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May 01, 2023 Feature

Alimony and Maintenance Considerations in Prenuptial Agreements

David N. Hofstein and Ellen Goldberg Weiner

The sad fact regarding prenuptial agreements is that at the same time the happy couple is planning their nuptial celebration, they are also planning their exit strategy. One exit strategy may include the payment of support or maintenance during their separation prior to the dissolution of their marriage and another may be the payment of post-divorce alimony. For purposes of this article, the term “support” is being used for all pre-dissolution support payments, including, but not limited to, maintenance, alimony pendente lite, and pre-dissolution support. Both are strategies to consider in drafting prenuptial agreements, particularly where there is a significant income disparity and/or where it is anticipated that there will not be substantial joint property assets to distribute between the parties if the marriage should fail. This article addresses some of the features that drafters might consider regarding support and alimony as they negotiate and draft prenuptial agreements.

Where You Are Matters

Prenuptial agreements are often about predicting the future. It is, however, difficult, if not impossible, to predict prior to a marriage where the parties will reside at the time of their separation or divorce, which potentially may be many years later. While parties generally include choice of law provisions in their prenuptial agreements, those provisions may be challenged or may not govern if the courts of the state where the parties ultimately reside conclude that the terms violate the public policy of that state. The Uniform Premarital and Marital Agreements Act, § 4. Therefore, attorneys handling prenuptial matters should counsel their clients about the possibility that the courts of a different state might ultimately be the ones to interpret their agreement rather than those of the state in which they married. A strong suggestion, in writing, can be made for the parties to consult with their prenuptial counsel if they relocate during their marriage to ensure that the agreement will not run afoul of the public policy of the state where they ultimately reside.

Some of the differences between states that drafters should be aware of include whether the reasonableness of the agreement is a factor for its enforceability, whether a full waiver of all support and alimony rights are permitted, and whether the modification or termination determinants for alimony must be explicitly stated to apply.

In some states, such as Pennsylvania, the reasonableness of the prenuptial agreement is not a factor in determining its validity. Simeone v. Simeone, 525 Pa. 392, 581 A.2d 162 (1990). In other states, whether the prenuptial agreement creates a substantial hardship or can be considered unconscionable in whole or in part can be relevant to whether the agreement will be held to be enforceable. The Uniform Premarital and Marital Agreements Act; see also, DC Code § 46-506; Va. Code § 20-151 (A)(2); Cannon v. Cannon, 384 MD 537, 865 A.2d 563 (2005) (all discussing how prenuptial agreements may not be unconscionable when executed). Given this difference, the drafter may wish to consider whether including a support or alimony provision will bolster the overall reasonableness of the agreement should there be a future challenge.

What the parties are permitted to waive in their prenuptial agreement may also vary among the states. In Pennsylvania, for example, parties are permitted to fully waive support and alimony. Karkaria v. Karkaria, 405 Pa. Super. 176, 592 A.2d 64 (1991). In contrast, in certain other states, such as Florida, parties are not permitted to waive pre-dissolution support (i.e., support following separation and prior to the entry of the divorce decree) even if the prenuptial agreement provides for such waiver. See, Belcher v. Belcher, 271 So.2d 7 (Fla. 1972); Lashkajani v. Lashkajani, 911 So.2d 1154 (Fla 2004); See also, DC Code § 46-506(b).

Further, what the support or alimony provision must state regarding termination or modification may also differ depending on the jurisdiction in which the prenuptial agreement ultimately is implemented. In Pennsylvania, the basis for the modification or termination must be explicitly stated in the agreement in order for the court to have the authority to modify or terminate the support or alimony obligation. 23 Pa.C.S.A § 3105(c). Otherwise, the support or alimony provision cannot be modified by the court. In contrast, in Maryland, the court can modify any provision regarding spousal support and alimony unless there is an express waiver of alimony or spousal support in the agreement or there is a provision that specifically states that the provisions with respect to alimony or spousal support are not subject to any court modification. Maryland Family Law § 8-103(c). Obviously, these are diametrically opposed results depending on the relevant state.

Why Provide for Support or Alimony at All?

Many practitioners found support and/or alimony to be an effective tool when it could be treated as taxable income to the recipient and tax deductible to the payor. Particularly where the parties were in different tax brackets, the payment of taxable support and alimony was advantageous. For example, if the payor was in the 30 percent tax bracket and the recipient in the 20 percent tax bracket, an alimony obligation of $1,000 would cost the payor $700 while the recipient would receive $800. However, as of January 1, 2019, the Tax Cuts and Job Act of 2017 generally eliminated the tax deductibility of support and alimony. The question for prenuptial agreement drafters, then, is should we even provide for support or alimony in our agreements?

If the prenuptial agreement will provide for both parties to have sufficient property to meet their reasonable needs based upon the division of assets, then there might not be a need in the prenuptial agreement to provide for support or alimony. However, if the dependent party will not be receiving assets sufficient to meet their needs, for example, where the prenuptial agreement does not provide for the acquisition of any or much joint property, then support or alimony may remain an appropriate tool to meet the parties’ expectations—even if the payment is no longer tax deductible.

Another consideration is the psychological aspect of support and alimony. Many couples marrying for the first time may initially reject the concept of support and alimony as an outdated remnant from a paternalistic past, but if they also anticipate circumstances where a party might be absent for a lengthy period from the workforce (for example, as the primary caregiver to children or to care for an aged relative), they might find that they wish to include support and alimony provisions in their prenuptial agreement. Therefore, before the concept of support or alimony is rejected, counsel should discuss with their client whether they can foresee a situation where it might be desired.

Flexibility Is Key

Support and alimony are very flexible tools. They allow for creativity on the part of the practitioner. Some, but certainly not all, of the features to consider follow.

Fixed versus increasing amounts of support/alimony. For example, the support and/or alimony can stay at a fixed amount throughout the duration of the payment period or it can increase over time as the length of the marriage prior to the date of separation increases.

The triggering conditions upon which support or alimony are to be paid. For example, the obligation to pay support and/or alimony can begin immediately following the marriage, begin after a specified number of years, commence only after a triggering event occurs (such as the birth of a child), or begin after the first to occur of a specific number of years or a specified triggering event. A triggering condition can also be based upon the amount that the recipient is otherwise receiving as the property distribution; for example, if the dependent spouse receives at least a specified amount in joint property, they will not be entitled to support or alimony, but if they do not receive at least that amount, then they are entitled to support and/or alimony in amounts to be set forth elsewhere in the prenuptial agreement.

Whether to include a cost-of-living increase. For example, a cost-of-living increase can be based on the Consumer Price Index (CPI) and can begin immediately upon marriage or be deferred until the payment of support or alimony is triggered. The cost-of-living increase can be compounded or not compounded on an annual basis, which can make a substantial difference in the amount ultimately paid. The drafter also can impact the increase by selecting the specific components of the CPI to be used in the calculation, for example, the geographic region selected or by including the rates for “all wage earners and clerical workers” or for “all workers.” The drafter should not just import a CPI calculation from another agreement without giving thought to the components of that calculation.

Permitting modifications at all, and if so, whether to permit both upward and downward modifications. For example, a modification can be triggered based upon a specific decrease or increase in either party’s income (or a more generally worded “substantial” increase or decrease), or upon a life event such as retirement, disability, remarriage or cohabitation. Consideration also should be given to whether there should be a “step-in/step-out” approach, where alimony is tolled if the recipient remarries but the alimony resumes if the recipient should later divorce.

The basis for terminating support and/or alimony. For example, upon the recipient’s death, remarriage and/or cohabitation, but also potentially upon the recipient’s receipt of a specified income level or upon their receipt of an inheritance. While the death of the recipient will terminate support and alimony, if the payor dies, the parties could provide for alimony to continue to be paid as an obligation of the payor’s estate (usually reduced to present value and paid as a lump sum) or the alimony could be satisfied through the proceeds of life insurance.

Whether there should be a full waiver of support and/or alimony. For example, the parties may choose to waive all support and/or alimony (if permitted in the applicable jurisdiction) or may choose to have support or alimony waived only under specific conditions, such as if one party is disabled at the time of the separation.

Don’t Forget the Downside Protection

Parties capable of paying support and alimony frequently fail to consider that their economic situation might not always be as rosy. Attorneys representing parties in prenuptial agreements should recognize this and protect their clients in the event of an unexpected future economic downturn. This can be done by including as a provision in the prenuptial agreement a maximum percentage of the payor’s net income that can be paid as support or alimony. For example, a prenuptial agreement can provide for a fixed amount of annual alimony, but state that the annual alimony amount paid cannot exceed a specified percentage of the payor’s annual net income. Under such an approach, it also will be important to define the term “annual net income” as failure to do so could lead to further disputes. An example of this downside protection as well as other model language is set out below.

Model Provisions

Full Waiver (where permitted under the applicable law of the relevant jurisdiction): Spousal Support, Maintenance, Alimony Pendente Lite and Alimony, Attorneys’ Costs and Fees. Including the benefits provided for in this Agreement and acknowledging each party’s Excluded Separate Property, Spouse #1 and Spouse #2 each have, and each anticipate having in the future, sufficient property and/or income to provide for their own reasonable needs. Therefore, notwithstanding anything to the contrary in this Agreement or under the laws of the applicable jurisdiction, Spouse #1 and Spouse #2 each expressly waive, discharge and release any and all rights or claims that they may have, now or hereafter, by reason of the parties’ marriage, to alimony (whether pendente lite, term limited, rehabilitative, indefinite, permanent or otherwise), health insurance or payment of unreimbursed medical expenses and, except as provided in the next sentence, to any other such benefits resulting from the parties’ status as spouses, irrespective of any circumstance or change in circumstance between them, whether foreseeable or unforeseeable. Additionally, except as may be precluded by the public policy of the forum implementing this prenuptial agreement, the parties expressly waive, discharge and release any and all rights or claims that they individually may have, now or hereafter, by reason of the parties’ marriage to pre-dissolution support (which may include, but not be limited to, alimony pendente lite, spousal support and/or maintenance) and to attorneys’ costs and/or fees. The parties agree that the terms of this paragraph __ and the alimony waiver of each party contained therein, are not subject to any Court modification at any time for any reason.

Fixed-Level Support and/or Alimony Obligation. In recognition of the criteria set forth in applicable statute, and subject to the provisions of Paragraph {}of this Agreement, commencing on {} and for a period of {} () months thereafter, Independent Party shall pay to Dependent Party as support/alimony for their support and maintenance the sum of {}Dollars ($) in cash per month, payable on the first business day of each month (“monthly payment”) OR [payable on [date]. Such payments shall be made [through the relevant office of {} County] OR [directly to Dependent Party].

→ Download "Increasing Alimony Schedule"

Cost of Living Increase

The monthly amount, payable commencing on January 1, {} and payable each month thereafter, shall be adjusted upwards [or downwards] as follows: as of January of each calendar year beginning with January, {} (the “payment year”), the monthly amount shall be adjusted to an amount computed by multiplying the monthly amount payable during the month of October immediately preceding the beginning of the payment year by a fraction, the numerator of which shall be the Consumer Price Index for all wage earners and clerical workers [or all workers] in the {} metropolitan area closest to Dependent Party’s residence] [excluding shelter], published by the Bureau of Labor Statistics of the United States Department of Labor (covering all items excluding shelter with 1982-1984 equals 100) (the “Price Index”) for the preceding October, and the denominator of which shall be the same Price Index for the second preceding October (the “Base Index”). If such Price Index shall at any time be succeeded or replaced by another index, the same provisions of such Price Index nevertheless shall continue to govern, namely covering all items [excluding shelter] and 1982-1984 equals 100. [In no circumstances, however, shall the alimony be decreased below {} Dollars ($) per month except as set forth in subparagraph {}( ) below.] Then provide an example of the calculation using the current Price Index and alimony/support amount.

Termination

The support/alimony payments provided for in this Paragraph {} shall terminate upon the first to occur of: (i) Dependent party’s remarriage; (ii) Independent party’s death; or (iii) Dependent party’s death, and in the case of alimony payments terminating upon Dependent party’s death, there is no liability to make any payments as a substitute for such alimony payments. In addition, the alimony payments provided for in this Agreement shall terminate upon Dependent Party’s cohabitation as defined in the applicable statute [or continuously for a period of {}() days in any calendar year] [OR for a period of in excess of ninety (90) days whether consecutive or non-consecutive in any calendar year] [OR with an individual in a spousal type relationship for a period of in excess of {}() months in any calendar year]. The term “cohabitation” as used in this Agreement involves a sexual relationship and does not include a tenant. [Notwithstanding the foregoing, if Dependent Party ceases to cohabit for a period of in excess of {} () consecutive months, the support/alimony payments provided for in this Paragraph {} shall resume, to be terminated upon the occurrence of any of the events specified in this Paragraph {}.]

Adjustments to Alimony

Waiver of Modification of Alimony. Each party acknowledges that the current rate of inflation may change, that the other party’s income and assets (including from inheritance) may substantially change in value, that their health and employment status may change in the future, and that, notwithstanding these or other economic circumstances which may be changes in circumstances of a substantial and continuing nature, the alimony payments provided for in this Agreement are fair, just and reasonable. Therefore, [except for the payments made pursuant to this Paragraph {},] and notwithstanding anything to the contrary contained in the applicable statute, or otherwise: (i) each party does hereby expressly waive, discharge and release any and all rights and claims which he or she may have now or hereafter by reason of the parties’ marriage to alimony, alimony pendente lite, support and/or maintenance or any other benefits resulting from the parties’ status as spouses; and (ii) the provisions of this Paragraph {} shall not be modifiable and neither party shall seek such a modification, it being specifically agreed that the payments provided for in this Paragraph {} represent a final determination of either party’s obligation to contribute to the other party’s support and/or maintenance]. In the event that either party nevertheless seeks such a modification, such action shall be a breach of this Agreement and the party seeking the modification shall exonerate and indemnify the other party against and hold the other party harmless from any loss resulting from such action, including for reasonable counsel fees.

Modification of Alimony Pursuant to Applicable Law. Independent Party’s alimony payments due to Dependent Party pursuant to Paragraph {} of this Agreement, shall be modifiable pursuant to Section {} of the applicable statute.

Modification of Alimony Due to Decrease in Payor’s Income. In the event that there is a change in Independent Party’s income and earning capacity resulting in a gross annual income to Independent Party of less than {} Dollars ($) per year due to circumstances that are involuntary and beyond Independent Party’s control, Independent Party shall immediately notify Dependent Party in writing of the situation and provide appropriate proof in writing. Dependent Party shall then at, Independent Party’s expense, be permitted by Independent Party to review such records as are reasonably necessary to verify Independent Party’s reduction in income. Once Independent Party’s income is determined, the alimony shall be adjusted by a fraction, the numerator of which is the adjusted income and the denominator of which is Independent Party’s income upon which alimony initially was based (which was {} Dollars ($) per year). For the purposes of this adjustment only, income shall include a reasonable rate of return on non-income producing assets, exclusive of Independent Party’s principal residence.

Downside Protection. Notwithstanding the provisions of this Paragraph {}, Independent Party’s alimony payments due to Dependent Party pursuant to Paragraph {} of this Agreement in any calendar year shall never exceed {} percent (%) of Independent Party’s annual net income [except that, in no event shall the amount of alimony in any calendar year be less than {} Dollars ($)]. [If, pursuant to the provisions of this subparagraph {}, Independent Party shall at any time pay to Dependent Party less alimony than is otherwise provided for under subparagraphs {} through {} of this Agreement, Independent Party shall be obligated to make up the ensuing deficiency beginning at such time as the alimony payments required under this Agreement again constitute less than {} percent of Independent Party’s net annual income. Independent Party shall thereafter make alimony payments equal to the greater of the amount provided for under subparagraph {} of this Agreement or {} percent of Independent Party’s net annual income during each such year until the deficiency has been eliminated.

This subparagraph shall not be applicable until Independent Party provides Dependent Party with at least {} () days written notice. In the event of such notice, Independent Party shall make available to Dependent Party all documents relevant to Independent Party’s income and/or expenses, including bank and stock account records, credit card statements and financial reports. Furthermore, in the event of such notice, Independent Party shall make all their assets except for their principal residence income producing as soon as is reasonable under the circumstances.

For purposes of this Agreement, the term “annual net income” for any year shall mean Independent Party’s annual earned and unearned income from any source, whether taxable or not taxable [OR (i) the sum of the: wages, salary, interest income, dividends, net capital gains, distributions of cash from retirement plans, individual retirement accounts, estates, trusts or partnerships, disability payments, annuity payments, Social Security benefits and tax-exempt income actually received by Independent Party in that calendar year; [and a reasonable interest rate applicable to non-income producing assets except for Independent Party’s principal residence] reduced by (ii) the sum of: net capital losses, interest, contributions, and other cash expenses or expenditures paid to maintain or carry business assets, investment or other income producing property, [mandatory contributions to retirement plans and individual retirement accounts,] and federal, state and local income, self-employment and personal property taxes incurred and due by Independent Party for that calendar year. “Net capital gains” and “net capital losses” shall mean the amount of money actually received by Independent Party from the sale of business or investment property reduced by the total amount of money paid by Independent Party to acquire and carry such property prior to its sale, to the extent it has not been considered in calculating Independent Party’s income in seeking a reduction under this Paragraph {}.]

Within {} days subsequent to the end of each calendar year, commencing {}, Independent Party shall submit to Dependent Party, or in the event of Independent Party’s death during such year, to Independent Party’s estate’s representative, a statement prepared by a recognized certified public accountant showing the additional amount, if any, that Independent Party, or their estate in the event of their death, must pay to Dependent Party to yield to Dependent Party the net amounts set forth in this subparagraph {} for the prior year, including any amounts paid pursuant to this subparagraph {}. Payment of such amount with respect to the prior year shall be made by Independent Party, or their Estate’s representative, to Dependent Party on or before April 1 of the succeeding year and subsequent monthly payments, if any, shall be increased accordingly.

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David N. Hofstein

Hofstein Weiner & Meyer, P.C.

David N. Hofstein is the founding shareholder of Hofstein Weiner & Meyer, P.C., in Philadelphia. He began his practice in domestic relations contemporaneously with the adoption of the Pennsylvania Divorce Code in 1980 and focuses his practice on complex divorce and custody matters.

Ellen Goldberg Weiner

Hofstein Weiner & Meyer, P.C.

Ellen Goldberg Weiner is a shareholder of Hofstein Weiner & Meyer, P.C., in Philadelphia and has practiced with the firm since its inception. Experienced in all aspects of family law, Ellen particularly focuses her practice on appellate matters and prenuptial agreements.