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Figuring Alimony on Commission Pay
Jan L. Warner & Jan Collins

Question: My husband is a salesman who works on commission without any guarantee. His income, therefore, fluctuates each month depending on what he sells and whether he works or plays golf or goofs off. We have been married for 12 years and have three children, one of whom is disabled, and I am unable to work because of the care he needs. My husband and I have had marital problems since shortly after our disabled son’s birth. From our previous tax returns, I know how much money my husband made in prior years, but I believe now that we’re getting divorced, he is suppressing his income by not working as hard as he can. Because he is on commission only, my lawyer tells me there is no sense of wasting my money trying to prove he can earn more. I don't think this is fair, but I don’t want to spend a fortune for nothing, either.

Answer: In situations where a supporting spouse had variable income due to commission sales or other contingency compensation, some state courts have (1) established a minimum award of alimony based on the income the husband said he was earning and (b) then added a percentage of any income earned over that amount as additional alimony, which is called an "escalator clause." We believe that under your circumstances, a judge could justify taking a similar tack in setting child support.

There are a number of arguments that can be made both ways, and if you are successful in taking the position suggested above, you’ll need monthly or quarterly accountings, which could be time-consuming and expensive to enforce. Still, we suggest asking your lawyer to look at this as a potential way to try to resolve your concerns.

Question: For most of our 10-year marriage, my husband spent the majority of his waking hours - when he was not working part-time – working on a multilevel marketing deal that involved the sale of telephone service. Since his part-time salary barely paid for our utilities and groceries, I used my income, gifts from my parents, and an inheritance I received to take care of the household (my husband, me, and our two children). I also did all of the housework, cooking, etc. Our marriage began to unravel at the same time that his marketing deal began to produce money, and he left me and the children.

I tried to settle with him, but he would not agree to share the proceeds with me, telling me it could end any day. Had he not spent the better part of 10 years on this project and worked instead, I would still have my inheritance and we would have saved money. My lawyer tells me that the marketing income can be looked at only for alimony and child support because it can’t be valued as property. I think I should have a percentage of what he gets each month and what he gets if he sells it. My husband has offered me 80 percent of our assets, including our home, if I will give up my claim to his interest, whatever that is, in the telephone deal. What is the best thing for me to do?

Answer: When it comes to dividing cash flow, such as your husband’s interest in this multilevel marketing enterprise, some state courts have ruled that at divorce, a spouse can receive a percentage of future revenues. Other state courts have found that, unless a tangible value is determined, this type of asset is merely an "expectancy" that can’t be divided. The other problem you face is that the longer your husband works, the greater his income is likely to be – meaning that the value of the “interest” is a moving target.

You have an economic decision to make: (1) Take 80 percent of all property you and your husband have acquired, which is more than a court would ever give you, or let him keep that asset and have the court establish child support and alimony based on distributions to your husband, or (2) Spend a lot of time and money to find out (a) how the courts of your state will treat this revenue stream and (b) if your husband can/will ever sell his interest. To us, the fact that your husband is not willing to negotiate about this revenue stream seems to indicate that there may be some value there. But even if there is, you don’t know how your courts will rule or whether the entire company could fold like a deck of cards. Like many of the more than 2 million people who divorce each year, the answer to your question comes down to whether you are willing to gamble and see who will blink first.



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FS-The Dangers of Family Loans
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FS-Transference of Affection & 10 Tips of Divorce
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