"After a downgrade in living standards and changing many aspects of one’s life after a divorce, men can find themselves feeling like they are paying too much in alimony."
In pursuit of maintaining the same level of living that you were accustomed to while you were married, many divorced spouses seek an arm and a leg in alimony, in an effort to regain their financial footing, at the expense of their ex-spouse.
Whether you are a man or a woman, the financial breadwinner from the marriage can find themselves with a crippling sense of loss, and the financial setbacks that divorce and alimony can create only set their recovery back even further.
Assumptions and assessments
The assumption of the man often being the more financially well-off spouse also comes with the assumption that they can easily recover from the losses suffered during the division of assets in a divorce, and that is simply not always the case. While many men may find themselves comfortable enough to lose many of their valued assets, there are equally as many who would say that their divorce has shaken their confidence in regaining financial wealth.
It is not necessarily the notion that the ex-husband wishes the ex-wife to have nothing. It has more to do with the fact that during a divorce, there is an endless amount of uncertainty in one’s future. With finances up in the air, it can feel like the only thing that you can control is what you fight for, and when it comes to money, trust is easily lost when you know that to some extent, you are going to lose.
That is why after the decision is reached in who gets what in terms of assets and alimony, one can find themselves evaluating what they have. They often compare it to their earning potential within a calendar year, taking out money for taxes and comparing the numbers before and after alimony is factored into the equation.
After a downgrade in living standards and changing many aspects of one’s life after a divorce, men can find themselves feeling like they are paying too much in alimony. They may look at their ex-wife’s standard of living, where they are living, what they are driving, and what their earning potential may be, given their career and education level and wish to reassess how much they are paying in alimony.
Change in circumstances
With how difficult it can be to truly assess what individuals without children are owed in alimony, judges are often allocated latitude in figuring out alimony amounts and the duration of payments. Many states have a list of guidelines that go into the alimony decision, including each spouse’s income potential, length of the marriage, role in the marriage, education and how each spouse has benefited from it, and standard of living.
Modification of the payment requires proving that there has been a significant change in your circumstances. The language of the divorce decree may make it easier, as well. If the divorce decree is designed to allow for a reduction if specified reasons are employed, a judge is more likely to rule in favor of the reduction.
The specific reasons in many divorce decrees that would warrant an alimony reduction include the recipient spouse cohabiting or remarrying, a significant increase in the recipient spouse’s income, and involuntary job loss, among others.
The language in a divorce decree can earn flexibility beyond the reasons why the decree would warrant an alimony reduction Including how long payments are to be made, how the support figure is calculated, what factors will end payments, methods for exchanging financial information each year, what, if anything, is to happen for the payee to become self-supporting, what happens upon retirement, identifying whether payments are modifiable, and methods for exchanging the exact number that each person is claiming on taxes can be beneficial ways to get your alimony payments modified down the line.
Alimony and taxes
Many are motivated to keep the alimony payments where they are, due to the repercussions on their taxes. Taxes and how they interact with the payment system create the need to define what is and is not alimony. A payment can only be defined as alimony if the payer and the recipient spouse do not file a joint return with each other, the payments are required by a divorce or separation instrument, and the payment is in cash, checks, or money orders, according to the IRS.
Unlike other types of payment, like child support, alimony is tax deductible by the payor and must be reported as income by the recipient. It also is considered an above-the-line deduction, so it can be subtracted from your gross income before you reach your adjusted gross income.
For taxes, it also is important to understand the three-year recapture rule, which has the ability to require you to claim all of your previous deductions within that period. It also implies that the payee is entitled to reduce the reported income from the alimony payments previously received. This rule is applicable when the payments decrease or terminate during the first three post-divorce calendar years, and the total payments made in the third year decrease by $15,000 or more from the payments made in the second year, or the payments made in the second year and third years are substantially less than the payments made in the first year.
This means that modifications of the decree, failures to make alimony payments on the given schedule, an inability to make payments, and a modification in the amount that is paid because the ex-spouse no longer needs as much from the payor may cause the reduction in the reported income from the alimony payments previously received.
The task of having to learn the implications to one’s taxes may turn one off in pursuing a modification in alimony payments, but given that the alternative is living a lower standard of life and not having the money to sustain and manage one’s day-to-day, it’s better to study up on tax regulations than to allow an ex-spouse to remain in control of your finances.
Dan Pearce is an Online Editor for Lexicon, focusing on subjects related to the legal services of customers, Cordell & Cordell and Cordell Planning Partners. He has written countless pieces on MensDivorce.com, detailing the plight of men and fathers going through the divorce experience, as well as the issues seniors and their families experience throughout the estate planning journey on ElderCareLaw.com. Mr. Pearce has managed websites and helped create content, such as the Men’s Divorce Newsletter and the YouTube series, “Men’s Divorce Countdown.” He also has been a contributor on both the Men’s Divorce Podcast and ElderTalk with TuckerAllen.
Mr. Pearce assisted in fostering a Cordell Planning Partners practice area specific for Veterans, as they deal with the intricacies of their benefits while planning for the future. He also helped create the Cordell Planning Partners Resource Guide and the Cordell Planning Partners Guide to Alternative Residence Options, specific for seniors with questions regarding their needs and living arrangements.