How Much Alimony Is Enough?
When a marriage ends, most divorcing couples acknowledge that a certain amount of spousal maintenance or alimony is needed. But how much is enough? And how long should it be given?
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When Michael Douglas divorced, his ex-wife emerged $45 million richer and was also entitled to any future earnings on things he worked on during their marriage.
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Camille Grammer, once married to Kelsey Grammer - star of such TV hits as Cheers and Frazier, was awarded $40 million in settlement when she separated from him after 14 years of marriage.
The Italian media tycoon and once Prime Minister of Italy Silvio Berlusconi is said to pay a cool $4 million a month alimony to his ex-wife. Now that is what you call an alimony!
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But these are extreme exceptions. When income can sometimes be barely enough to support a single household pre-divorce, spousal support or alimony can become a main source of resentment following a divorce.
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The responsibility to suddenly support two households can be an extraordinary financial burden. And for the recipient of the payments, it can also mean a more restricted lifestyle than the one that they had become accustomed to.
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What Factors Determine Alimony?
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Spousal support (also known as alimony) is meant to help the recipient maintain a certain level of financial security after divorce. Alimony is considered enough when it is able to ensure that the recipient’s standard of living is maintained and does not suffer a downgrade after divorce.
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In determining how much spousal support to grant, a judge considers several factors. He or she usually reviews the receiving spouse’s need for the funds to meet basic expenses, as well as the paying spouse’s ability to make the payments. The factors that the judge considers to make a decision are:
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Income Need / Capacity to earn an income: The important thing that the judge will consider is if the recipient has enough money to live on. He or she will also look into the recipient’s ability to earn an income as well as the marital assets of the spouse seeking support to ascertain if he or she can use these assets as a source of economic support.
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Capability to Pay: On the flipside, the judge will also consider the payor’s capability to pay and yet still have enough to support the standard of living that he or she is accustomed to.
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Duration of the marriage: The length of the marriage is also a factor when the judge awards spousal support. If the marriage lasted for two years, for instance, it is possible that no spousal support will be granted.
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In California, the general rule is that spousal support is granted for half the length of the marriage for marriages lasting less than 10 years. In marriages that last 10 years or longer, the court does not set the duration of the alimony. The burden is on the spouse who is paying to prove that alimony is no longer necessary at some point in the future.
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The needs of each spouse based on the standard of living during the marriage.
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Here is where the importance of hiring, not just a divorce lawyer but also a Certified Divorce Financial Analyst® to assist you, becomes apparent. Divorce can be such an emotionally draining experience, that just to get through the process as quickly as possible, it is easy to agree to an alimony amount that is less than what is really needed.
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A CDFA® reviews the financial situation of both parties and makes a projection for the future that include all expenses, income, assets and liabilities. With a clear financial picture, it becomes easier to determine an alimony that would be beneficial for both parties - one that would ensure that the divorcing couple will be able to thrive financially after the divorce.
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Leeward Divorce Financial Planning Can Help
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At Kimberly Surber Divorce Financial Planning, we help you gain financial empowerment during divorce and for your future.
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Here is what we offer:
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Assistance in preparing and consolidating your financial statements so you have a clear understanding of your financial life.
Help in preparation of a realistic budget to live on before and after divorce.
Help in understanding important matters such as child support and alimony so you make the best financial decisions for your future.
Proposal of alternative settlement options
If necessary, act as an expert witness of financial issues if the divorce case goes to trial
Take Control of Your Future
Divorce is stressful. My job is to make the process easier and help both you and your attorney review your options so you understand the impact of your financial decisions and how they will affect your future.
Kimberly can provide step-by-step guidance on matters related to divorce. With a wide range of experience and expertise related to divorce issues, our team will simplify the process and provide much-needed clarity in areas such as long-term tax consequences, asset, and debt analysis, dividing pension plans, continued health care coverage, stock option elections, protecting support with life insurance, and much more.
This information is not intended to be a substitute for seeking legal advice from an attorney. For legal or tax advice please seek the services of a qualified attorney and/or qualified tax professional.