The Buck Stops Here: Options for Long-Term Spousal Support

So here you are, trying to figure out whether long-term spousal support is going to be ordered and how much it would be. You have already been told that you can’t use a guideline support calculator and there is a multi-factor maze you have to wander through before the outstanding issues regarding support are resolved. But even after those factors are considered, if there is no way to plug in numbers, what can you do? You can start negotiating!

In terms of the differences between long-term and temporary spousal support please see our article on that issue. In a nutshell, long-term spousal support (also referred to as ‘post judgment’ support or ‘permanent’ support) usually lasts for up to half the length of the marriage (assuming your marriage is less than 10 years). If you were married for 10 years or more, support may (but not always) continue past the five-year mark and even extend for many years past that point (depending on the facts of your case). In the area of spousal support, the judicial officer on your case has a lot of discretion because it is such a case-by-case analysis. As such, you have a lot of room for negotiation.

Once it has been determined that long-term spousal support is available, there are several things to consider: Should you reserve over the issue and handle it down the road? Should you terminate it, such that one or both parties do not have the option to request it from the other? Should you make it modifiable or non-modifiable? Should you offer a buyout? Because spousal support can have such a long-lasting impact based on which of these options you chose, it is always a good idea to consult with an lawyer (and possibly a CPA) who can help you decide how to proceed (i.e. walk you through the long-term spousal support factors, analyze the specific facts of your case, and discuss possible tax implications).

Let’s take a closer look at some of the options for resolving long term spousal support:

Reserving Jurisdiction

At its most basic level, this does what it says it is going to do. It reserves the issue so that spousal support can be addressed at a later date if need be. Reserved jurisdiction means that the parties can come back after the divorce and request spousal support. This is most frequently done when it was a long marriage and the court does not want to terminate jurisdiction, but under the current circumstances, no spousal support is called for.

It also comes up when neither party has asked for spousal support during the proceedings, but the marriage was of such a long duration that the court is unwilling to terminate support in case something catastrophic happens to either party and support is needed later.

Oftentimes during a dissolution proceeding, so many things are happening that it’s unclear whether either partner is going to need support or what kind of support they will need, so neither party asks for it. (Also because it has a heavily emotional component, and sometimes it is not strategically smart to open that door and start that war). If one parent has been out of the workforce for a while but is in job training and receiving temporary spousal support for a period of time, then reservation can be a good option. It allows for both parties to evaluate if they need spousal support and figure out their finances after the proceedings are over.

The drawback with reserved jurisdiction for the ‘payee’ spouse, is that the longer you go without spousal support, the less likely it becomes that the court is going to award it to you. The argument is often that, if you have lived on your own for a long enough time without the support, then why would you need it now? The drawback with reserved jurisdiction for the higher earning spouse is that it hangs over you –- you never know when you will have to pay and for how long. To avoid having the court reserve status over the issue of spousal support, you may wish to ‘buy’ a termination date –- in other words, pay your spouse additional cash and/or trade an asset to induce him or her to terminate spousal support.

Note: If there is already a temporary support order in place and the parties do not do anything to change it, it often becomes long-term support, but is modifiable.

A Buyout

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’ spouse can offer: 1) cash; 2) an asset; or 3) an interest in an asset. This is a good option if you have cash, a piece of real estate, or stock options that you own jointly and can easily put into one party’s name. Essentially, you are a setting a monetary amount or trading half of something of value for the right to ask for spousal support. Once you have agreed to a buyout, either spousal support is terminated and cannot be asked for again or the amount agreed upon is non-modifiable and cannot be negotiated later.

This is a gamble for both parties, whether you elect to go with a buyout or not. Sometimes the asset you selected loses value and it isn’t worth as much as you thought it would be. Or you use an asset as a buyout that rapidly increases its value beyond what would have reasonably been ordered as spousal support. Sometimes the payee spouse quickly remarries or co-habitates after receiving the buyout, which can be frustrating for the payor spouse. The payee spouse should be aware that there are advantages associated with receiving support ‘up front.’ S/he no longer has to worry about collecting (enforcing) a support order or losing support if the payor spouse gets laid off, becomes disabled or dies. If you elect to use cash, then there is the issue of how to structure the payment and whether the amount agreed upon will be enough for the party receiving support and whether the paying party can really afford it. Also, whether it will be paid out over time, whether interest will accrue and how to account for potential inflation because once an amount is set, it is non-modifiable.

When you are using cash, it also depends on the paying party’s access to funds and the amount you are paying because there can be serious tax ramifications. If the lump sum amount exceeds $15,000 (and you are calling it taxable ‘alimony’ for purposes of taxes), it may be subject to complicated tax laws. Usually, spousal support is tax deductible from the paying party and treated like income for the party receiving it. If you want to opt for a cash buyout, it’s best to consult a tax lawyer or CPA first in order to ensure that you will not have undesired tax consequences.

When you are using an asset, it really depends on whether or not you have an asset that makes sense to use for the buyout. Often these things are stock options, interest in a community piece of property, survivorship benefits in a pension plan, a valuable piece of art, a race car… you name it! It was your marriage or partnership; what has value or doesn’t have value is between the two of you.

Because it often takes a full-on trial to measure and weigh potential long-term spousal support, if you have a chunk of change or a valuable asset that you can use as a buyout it’s often a good idea. It allows the 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 the parties’ circumstances change. It usually comes about in two ways: 1) there is a temporary support amount in place but it does not have a termination date, so it keeps being paid after the judgment is final; or 2) the parties agree to an ongoing set amount, which can have an end date, but can still be changed if the needs of one or the other party change.

With this option, if either party can show a change of circumstances, they can come back and ask to change the support being paid. If the parties agree, the judge orders, or a temporary support amount is in place but does not have a termination date, this often becomes modifiable long-term spousal support. The key here is that if either party can show a change of circumstances they can modify the amount of spousal support. This can be from the most basic change of circumstances — such as the paying party making less money or the receiving party making more money — to the very complicated — such as the permanent disability of one party with a large personal injury payout. It runs the gamut. The upside of this option is it allows for things to change and support to still be available in case the worst happens, i.e., if you get hit by a bus and need around-the-clock medical care for the rest of your life.

The downside to this option is that because it is modifiable, it is not guaranteed. Post-judgment you will 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 paid job.

The court may also set that there is a modifiable amount of support for a certain period of time, but after that period, support shall terminate. This is not as common as modifiable support for an indefinite period, but the courts look to the length of the marriage and in some cases this may be the appropriate way to address long-term support. More often, there is a modifiable support for a certain period at which times it remains reserved if the duration of the marriage or the circumstances call for it.

Non-Modifiable Long Term Support

This option also sounds like what it is. In some instances the parties can agree or the Judge can order non-modifiable support. However, the wording on the non-modifiable support must be done very carefully as the general policy is to construe long-term support as modifiable. In order 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, meaning we look at what each party receives to see whether it was a fair agreement between both parties.

Non-modifiable support often arises because of the wealth of one party compared to their spouse, or when the amount is set at such a small amount that one party should always be able to pay it. One of the ways to follow through on this is to set up an annuity to ensure the payments will always be made. When there is a large wealth discrepancy and the standard of living during marriage was very high, this can be a practical solution. However, because if drafted correctly it cannot be undone, parties who opt for non-modifiable support are usually advised to set up an annuity or another means of ensuring that the payments are made no matter what happens to the paying party, e.g., if one party is a professional athlete who suffers a debilitating injury and can no longer make the non-modifiable payments.

The greatest benefit of non-modifiable support is also its detriment. If the paying party is on the cusp of making a lot more money (and thus there would be more available for support at the standard of living during marriage), locking in a low non-modifiable amount can benefit them. However if the same person then finds themselves permanently disabled and unable to afford what seemed like a modest amount when it was put in place, it is still non-modifiable if it was drafted properly. This method of apportioning support is the most risky and should only be entered into with the advice of a lawyer.

Terminating Support

In some ways this is the most obvious and most popular option for dealing with long-term support. It terminates either party’s right to ask for it forever, no matter what happens. In cases where both parties are employed, make around the same amount of money, and are relatively healthy, the parties often elect to terminate the right to support.

Sometimes, given the duration of the marriage, the judicial officer will refuse to terminate will instead reserve it, and make a determination that it is set to zero pending a significant change in circumstances (and then if you are lucky, outline those circumstances) to make it really difficult to get. If both parties have an 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 like this option because they know that they will never have to pay their spouse. Given how difficult divorces can be, the certainty of this solution often makes both parties feel better. They will never have to support their ex-spouse/partner even if they do get hit by a bus. It also means that if either party does later want to ask for support it will be very difficult and they will be unlikely to succeed, unless the circumstances or the termination were suspect or the parties were not well informed.

There are lots of ways to deal with long-term spousal support, and no one is necessarily better than any other. The utility of each depends on the circumstances of the parties involved and what their ultimate goals are. The parties need to consider what their various resources and needs are, as well as whether they are willing to lock in a decision that they cannot change later. So much has to be weighed to determine the amount and duration of support that if the parties cannot agree, it often goes to trial to give the judicial officer the opportunity to weigh it all. There is so much to consider that talking to a legal coach about your options and how they will affect your life is always advised.

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