Navigating Spousal Support Depends on the Assets

close up shot of alimony payment check - navigating spousal support concept

Spousal support, sometimes called alimony, can be a point of conflict in any divorce. But navigating spousal support issues in a high asset divorce does not need to be challenging. If your family is living the lifestyle of a family with high income and/or significant net worth by accumulating significant debt, spousal support is likely to be particularly contentious, with the outcome often requiring an unemployed or underemployed spouse to maximize their earning capacity. But if your family has significant assets from which a relatively liveable income can be generated, alimony can quickly become a non-issue.

Alimony is necessary in most cases when there is a disparity of income between spouses that cannot be bridged in the near future, such as when one parent is working inside the home because the children are young and the cost of child care would consume a significant, if not all, of that parent’s income. In those cases, “rehabilitative” alimony is often appropriate to allow the in-home parent to obtain or finish an education and enter a sufficiently-paying occupation. Regardless of your particular circumstances, alimony negotiations can be challenging (and costly) to take to trial.

Can You Get Spousal Support in a High Asset Divorce?

In wealthy families, more so than in middle-class or working-class families, one person’s income, inheritance, and/or assets is often relied upon because both spouses do not need to generate income. When a marriage like this fails, the “dependent spouse” may expect temporary, long-term or even permanent/lifetime spousal support to maintain their quality of life. Whether courts are willing to consider spousal support in high asset divorce cases depends on many factors, but in these unique circumstances, it can often boil down to the assets and cost to maintain those assets, that the dependent spouse is going to own after the divorce.

All things being equal, spousal support awards are more common:

  • In longer-term marriages, but not necessarily when both parties are at or near retirement age;
  • Where there is a significant disparity in the spouses’ incomes;
  • Where one parent’s contribution to the marriage was to stay at home during the work day and care for minor child(ren), and even more so if the daytime caregiver interrupted their education or professional career;
  • If one party is unable to work due to an appropriately-documented physical or mental disability and the resulting income does not place that spouse at or near par with the other spouse.

When You Can Anticipate Receiving Spousal Support

Any alimony award in Michigan must be fair and equitable to both parties, and may not impoverish a party. Whichever side of the spousal support argument you are on, you need to be prepared to address the issue practically. Often, using a neutral, certified divorce financial planner who can help the parties create realistic budgets going forward and predict when each party will run out of money given their respective earnings, savings, and projected reasonable expenses, can make all the difference in the world. Often, people just want to know they’re going to be financially solvent at the time of their death, and not have to rely on children or substandard assisted care facilities, at the end of life. This is a holistic approach often embraced by the Collaborative Divorce process.

If you are seeking alimony after divorce, talk to your attorney about whether you are in the best position to ask for it. Many times, people purposely reduce or minimize their income to maximize their chances of receiving alimony. Because alimony is modifiable, the longer you delay maximizing your income, the more you are likely hurting yourself. Raises and promotions are often based on seniority and longevity, so getting into your field of choice as soon as possible can ultimately serve you well in the end. And once your income increases, your alimony will go down or be eliminated. If you have minor children, they are best off if both their parents are maximizing their income because the higher cost of maintaining two homes can be offset by the increased income of the previously underemployed parent.

If you truly are hog-tied and unable to obtain meaningful employment in your geographic region (you are not expected to take a job that would require you to move away from your children), you will need to demonstrate by way of a doctor’s or psychiatrist’s evaluation, that you are unable to work and the resulting disability income, combined with child support and the net assets you are awarded, is insufficient for your basic living expenses.

Sometimes in high asset cases, there is a family business from which the dependent spouse receives an income that will end during or after divorce. This loss of income for that family member can certainly be considered in determining an equitable alimony outcome.

In many cases, you can receive short-term spousal support for a period of months or years after your marriage so you can transition into being self-supporting. Longer-term, or permanent spousal support is generally reserved for people who are disabled and do not receive sufficient income from the government, disability insurance, and/or assets awarded in the divorce. People may think that if they are older (think “the gray divorce”) that permanent or lifetime alimony is appropriate. However, the person paying the spousal support is typically permitted to retire at a reasonable age without being imputed non-retirement income. Sadly, if an older couple has not saved enough to live separately in retirement years, they may have to resort to selling a beloved marital home, getting a reverse mortgage, applying for medicaid, or moving in with a family member.

If you believe you are a strong candidate for support, you should ask your attorney what they think your judge’s beliefs are about spousal support. Judges, who work very hard for relatively low pay compared to their colleagues, can be predisposed to make findings of fact leading to a denial of alimony. But be prepared to present your reasonable living expenses to show where spousal support money would go, should you receive it, and show how you plan to become self-sufficient as quickly as possible.

You may have heard of “Alimony Guidelines” or other “Rules of Thumb” for how much monthly alimony to expect, and for how long. Talk to your lawyer about these tools, but know that they are not black-letter law, and judges have the discretion to award as much or as little as they deem to be “equitable.” That which is equitable to one person is not always equitable to another, so heading to court over an alimony argument is likely to yield an outcome that disappoints and upsets one party, and there is no sure-fire way of knowing which party that will be. Using alternative dispute resolution mechanisms can be the best way to avert what feels like a devastating outcome in court.

Arguments for Avoiding Spousal Support

Just because you make a lot of money does not mean you will automatically be required to pay for your spouse’s living expenses after divorce. Unlike child support, alimony payments are not automatic, and they do not follow a formula. If you believe spousal support is inappropriate, you and your divorce attorney may be able to prove:

  • Child support and your spouse’s income in light of their reasonable expenses, are sufficient
  • The proposed award would unfairly favor the recipient spouse by, for example, allowing them to maintain a lifestyle that is out of sync with the parties’ collective earnings or enabling them to afford a home, vacations and luxuries that may lure a child away from the paying spouse who cannot afford such things because of they have to pay alimony
  • Your spouse has an unexercised ability to work or earn more money
  • You need to reduce your income to be able to follow your spouse and children to another location if they are moving
  • Your income is front-loaded because of the nature of your job: e.g., you can work as a professional soccer player for a few years and earn substantial income, but after that, you will need to live off your savings for the rest of your life
  • You cannot pay spousal support without invading separate property assets (like a family trust fund) and there are sufficient funds and assets otherwise available to maintain both homes
  • Your spouse waived his or her right to spousal support in a signed prenuptial agreement

You may also be able to argue that any spousal support award should be limited in time or amount, or should terminate when some future event happens, including:

  • Your death (but expect to potentially be required to carry life insurance to cover any remaining balance of alimony owed at the time of your death)
  • Your spouse’s remarriage (this argument is unlikely to get you very far, since your spouse’s remarriage could be short-lived, and/or their new spouse may earn little or no income: however, it is a viable argument for temporarily decreasing or suspending alimony if the new spouse is wealthy and providing for your former spouse’s needs)
  • Cohabitation with a new romantic partner (if your former spouse’s living expenses are paid by the new romantic partner, but defining and enforcing an agreed-upon definition of “cohabitation” can be tricky)
  • The start of full-time schooling of your youngest child, depending on the cost of child care versus the potential income of your former spouse.

Challenges to Determining Spousal Support in a High Net Worth Divorce

Depending on your family’s financial portfolio, it may be difficult to determine the appropriate amount of spousal support in a high net worth divorce. Business owners and shareholders may have a high net worth, but are unable to spend their assets: for example, the stock owned by the spouse may be non-transferrable, non-assignable, and saleable only upon a majority vote of shareholders - and often, the spouse does not have a majority ownership interest. Owners may also have variable income and a complicated, every-changing interplay between their compensation and the company’s value. In other families, trust disbursements, stock portfolios, and capital gains concerns may make it hard to establish each party’s true net worth. Finally, many high net worth families prefer to resolve their differences outside of court, to avoid the public eye and any unwanted media attention. Because of this, you may want to consider an alternative to litigating over spousal support. Having an attorney well-versed in high asset cases is important.

Alimony Alternatives to Avoid Ongoing Payments

The writing is on the wall, and your attorney tells you there is no avoiding paying alimony. You cannot bear the idea of having your former spouse “on the payroll.” Understandably, you would prefer to write one check and be done with it. If your income seems likely to go up, this “buy-out” option is going to come at a cost, but you may still be willing to take it. If your income seems likely to go down, your spouse may be interested in taking a trimmed-down buyout on the theory that a bird in the hand is worth two in the bush. If you want to avoid ongoing spousal support payments or the need to go to trial over alimony, there are several options available to high income families involving property distribution and lump sum payments that may not be accessible to families with smaller marital estates. For example, you might consider:

  • A lump-sum buyout of the proposed spousal support award (adjusted to its present value, using an appropriate discount rate)
  • Transferring all or part of an annuity, retirement, or investment asset to supplement the would-be recipient’s income
  • Awarding the would-be recipient income-producing property (such as a vacation home or rental property) in lieu of some or all of their spousal support
  • Paying for specific expenses, such as the mortgage or educational costs, directly, rather than making ongoing payments to your spouse (check with an accountant regarding who can claim the mortgage interest deduction on their tax returns in light of whether the mortgage is paid directly to the lender versus the former spouse)

When negotiating a settlement agreement, couples have a great deal of flexibility around how they fashion their spousal support payments and property distributions, even if those options aren’t the likely outcome at trial. Spousal support is a particularly challenging piece of the divorce puzzle to predict in terms of what the court will do. Which is one of many reasons settlement is often the better solution for families navigating spousal support in high asset divorce.

At NSSSB, we help many couples negotiate and litigate spousal support issues in court. Our Ann Arbor divorce attorneys can help you review your financial situation and your alimony options, so that you can be sure any spousal support award is fair, equitable, and provides for your needs. Click here to schedule a consultation with our divorce team.

Categories: Spousal Support