Options for Long-Term Spousal Support in California
So here you are, trying to figure out whether long-term spousal support will be ordered and how much it will be. You've already been told you can't use a guideline support calculator, and a multi-factor maze stands between you and the resolution of your outstanding support issues. But even after those factors are considered, if there is no way to plug in numbers, what can you do?
Answer: You can start negotiating. Long-term spousal support (also called "post-judgment support" or "permanent support") usually lasts up to half the length of the marriage, assuming you were married less than 10 years. For marriages lasting longer than 10 years, support might continue past the five-year mark. It may extend many years past that point, in fact, depending on your case. In the area of spousal support, your judicial officer has a lot of discretion. As such, there is room for negotiation. (To learn more about the differences between long-term and temporary spousal support, please see our article on that issue.)
Long-term spousal support is on the table. Now what?
Once long-term spousal support is on the table, several considerations remain. Should you reserve over the issue and handle it down the road? Or should you terminate it? Should you make it modifiable or non-modifiable? Or, should you offer a buyout? Your decision can dramatically impact your life. Therefore, it's wise to consult a lawyer and possibly a CPA. These professionals can walk you through the long-term spousal support factors, analyze the facts, and discuss tax implications.
Options for resolving long-term spousal support
Let's look at some options for resolving long-term spousal support.
At its most basic level, "reserving jurisdiction" does what it says it's going to do. It reserves the issue so spousal support could potentially be addressed later on. Reserved jurisdiction means a party can request spousal support after divorce. This is most frequently done when the marriage was long and, although no spousal support is called for, the court does not want to terminate jurisdiction.
It also happens when neither party asked for support but the marriage was so long that the court is unwilling to terminate support in case something catastrophic were to happen. Often during a dissolution proceeding, so many things are happening – including a heavy barrage of emotions – that it's unclear whether either partner would need support. It's also unclear what kind of support they might need. As a result, neither party asks for it.
An example of reserving jurisdiction: Let's say one parent has been out of the workforce for a while. They're now in job training and receiving temporary spousal support. Reservation, in this case, can be a good option because it allows both parties to evaluate their need for support and figure out their finances after the proceedings are over.
The drawback to reserved jurisdiction for the "payee" spouse is that the longer you go without spousal support, the less likely the court will award it to you. Often, the argument is that if you lived on your own for this long, why would you need it now?
The drawback for the higher-earning spouse is the possibility of having to pay, which forever hangs over your head. You never know when you will have to pay or for how long. To avoid the court reserving status over the issue of spousal support, you may wish to "buy" a termination date. In other words, you may elect to pay your spouse cash or trade an asset in exchange for terminated spousal support.
Note: If a temporary support order is already in place and the parties do nothing to change it, it often becomes long-term support that is modifiable.
This option allows one party to offer to trade or "buy out" the other party's right to request or receive long-term spousal support. The payor may choose to offer cash, an asset, or interest in an asset. This is a good option if you have cash, real estate, or joint-stock options you could easily put in one party's name. Essentially, you are setting a monetary amount or trading half of something of value for the right to ask for spousal support. Once you agree to a buyout, one of two things happens: spousal support forever terminates, or the agreed-upon amount becomes non-modifiable and non-negotiable.
A buyout is a gamble for both parties. For example, the asset you select might lose value. Or, its value might rapidly grow beyond what you would have paid in spousal support. Another potential frustration: The payee may quickly remarry or cohabitate after receiving the buyout. As you might expect, this could aggravate the payor.
Note: The payee should understand the advantages associated with receiving support "upfront." They no longer have to worry about collecting (enforcing) a support order or losing support if the payor spouse gets laid off, becomes disabled, or dies.
If cash is used in a buyout, the issue arises of how to structure the payment and whether the agreed-upon amount would be enough for the recipient. Also, there is the issue of whether the paying party can really afford it. Additional questions also arise: Will the cash be paid over time? Will interest accrue? How will you account for potential inflation? (Once an amount is set, it is non-modifiable.) When dealing with cash, the payor's access to funds and the amount to be paid can have serious tax ramifications. If the lump sum exceeds $15,000 (and you are calling it "alimony" for tax purposes), it may be subject to complicated tax laws. Usually, spousal support is tax-deductible for the payor and treated as income for the payee. If you want to do a cash buyout, it's best to consult a tax lawyer or CPA first to avoid undesired tax consequences.
If you're thinking about an asset buyout, first consider whether you have an asset that makes sense to use. You may choose to use stock options, interest in community property, survivorship benefits in a pension plan, a valuable piece of art, a race car ... you name it. Notably, it often takes a full-on trial to measure and weigh potential long-term spousal support. Therefore, if you have a chunk of change or a valuable asset you can use as a buyout, it may benefit you to do so.
A buyout allows parties to "buy" from each other what they think their long-term support obligation is worth in the end.
Modifiable long-term spousal support
This is another option that sounds like what it is. It is long-term support that starts at a set amount but can be changed later if circumstances change. It usually goes one of two ways:
- A temporary support amount is in place, and it has no termination date. Thus, it keeps being paid after the judgment is final.
- The parties agree to an ongoing set amount with a changeable end date. The "change" depends on the needs of the individuals.
With the second option, if either party can prove a change of circumstances, they can ask to change the support being paid. This could stem from the most basic of circumstances, such as the payor making less money or the payee party making more money. The circumstances could also be more complex, such as the permanent disability of one party with a large personal injury payout. It runs the gamut.
Pros and cons of modifiable support
The upside to this option is that it allows for things to change and support to still be available if the worst happens For example, if you were to get hit by a bus and need around-the-clock medical care for the rest of your life, support is still on the table. The downside is that, because the support is modifiable, it's not guaranteed. Post-judgment, you would need a significant change of circumstances. But in terms of spousal support, this can be read pretty broadly, depending on your judicial officer. The most obvious trigger is one party losing their job or getting a higher-paying job.
Temporary modifiable support
The court may decide to set modifiable support for a certain period. After that period, support terminates. This is not as common as modifiable support for an indefinite period, but the courts look to the length of the marriage. In some cases, they may deem it the appropriate way to address long-term support.
Non-modifiable long-term support
This option also sounds like what it is. In some instances, the parties can agree to – or the judge can order – non-modifiable support. However, the wording on the non-modifiable support must be carefully crafted. Why? The general practice is to construe long-term support as modifiable. To put non-modifiable support in place, it must be made subject to the parties' written agreement or an in-court oral agreement. This form of support is reviewed based on contract provisions. In other words, we look at what each party receives to see if it is fair for both parties.
Non-modifiable support often arises because one party has a lot more wealth or because the amount is so small that one party should always be able to pay it. For follow-through, many people set up an annuity to make sure payments are made. Parties who opt for non-modifiable support are usually advised to set up an annuity or another means of making sure payments are made no matter what happens to the payor. (For example, let's say the payor is a professional athlete who suffers a debilitating injury and can no longer make the non-modifiable payments.)
Pros and cons of non-modifiable support
The greatest benefit of non-modifiable support is also its detriment. For example, if the paying party is on the cusp of making a lot more money, locking in a low non-modifiable amount could benefit them. However, if the same person finds themselves permanently disabled and unable to afford what seemed like a modest amount at the time, it is still non-modifiable (if drafted properly). This method of apportioning support is risky and necessitates the advice of a lawyer.
In some ways, this is the most obvious and popular option for dealing with long-term support. It terminates both parties' right to ask for it forever, no matter what happens. If both parties are employed, earning about the same amount, and are relatively healthy, they often elect to terminate the right to support.
Sometimes, given the duration of the marriage, the judicial officer will refuse to terminate and will instead reserve it. In that case, payment will be set to zero pending a significant change in circumstances. If both parties have a lawyer, the judicial officer is more likely to allow them to terminate the right to ever ask for spousal support because they should have been advised of all of their rights and, thus, understand what they are giving up. If it is possible to terminate support, parties tend to like this option. Why? Because they know that they will never have to pay their spouse. Given how difficult divorce can be, the certainty of this solution is often welcomed by both parties. They will never have to support their ex-spouse, even if they do get hit by a bus. It also means that if either party tries to ask for support later, they would likely fail – unless the circumstances were suspect or the parties were ill-informed.
You've got choices
There are lots of ways to deal with long-term spousal support. One way is not necessarily better than another. The utility of each depends on the circumstances and individual goals. The parties need to consider what their various resources and needs are. They also need to consider whether they are willing to lock in a decision that cannot be changed later. So much must be weighed and decided, in fact, that the issue may go to trial before a judicial officer for help with the final outcome. There is much to consider when it comes to long-term spousal support after divorce. It's worth talking to a legal coach about your options and how each option would impact your life.