going to base that on. Let’s see how it goes.” That will be not cool for you to have that level of uncertainty and to have to start over every year or every other year with a negotiation on support from scratch, not really having any direction as to what to base the new numbers on. If you are anticipating frequent recalculation of support, then you really want to give yourself more clarity in terms of how that new number is going to be calculated so that you’re not setting yourself up to be doing a ton of work on support every year or every other year, which would start to feel unmanageable for most people.
Now, if you’re both agreed that you really want to minimize the amount of recalculation and of sharing of documents and of working with attorneys or accountants to recalculate, but for instance, your kids are very young, and you anticipate having child support paid for the next 15 years, then what sometimes people will do is say, “Okay, listen. We agree to increase child support by this percentage or to peg it to inflation so that we’re not going to reassess, but child support is not going to lose value over time, especially if we have a longer child support award.” That said, that’s putting the burden on the spouse paying child support to make sure that they keep increasing their income by at least that much so that they’re not losing money and purchasing power on their end while they’re guaranteeing an inflation-based adjustment to the recipient spouse.
Sometimes people will say, “This is the child support amount. It’s going to increase by inflation provided that the payor spouse’s income has increased by at least as much as inflation has increased.” And if not, let’s say inflation was 2%, the payor spouse’s income only went up 1%, then child support would go up by the lesser of those two, so 1%. Then at other times, people, as part of their negotiation, they agree to a child support amount or a spousal maintenance amount that feels very high to the payor, and part of the negotiation is, “Okay, we can agree to this amount, but it will not be adjusted for inflation over time.” That’s another component of the negotiation that you’ll clarify as you go through the process and then that your contract will reflect.
But certainly, if you want a more dynamic recalculation of support, more dynamic, that is, than just a percentage adjustment by inflation or by some percentage of inflation, you will likely want to speak in your agreement to under what conditions is either of us entitled to request a recalculation of support. And if our request is justified, then how will that recalculation be conducted, so that you have some certainty at the time. That was our episode on modifying support. I hope it was helpful for you.