Maintenance | Spousal Support
"The guideline is only advisory unlike the child support formula, which is presumptive."
What is Maintenance?
One of the most contested issues in any divorce case is maintenance, also known as spousal support or previously known as alimony.
In an effort to produce more consistent outcomes across jurisdictions and to help parties settle the issue out of Court, the legislature passed a law in 2013 that went into effect on January 1, 2014. The law includes a formula to calculate guideline maintenance for marriages between 3 and 20 years and when the combined annual income of the parties is less than $300,000. The guideline is only advisory unlike the child support formula, which is presumptive. Therefore, the Court will consider the guideline but may deviate from the formula in its sole and absolute discretion. For example, the formula does not account for the standard of living during the marriage. We believe that any maintenance order should reflect the standard of living during the entire marriage, which may include a declining maintenance order opposite the increasing income level during the marriage. In any event, the outcomes in most jurisdictions are still unpredictable. As a result, the issue remains highly contested and difficult to resolve out of court.
While it is becoming less common, many marriages exceed 20 years,
to which the guideline does not apply except that, in general, the term of maintenance obligation must be for at least 10 years. For marriages where the combined income is in excess of $300,000 per year, the Court will take a more subjective look at the paying spouse’s ability to pay and the recipient’s spouse’s need, amongst other factors when issuing a maintenance order. The factors include standard of living, physical/mental health of both parties, and amount of property allocated to each party.
Perhaps the most litigated issue in a maintenance case is the income of the party seeking maintenance. This is especially true when such spouse is unemployed or underemployed. Typically, the Court will impute to the spouse his/her earning potential for purposes of calculating maintenance. However, spouses who have been homemakers are often given time to increase his/her earning potential, which may include higher education and/or training. In any event, even homemakers are expected to work in a post-decree world. Vocational evaluations are often performed to determine the spouse’s earning potential and any physical or mental health issues that may impede his/her ability to work.
Another common dispute involves self-employed individuals. In general, the income of self-employed persons is established by deducting ordinary and necessary expenses from his/her gross revenue, when expenses exclude permissible tax deductions such as depreciation. In addition, expenses that are paid by the business that offset a party’s personal expenses are generally added back to income. Self-employed individuals may make more than if he/she performed the same job for a company. This can create excess earnings and therefore goodwill, which may create a value for the business that may be allocated in a divorce proceeding. Therefore, such individuals could face an allocation of the value of his/her business and an award of maintenance.
“…the Court and the parties will have to consider the change in the tax code.”
Because the intent in any divorce matter is to separate the parties as much as possible, included in the 2013 legislation is a preference for the disproportionate division of property in lieu of maintenance. Indeed, many paying spouses would prefer to buy out or buy down a maintenance obligation. While this does alleviate the stigma that may be associated with maintenance, it does come with some challenges. The paying spouse will lose the ability to discontinue paying maintenance if the receiving spouse remarries. Buying out/down maintenance should contemplate lump sum discounts, net present values, and tax implications. Due to the 2018 reformation of the tax code, paying spouses will no longer be able to deduct maintenance paid and the receiving spouse will no longer be required to claim maintenance as income. While it may seem easy to adjust guideline maintenance to reflect this change, the paying spouse’s tax benefit is usually greater than the receiving spouse’s obligation because the payor usually has a higher tax bracket. While the Colorado legislature contemplates modifications to guideline maintenance, the Court and the parties will have to consider the change in the tax code.
One of the most overlooked options in any maintenance case is the ability to pay contractual support. This is an option available only by agreement and prohibits either party from modifying spousal support at any time for any reason. By comparison, the Court may only award statutory maintenance, which is always modifiable if there are changes in circumstances that are so substantial that they make the maintenance obligation unconscionable. Parties who are risk adverse may prefer a contractual obligation. Paying spouses who are at the beginning of his/her career may want a contractual obligation to avoid increases later just as recipient spouses may want one to avoid decreases when the paying spouse is nearing the end of his/her career. In any case, the party who wants contractual support will usually pay for it. A paying spouse may pay a higher amount and/or for a longer term. A recipient spouse may receive a lower amount and/or for a shorter term.
Attorney Márquez has an extensive accounting background that enables him to evaluate and formulate maintenance agreements or arguments that may be complex and creative. Maintenance obligations can significantly impact the livelihood of both parties, which makes the issue complicated and emotional. Trust a professional to navigate and resolve this difficult issue.
Attorney Márquez’s extensive experience in high conflict, complex financial, and high asset family law cases affords him the unique ability to help parties find detailed and often creative solutions to solve their cases. He is an empathetic and active listener, but more importantly, he is honest, practical and effective. Less time is spent on rehashing the conflict than on understanding the conflict to formulate options that lead to resolutions.
We look forward to assisting you find ways to resolve your complex cases efficiently and fairly.