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Ask WomensFinance? : Answer |
Q: What is Alimony?
A: Alimony
is very different from child support. It's not calculated with some mathematical formula
provided by the state. Alimony payments are determined by a variety of complex factors
that make up a marriage. And the rules regarding alimony vary from state to state, so a
judge has a lot to consider before he or she makes a decision.
1) What is Alimony?
Alimony is the amount of money your ex-husband legally has to pay you -- or you pay him --
under a divorce or separation agreement. The IRS allows a tax deduction for the person
paying it. Otherwise it's treated as taxable income.
Alimony may be awarded in the form of permanent, temporary, lump sum, or rehabilitive
alimony. Some payments are even tied to a spouse's income or salary.
There are several factors that determine the amount and extent of your alimony payments,
including:
- The length of your marriage.
- Your financial lifestyle.
Documented personal
expenses.
Tax consequences.
Your ability to work.
Your conduct.
2) Requirements
- Alimony payments must be in cash or a cash equivalent.
- Alimony payments can't be made if you and your ex-husband are living together.
- If you're paying alimony, you can't claim a tax deduction when filing a joint tax
return.
- Alimony payments stop when the spouse (on the receiving end) dies or remarries.
3) Qualifications
How much you actually receive or have to pay depends on the laws of the state in which you
live. Most states consider the needs of each spouse and their ability to pay. Other states
first determine marital fault and then go from there.
The following situations might affect the outcome of your alimony settlement:
Possibility (for payment)
- You've been financially dependent on your spouse for a long period of time.
- You supported your husband while he was in school full-time.
- You're a full-time mother who has been out of the workforce for many years.
- You're a full-time mother who has never held a job outside the home.
- Your income is significantly less than your husband's.
- You've been married over 10 years.
Slim Possibility
- You have a good job. You're earning income that exceeds (or is equal to) your husband's.
- Your property settlement was significant (in your favor).
- Your spouse (or you) will be paying child support. In this case, alimony payments might
be paid on a reduced basis.
- You remarry or go back to work full time.
4) Lump-Sum Settlement
In some cases, you might be able to get a lump-sum settlement instead of a monthly alimony
payment from your ex-husband.
Which is better? There are pros and cons to each. Take a look.
Advantages
- Lump-sums payments might
offer more stability. You don't have to worry about your ex-husband making payments each
month.
- You can end all ties with
your former husband once and for all. No more dependence.
- Getting remarried or
cohabitating with someone generally terminates your alimony payments. You won't have this
worry if you take the lump-sum payment -- the money is yours right away.
Disadvantages
- The sum of your alimony
payments may be worth more than a lump-sum payment.
- Some spouses prefer to have
a check arrive each month. Steady income offers consistency and way to budget.
- Lump-sum payments are not
tax deductible for the paying spouse.
- If the paying spouse get disabled or dies without having adequate life or disability
insurance, your payments might be reduced or possibly stop.
- If the paying spouse loses
their job or suffers a financial setback, alimony payments might be reduced.
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