Speaker 1: Spousal support, sometimes known as alimony, is a form of financial support awarded to one's spouse after a divorce. Fault in the breakdown of the marriage is not generally taken into consideration by a court when deciding whether to award spousal support, as alimony is not meant to punish but merely to correct the potentially unfair effects of a divorce and the consequent breaking up of what had previously been a financial partnership. Alimony is fundamentally about financial fairness. The concept behind alimony is that one spouse may have given up training or career to support the other spouse or maintain the home or raise children. To allow the spouses to now separate and expect them to be independently responsible for their maintenance would be unfair to the spouse that had sacrificed potential livelihood to support the other spouse. One spouse may have dropped out of college or taken a long career break that could be detrimental to future earning potential to support the other. It is therefore reasonable to expect the beneficiary spouse to compensate the sacrificing spouse through payments of alimony in reasonable amounts and for a reasonable time. This presentation will look at the various types of spousal support, examine how and when spousal support awards are modified or terminated, and consider the tax effects of spousal support for both the payer and recipient's spouses. There is no uniform approach to the determination of spousal support awards. Each couple's financial situation is unique and thus support awards vary by circumstance. Still, there are some factors common to the determinations made by most courts, including duration of the marriage. The longer the duration, the more reasonable it is to assume that one spouse sacrificed earning potential for the other. Therefore, the longer the duration, the more likely and more significant alimony awards will be. Income and property of each spouse. The greater the disparity between the relative incomes of the spouses, the greater the alimony award. Impairments in earning capacity. If one spouse has an impairment on his or her earning capacity, that militates in favor of his or her need and therefore a greater reward. Standard of living established during the marriage. Where practical, courts will consider the couple's standard of living during the marriage and try to maintain the abilities of both spouses to remain as near as possible to that level. The time needed for the party seeking support to obtain the training necessary to find employment. The more time that the sacrificing spouse will need to obtain the necessary employment training, the longer the alimony award is likely to last. The payer spouse's ability to meet his or her own needs while paying spousal support. This factor reflects the idea that alimony should not impose an undue hardship on the paying spouse. There are various types of spousal support, including permanent periodic, rehabilitative, lump sum, and reimbursement. The most common form of spousal support is permanent periodic support, also known as general term alimony. Such an award is paid on a regular basis, including a monthly or bimonthly basis. The purpose of permanent periodic spousal support is to minimize the hardship of the substantial decrease in the quality of life in the amount awarded will be governed by this principle. Permanent periodic spousal support can be modified upon a substantial change in circumstances. A court's decision to modify is a fact-based determination. For example, William and Martha were married for 25 years until they divorced this past December. Both worked as engineers prior to the marriage, but after getting married, Martha became a stay-at-home mom. After the divorce, William and Martha agreed to periodic spousal support payments of $3,000 per month. Six months after the divorce, an engineering firm hires Martha as a part-time engineer, where she commutes to the office and works three days per week. Her salary is $4,000 per month. Undoubtedly, a court could view that income as a substantial change in circumstances. Because of this change, William could petition a court to reduce the periodic spousal support payments from $3,000. Courts have a great deal of leeway to set the length of time a spousal support award should operate for and when it should terminate. Permanent periodic spousal will terminate if either the payer or recipient spouse dies or if the recipient spouse remarries. An award can also terminate when the couple's children reach adulthood. Rehabilitative spousal support is becoming more widely adopted in jurisdictions across the United States. Some have even called it a modern form of spousal support. Rehabilitative spousal support is made up of periodic payments for a limited time to enable a spouse to become self-supporting and less dependent on any form of spousal support. To become self-supporting, the recipient spouse may use these rehabilitative periodic payments to complete job training or education. Rehabilitative spousal support is most likely to be awarded if the recipient spouse compromised his or her earning power during the marriage and now seeks to reclaim this earning power. Like periodic permanent support, rehabilitative support can be modified upon a substantial change in circumstances. It also typically terminates when the recipient spouse completes the rehabilitation process. Lump-sum spousal support is a one-time award in lieu of periodic payments. More states are incorporating lump-sum payments into their divorce statutes, but courts still use this method in very rare circumstances. A lump-sum payment has several advantages over monthly periodic support. First, a lump-sum payment ends the spousal support discussion once and for all. It curtails the potential for hostile interactions between the two spouses and the need for enforcement because it is a final judgment and it's executed at once. Moreover, it gives the recipient spouse control over the investments and growth of the money that will provide her support. With skillful managing and investing, it can provide greater benefits than fixed monthly payments. Reimbursement is court-ordered payment that is not necessarily a form of support. If the recipient spouse contributed to the financial resources of the payer spouse or financially supported the payer spouse during his or her time spent obtaining a degree or professional license, then the recipient spouse can receive a fixed amount as a type of reimbursement. This fixed sum is not modifiable. As such, it's a form of restitution more than a type of alimony. All four of these types of spousal support awards have tax consequences for both the recipient spouse and payer spouse. The federal tax treatment of alimony is directed by the Internal Revenue Code, and couples cannot circumvent this treatment through a court order or divorce agreement. Unlike child support payments, spousal support awards are deductible by the payer spouse and are treated by the recipient spouse as taxable income. The payer spouse can deduct the spousal support award if the spouses don't file a joint return with each other, the payments are in cash, the payment is to or for a spouse or a former spouse made under a divorce or separation instrument, the divorce or separation instrument doesn't designate the payment as something other than alimony, such as child support or a property settlement, the spouses aren't members of the same household when the payments are made, and the payments are scheduled to terminate upon the death of the recipient spouse. Conversely, alimony payments that are deductible by the payer spouse must be reported as taxable income by the payee spouse. Alimony is a form of equity. It is designed to ensure fairness and alleviate hardships for divorcing spouses who may not be in a position to support themselves. The rules and procedures involved in establishing alimony all stem from this policy consideration.