Volume 20, Number 6
DOMESTIC RELATIONS LAW
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ALIMONY DRAFTING TIPS
By Linda J. Ravdin
Linda J. Ravdin is a shareholder in Pasternak and Fidis, PC, in Bethesda, Maryland.
Judges deciding alimony cases are limited by authority granted under state law. By contrast, negotiating parties may fashion terms to meet the particular needs of their situation. Award amounts are not bound by statutory limits. For example, many state laws do not permit a court to order a spouse to maintain life insurance or to make a lump sum award. Parties may negotiate with a larger arsenal of options and thus find acceptable solutions that otherwise might have eluded them.
One common question is whether the dependent spouse should make immediate plans to return to work, assuming that is an option, or remain unemployed to enhance an alimony claim. For most dependent spouses, becoming as self-supporting as possible is the better option. A dependent spouse will likely get more long-term benefit from reentering the job market and using support money for retraining or an advanced degree, if necessary. Enhanced earning potential survives the payee's remarriage and the payor's change of heart, change of circumstances, or death.
Before negotiating an alimony agreement, the most important step is developing a realistic budget that takes into account existing and projected income from all sources and resources, such as proceeds from the sale of a family home that may be used to buy another home, and a reasonable projection of living expenses. The budget should take into account child support obligations; major anticipated expenses, such as college expenses provided for in the divorce settlement; and other factors, such as plans for retirement and the availability of retirement benefits for support. The dependent spouse must take into account new expense items, such as health insurance and life insurance on the former spouse. He or she also should consider where savings may be achieved, such as downsizing living quarters. The payee should consider opportunities to generate additional income not dependent on the spouse, such as a return to employment.
Issues and tradeoffs. Parties may negotiate the amount, duration, automatic adjustments, division of property in lieu of support, provision of life insurance or other benefits, direct payment of expenses, or the right to use a marital asset, such as the family home, for a period of time. A concession in one area generally will trigger some concession by the other party.
The appropriate alimony amount will be a function of many factors, including needs of the payee in light of the standard of living during the marriage and the payor's ability to meet those needs. Courts generally do not like alimony awards that give payees a disincentive to become self-supporting or that appear to penalize the wage earner. A negotiated settlement must take this reality into account.
Support will either be indefinite or end at a fixed point. The payor may be willing to make somewhat higher payments if there is a definite termination date. The payee might be willing to accept a defined termination point in return for higher payments that provide needed support during retraining or until retirement benefits are available.
Most alimony contracts provide for termination on the death of the payor, the death of the payee, or the remarriage of the payee. However, in some circumstances, such as when the payee makes concessions regarding division of property or when spousal support is intended in part to provide resources for children, parties may agree that alimony will not terminate upon remarriage. Some payors may wish to insist that alimony terminate if the payee enters into a cohabitation arrangement that looks like a marriage. For older parties with retirement in sight, especially if they will be sharing substantial retirement benefits, an automatic termination at the payor's normal retirement age may be appropriate.
Parties have the option in most states to provide that alimony terms may never be modified, except by agreement of the parties, that they are open for future modification by the court in accordance with the standards that would apply in the absence of an agreement, or that they are modifiable in accordance with rules determined by the parties. Even when an agreement is not modifiable by the court, the parties may wish to agree to specific adjustments based on defined circumstances. For example, they may agree that alimony will reduce in a graduated fashion over a specified number of years. When adjustments are based on income from employment, attorneys should consider the possibility that a party may manipulate his or her income, for example by quitting work or negotiating for employee benefits in lieu of cash compensation.
Both parties may be better off if the payor makes concessions in the property division to get a lower alimony payment or an earlier termination than would otherwise be the case. Property allocations are not dependent on remarriage and are not subject to modification based on changed circumstances. The security of additional property may make the payee more willing to accept lower payments.
When the payor has substantial private-sector retirement benefits and the parties are close to retirement age, additional opportunities may be available to structure a deal. The Retirement Equity Act permits the nonparticipant spouse to start taking benefits from the plan when the participant reaches his or her earliest retirement age, even if the participant is still working. Thus, it may be in the parties' interests for the dependent spouse to receive, in lieu of some or all alimony, a disproportionate share of the payor's retirement benefits, which he or she may begin to take while the participant continues to work to accrue additional benefits.
Enforcement. Incorporating but not merging a marital settlement agreement into a judgment of divorce, so that the full array of enforcement remedies are available, may be the best protection for the payee in states where such a mechanism is available. In addition, the parties may agree to automatic wage withholding so that payments go directly from the payor's employer to the payee. When the agreement is to be incorporated in a court order, unless parties have expressly agreed to future modifiability, structure the agreement to preclude the court from modifying it.
FOR MORE INFORMATION ABOUT THE SECTION OF FAMILY LAW
- This article is an abridged and edited version of one that originally appeared on page 31 of Family Advocate, Spring 2003 (25:4).
- For more information or to obtain a copy of the periodical in which the full article appears, please call the ABA Service Center at 800/285-2221.
- Website: www.abanet.org/family/.
- Periodicals: Family Advocate, 64-page quarterly magazine; Family Law Quarterly, quarterly journal.
- Books and Other Recent Publications: Collaborative Law; The Complete QDRO Handbook; The Divorce Trial Manual; 101+ Practical Solutions for the Family Lawyer; Balancing Competing Interests in Family Law; What Your Children Need Now: A Divorcing Parent's Handbook.