how does spousal support work in divorce

How Are Spousal Support Payments Calculated In California?

Goldberg Jones Divorce & Finances, Spousal Support/Alimony Leave a Comment

Ending a marriage doesn’t come cheap and divorce comes with a laundry list of expenses. You have to pay court costs, charges for filing paperwork and responding to motions, and likely attorney’s fees.

Afterward, you may have to shell out to set up a new home base, changes in your filing status impact your tax situation, and if there are kids, you may wind up on the hook for child support.

And in some cases, the court may also order you to pay spousal support.

What Is Spousal Support?

Spousal support is court-ordered payments designed to ease the financial hardship of dependent spouses following divorce. Many people refer to it as alimony.

It usually factors into a divorce agreement when there’s a substantial gap between the earnings of spouses or in cases of financial need.

How Does Spousal Support Work In California?

A number of things go into determining spousal support. In some cases, payments are temporary. These are usually intended to help one party get back on their feet.

Under other circumstances, however, spousal support payments continue indefinitely.

When Spousal Support May Be Ordered

California is a community property state, which means they view all assets earned or acquired during the course of the marriage as belonging equally to both spouses.

Once you deal with the division of debts and property, then spousal support may come into play. This is most common when one spouse has additional needs, or there’s an imbalance in the settlement. If spousal support factors into your settlement, it will likely be one of your biggest post-divorce expenditures.

If each spouse can maintain a lifestyle similar to during the marriage, spousal support may not come up at all.

The general idea is for each party to depart on a relatively equal footing. When a substantial gap in earning potential exists, health issues impact employment, or other factors arise, it may.

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Types Of Spousal Support In California

The specifics of spousal support vary greatly from one state to the next. Most states have multiple forms, and California is no different. Two kinds of spousal support exist in the Golden State. Depending on the circumstances, the court may award temporary or permanent support.

Temporary (Short Term) Support

As the name implies, temporary spousal support provides financial support for a limited duration. The “temporary” designation comes into play as these payments are designed to ensure stability to the lower-earning spouse during the divorce process.

Once the marriage is dissolved and permanent spousal support is either awarded or unnecessary, these payments stop.

Permanent (Long Term) Support

While temporary payments sustain one spouse during a divorce, permanent spousal support does the same on a long-term basis after the marriage officially ends.

The “permanent” label is something of a misnomer. Such awards rarely continue indefinitely. How long depends on a number of factors, like the level of need, the length of the marriage, and more.

If your marriage lasted longer than 10 years, things become more permanent. The court must order indefinite support until one party dies, one party marries, or the court rules otherwise. Only by reaching an out-of-court settlement can you avoid this.

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How Are Payments Calculated?

As the goal is for each party to maintain the lifestyle they had during the marriage, that’s the general target. One of the big components, earning potential plays a substantial role in determining spousal support.

The court considers:

  • the length of the marriage,
  • education,
  • job skills,
  • the earning potential of both spouses,
  • age,
  • health concerns,
  • the standard of living while married,
  • child-care responsibilities,
  • level of need,
  • ability to pay and other factors laid out in Family Code §4320.

Other scenarios may also figure into the decision. For example, if one party worked full time to put the other through school.  Though called permanent support, that’s rarely the case. And when it does continue indefinitely, it’s usually because of disability and inability to work.

Regardless of how long a marriage lasted, California courts require parties seeking spousal support to show good-faith efforts to become self-sufficient. If you can’t become self-sufficient, you have to provide evidence to justify these claims.

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Can You Modify Spousal Support?

Just because the court orders spousal support, and just because the name says permanent, doesn’t mean you can’t alter or end the payments. Either spouse can request modification or termination due to changes in financial standing, like the loss of a job.

If the recipient remarries, support should end. Payments also end if one party dies. No one can compel you to continue payments to the estate of the deceased, nor can you collect payments from the deceased’s family.

Modifications to the original agreement can happen if two spouses can agree on the terms. Both sides still must enter into a written contract that explicitly states the new details, and a judge must sign off to make it official.

If you can’t reach an agreement, going to court may become necessary. The party who wants to modify the arrangement must file a motion to show that his or her financial circumstances have significantly changed since the original order.

The court, of course, requires evidence to back up these claims and will issue a ruling based on what it sees.

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Spousal Support and Taxes

At the end of 2017, The Tax Cuts and Jobs Act was signed into law and was the largest overhaul of the tax code in three decades. As far as spousal support is concerned, the tax plan abolished a deduction on alimony that’s been in place for more than 70 years.

That means that on court orders after December 31, 2018, the spouse who pays spousal support is no longer able to deduct that amount. At the same time, the spouse who receives payments no longer has to pay taxes on that money. Before, the positions were switched.

This was a huge deduction for the payer, since it’s an “above the line” deduction as opposed to an itemized deduction.

It also means the recipient does not have to claim the payments as income and pay taxes on that amount.

The previous deduction often saved the payer a significant amount and left more money to divide between spouses. The loss of the deduction may be washed away by the reduction in the gross amount.

The tax code changes also impact those looking to modify spousal support. After 2019, any changes fall under the same laws. It may have a dramatic chilling effect for those who have an argument for reduction.

Arguments For The Change

Despite appearances, there are potential benefits to this provision. The House Ways and Means Committee calls the deduction a “divorce subsidy.” They note, “A divorced couple can often achieve a better tax result for payments between them than a married couple can.

Others take the stance that the government should treat spousal support like child support. Those payments aren’t tax-deductible for the paying spouse or taxable for the spouse on the receiving end. The new tax plan essentially aligns the two.

The Joint Committee on Taxation, a congressional committee that investigates and reports on tax matters, sees another possible upside. Their findings estimate that abolishing this deduction will result in $6.9 billion in new tax revenue over the first ten years.

Arguments Against The Change

There are, of course, people critical of the new tax plan. Those who oppose the measure claim that the higher-earner will wind up paying less while the recipient receives less.

Essentially, the fear is that the person who needs it most will wind up getting less money and support.

The present setup allows for larger payments with lower costs after taxes. One side gets a lighter tax obligation, while the other receives larger payments than they might otherwise.

This could make it more difficult to make ends meet and for recipients to support themselves. Some see that as defeating the purpose of spousal support in the first place.

Spousal support forms just one piece of the larger divorce puzzle, but it’s still an important one to consider. How it all shakes out in a particular case depends on the specific couples and their unique finances.

Many factors go into determining whether or not a spouse qualifies for support payments. Regardless of how long a marriage lasted, if a spouse is awarded either temporary or permanent payments, California courts require parties seeking spousal support to show good-faith efforts to become self-sufficient.

If you can’t become self-sufficient, you have to provide evidence to justify these claims.

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