By Rebecca Kuderka | Withum, AAML NJ Gold Sponsor
When litigating a divorce case, one important item to consider is alimony. There is no set formula that can be used to calculate alimony and there are various types of alimony. The purpose of alimony is to allow both parties to maintain their lifestyle after the divorce. To understand the full alimony picture, it is important to be aware of the different types of alimony and the factors that are considered when determining alimony.
Types of Alimony
In the time between the filing of the complaint and the judgment of divorce, the Court can order Pendente lite support, also known as temporary support. This support can be agreed upon by the parties or ordered by the court if necessary. This support does not continue after the divorce is finalized but may be replaced by the other types of alimony.
After the final judgment of divorce, the court can order, or the parties can agree on four types of alimony: Open Duration, Limited Duration, Rehabilitation, and Reimbursement.
Similar to the traditional Permanent Alimony, Open Duration Alimony has no set time limit. Normally the payments continue until either there is a change in circumstances, i.e., the supporting party has a loss in income, or there is a termination of the alimony payments such as when the supported spouse remarries. Open Duration alimony will usually be considered for individuals married for 20 years or longer.
The second category, Limited Duration Alimony is typically considered for those married less than 20 years. With this type of alimony, the payments will not typically exceed the length of the marriage, unless there are exceptional circumstances such as the level of a former spouse’s financial dependence or the poor health of the dependent spouse.
Despite the name that seems health-related, the third category, Rehabilitation Alimony is considered when a dependent spouse is completing additional education or training needed to re-enter the workforce. This type of alimony is typically a short-term obligation and requires a detailed rehabilitation plan which should detail the requirements for the dependent spouse to complete the education/ training needed to achieve financial independence.
Finally, there is Reimbursement Alimony. This form of alimony is designed to re-pay an individual who made financial contributions to the education or career development of their spouse. The reimbursement alimony could include the payments that went towards tuition, cost of living (for the student spouse), and/or other costs to obtain the degree or professional training.
Factors Considered
There is no set formula to determine the amount of alimony payments; however, the New Jersey Statute, NJSA 34 N.J.S.2A:34-23, sets forth factors that are considered when making this determination.
- The actual need and ability of the parties to pay.
- The length of the marriage or civil partnership.
- The age of each party, as well as their health, both emotional and physical.
- The standard of living the parties established during their marriage, as well as the ability of each party to financially achieve a reasonably similar living standard.
- The earning capacity of each party, including their level of education, training, occupational skills and overall employability in the current job market.
- The length of time the party requesting support has been out of the workforce.
- A parties’ parental responsibilities.
- How long and how much it will cost for the party asking for the support to complete the education or training that will allow them to secure employment, whether such training is available, and the prospect of future attainment of income.
- The contributions of each party during the relationship. This includes both financial and non-financial, such as raising children and forgoing a career to support the other party’s aspirations.
- The division of marital property.
- Whether investment income can be derived from any assets held by each party.
- The tax ramifications to the payor of any alimony awarded.
- The nature, amount, and length of pendente lite support paid, if any; and
- Any other factors which the court may deem relevant.
Negotiations
It is best to be realistic when negotiating alimony. The best way to do this is to start with an accurate understanding of the parties’ finances. Be sure to identify all sources of income, including salaries, dividends, bonuses, business income, etc. If you are unsure that all income is reported, consider retaining a forensic accountant to investigate the spouse’s income. This will enable you to determine their ability to pay. Finally, but equally as important, document your client’s expenses. This will allow you to establish the financial need for alimony. This financial need along with the ability to pay will ultimately be the basis of your negotiations to get your client the alimony he or she needs to maintain their lifestyle after the divorce.
