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MAINTeNANCE and ALIMONY
Alimony. You've all heard the word. But what does it really mean? Do you have to pay taxes on it? What are "reasonable needs" and how will that important qualifier affect you? For the ammunition you need to assure yourself of the best settlement, read on.
What is the difference between maintenance and alimony?
Practically speaking, there is no difference. This is just a difference in terminology. With the "no fault" divorce laws, the word maintenance is more commonly used. (See Appendix G of book.)
Who pays the taxes on maintenance?
Normally, the person who receives maintenance pays taxes on it as ordinary income. The person who pays maintenance gets to deduct that amount from their taxable income. That is, if all IRS rules have been followed.
How do I know if I qualify to receive maintenance?
You qualify for maintenance if you are unable to meet your reasonable needs.
What does "reasonable needs" mean?
Look at the property division. If Sara and John have been married 40 years and Sara is 60 years old and has never worked, she seems to be a candidate for maintenance. If, on the other hand, she receives a two million dollar property settlement, there may not be a reasonable need.
Can the husband ever receive maintenance?
Yes, if he shows reasonable need and the wife is able to pay.
Are there different types of maintenance?
There are 2 types: open-ended and non-modifiable.
What is open-ended maintenance?
Open-ended maintenance is open to review. It can be increased, decreased or stopped as circumstances change.
What is non-modifiable maintenance?
Non-modifiable maintenance is paid for exactly as long as is stated -- no less, no more.
What if I am awarded maintenance for 6 years, but my spouse dies in 2 years?
Maintenance will stop upon death of the payor.
How do I protect my maintenance in the event of the death of my ex-spouse?
The court order should contain provisions for life insurance to cover the life of the person paying the maintenance.
What if I am awarded maintenance for 6 years and I get remarried in 2 years?
Open-ended maintenance usually terminates upon remarriage. Non-modifiable maintenance will be paid for 6 years even if there is remarriage. Check with your attorney to be sure.
Do I have to pay maintenance if my wife is living with another man?
You must pay maintenance as long as a court order requires you to do so. Some orders provide that maintenance will stop under these circumstances. Always check with your attorney before stopping payments.
What is permanent maintenance?
So called "permanent maintenance" continues for life unless modified by the court.
Are pre-nuptial agreements an important consideration?
Yes, they could nullify all the rules we've been talking about.
© Carol Ann Wilson, Certified Financial Planner, and Edwin Schilling, III, Attorney at Law, Authors of "Survival Manuals"
