Support in General and Pendente Lite

Posted on 03/14/2013 by ejacobwolf
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Support

There are two main types of support contemplated in divorce actions. One is child support, which includes both regular monthly (or other periodic) payments, and can include in addition to those regular payments use and possession of a family home or car, medical insurance for children, child care expenses, extraordinary medical expenses, and other child-care related expenses like tuition for school or camps. The calculation for child support is formulaic but there are strategic considerations that will be discussed in another post.

The second type of support is alimony which is often referred to as spousal support. Alimony are payments awarded to one spouse from the other to avoid an inequitable situation that would occur post-divorce. Alimony has many factors that a court considers but those factors more or less funnel into the two questions of whether or not one spouse needs the support; and whether or not the paying spouse can afford to pay the support requested.  A separate post will deal with alimony specifically.

Use and Possession

The law also allows for a judge to award “use and possession” of a family home and other personal property to one party regardless of how the property is titled or who owns the property. Commonly, family vehicles are subject to use and possession awards in addition to real property. Use and possession awards are only applicable when the property is used by at least one of the parties’ minor children. Therefore, the court applies the “best interest standard” in determining whether or not a use and possession award is appropriate. The court can order that one party pay all or a portion of the expenses associated with the use and possession of property, including any mortgage, tax liability, insurance, rent, etc. The limit to the award for use and possession of real or personal property is three (3) years. Similar to other types of support, the use and possession ends when the receiving party remarries.

Attorneys Fees and Suit Money

Negotiating a divorce is expensive.  Most people, especially in a contested divorce, obtain an attorney to represent them and advise them in the divorce process.  Also, to investigate your case, parties in a divorce usually have expenses like hiring an accountant to advise them on tax consequences of their divorce or for forensic needs like tracking down hidden money.  A court can award that one party pay for all or a portion of the other’s attorneys fees and other expenses related to the divorce action.  Usually the consideration to this is limited to the financial circumstances of the parties — not who is at fault for the divorce or other considerations.

Other types of support

Support awards are not limited to what the law specifically allows. Parties can contractually agree to a number of different ‘remedies’ in a divorce agreement. Some common examples include that one party will continue to pay all or a portion of the expenses for a family home for a specific period of time or until a condition occurs, one party can be contractually obligated to maintain life insurance for the benefit of the other spouse or for the parties’ children, and one party can be contractually obligated to contribute to the college tuition and expenses for the parties’ children. These types of ‘remedies’ are equitable in nature and while they are not specifically codified in the law, a judge can order them as an equitable remedy in a divorce.

 Pendente Lite

Pendente Lite (pronounced: pen-den-tey lee-tay) is a Latin phrase meaning, “pending litigation.” Upon request from one party in a divorce action, the court can award temporary relief to a party during the pendency of the divorce action. The court will consider immediate needs for the parties and their children’s wellbeing, which are not necessarily the same considerations as outlined above. While a party must wait for their divorce action to be “ripe” to file for an absolute divorce, a party may file for a ‘limited divorce’ in order to receive temporary relief, or support pendente lite. This temporary relief includes child support, use and possession of family assets, and alimony. It does not include a division of marital assets or other property.

Pendente lite hearings are also held for temporary custody and visitation arrangements. Pendente lite custody hearings may be held to determine what custody arrangement is in the best interest of the children pending the divorce litigation.

Alimony

Posted on 03/14/2013 by ejacobwolf
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Alimony in general

There are three types of alimony—two that the court can order, and one that is a compromised amount. The three types are called temporary rehabilitative alimony, permanent alimony, and the compromised amount is definite alimony. Some major factors are the length of the marriage, the incomes of the parties, the contributions both financial and otherwise of each party to the marriage, the education of the parties, whether or not the parties are ‘employable’ (how easy could they find a job or a better paying job), and the age and any disability of the parties. The court will consider all relevant factors (and there are a lot) in any alimony case.

Alimony generally automatically terminates upon one of three events: the husband dying, the wife dying, or the remarriage of the receiving spouse. The court or the parties themselves in a separation agreement can state additional terms by which the alimony will terminate, usually upon a specific date. Alimony can sometimes be modified on a showing of extenuating circumstances that come about after the divorce although in some divorce agreements the parties agree that the alimony will be ‘non-modifiable.’

From a tax perspective, alimony is treated as income. Therefore, alimony paid is deducted from the payor’s income (i.e., paid before taxes are deducted) and is included in the receiver’s income. While many individuals in a divorce may seek to avoid any alimony payments, it is important to recognize that alimony payments result in a tax savings equal to the amount of the taxes that would have been paid on the alimony amount. For example, for a high-income earner who pays $50,000 per year in alimony, if the $50,000 would be taxed at a 35% marginal tax rate, then the alimony actually ‘costs’ the payor $32,500 per year, since the IRS, State, and local taxing authority would have received the remaining $17,500 in tax revenue anyway.

Rehabilitative Alimony

Rehabilitative alimony is generally granted for a short period of time, perhaps two, three, or up to about five years. The goal of rehabilitative alimony is to provide some ‘buffer’ time for one spouse to be able to achieve self-support status. This is common for spouses who are unemployed voluntarily (e.g., stay at home mothers) or under-employed (e.g., if one spouse works part time). It is also common in cases where one spouse is in school or intends to return to school to obtain an advanced degree or certification to further their careers. In those cases, the court may order one spouse to pay alimony to support the other spouse while he or she remains in school (until their expected completion date). After a divorce, newly-single parties will have to begin life anew. When the income discrepancy is great, the court may be inclined to award some short term alimony to the spouse earning far less money as she transitions out of the marriage and begins to support herself.

Permanent or Indefinite Alimony

Permanent alimony is long term and indefinite (with the exception of death or either party or remarriage of the party receiving alimony) in the event that the party asking for alimony cannot reasonably become self-supporting because of their age, disability or illness (either physical or mental). Permanent alimony can also be awarded if the standard of living for the parties will be “unconscionably disparate.”

Definite Alimony

While the court can award ‘rehabilitative alimony’ it’s term is rarely for more than five years or so considering the circumstances. However, in some cases where one spouse might have a case for indefinite alimony, the parties might compromise on a period of alimony that is five or more years, but ends upon a certain definite time. A common example of this type of alimony is in a situation where one spouse has tremendous earning capability during his working career, but expects to retire and draw off retirement savings. At the time of retirement, it would be expected that the parties’ incomes would be reduced and, when there is a division of retirement assets, both parties will receive distributions from a pension, retirement fund, or other retirement asset so alimony payments would be unnecessary to ‘level the playing field.’

Child Support

Posted on 03/14/2013 by ejacobwolf
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Child Support

Child support is the payment by parents for the support, maintenance, and care of their minor children.  Child support is owed to the children.  However, because minor children cannot handle the funds themselves and require a parent to feed, house, and clothe them, the payments are made to the custodial parent and are earmarked for the specific use of caring for their children.  The law requires that the legal parents pay child support to their children via the custodial parent or guardian.  The legal parents are the parents listed on the birth certificate of a child, the adoptive parents, or the husband of a mother at the time of the birth (the husband is presumed to be the father).

The Maryland law uses “child support guidelines” to calculate the amount that the parents are responsible to pay for the care and maintenance of their children.  The child support guidelines use a table approved by the state legislature.  The amount is determined by calculating the total joint adjusted gross income of the parties.  (This amount is adjusted for alimony paid or received and child support paid.) Each party is assigned a percentage of their share of the joint income.  For example, if the mother earns $30,000 per year and the father earns $70,000 per year, the total joint adjusted gross income will be $100,000 with the mother being responsible for 30% and the father, 70%.

Once the joint income is calculated, the monthly income is referenced in the statutory table against the number of children.  This number is considered the basic child support obligation.  If there is ‘shared physical custody’ (each parent has at least 35% of the overnights with the children), then the basic child support amount is multiplied by 1.5.  Then, other expenses are added to the base figure, including any medical insurance premiums paid by either of the parties, extraordinary medical expenses, work-related child care expenses, miscellaneous other expenses including tuition, and cash medical support.  The aggregate of the base amount plus these additional expenses is the ‘total child support obligation.’

In sole physical custody scenarios, the total child support is multiplied by the percentage of the gross income that each parent is responsible for.  Then, credit is given for “direct payment” of each parent (for example, if the children are on the father’s health insurance, he is given a credit for the premiums that he pays for the children’s benefit).  Then, the direct child support obligation is arrived at by determining the base amount less any direct-pay credits.

In a shared custody situation, the calculation is similar except the total child support obligation is also multiplied by the percentage of overnights that each parent has the children in a given year before it is multiplied by the percent that each parent earns in income.  Also, expenses are paid by percent of income.  So, if the mother pays 100% of the daycare but has 35% of the joint income, she would be responsible for 35% of the day care costs and the husband would be responsible to reimburse the mother for 65% of the day care costs in addition to his share of the basic child support obligation.

There are several ‘online calculators’ that offer child support calculations.  However, the amounts are updated often, and underwent a significant overhaul in 2010.  Many of the online calculators are incorrect.  There are also multiple variables to determine what the correct amount of support should be.

Common areas of dispute include the parents’ income (e.g., if one parent is self employed or is paid on commissions) and what constitute expenses to be included in the calculation.  The law only provides for joint incomes of up to $15,000 per month–after that the support amount is in the judge’s discretion–so for families with high income earners, there can be disagreement about how much child support is appropriate.  As with any consideration dealing with children, the court will consider what is in the children’s best interests.