Maintenance, Alimony, Spousal Support and Divorce

Maintenance (sometimes called alimony or spousal support) is a payment made by one spouse to another. There are no hard and fast rules on when maintenance should be paid, how much or for how long. It is separate from child support. While maintenance and Alimony, Spousal Maintenance and Divorceproperty division are two separate issues, in reality they can, and often are, linked, particularly in cases where there are sufficient assets that it is deemed that maintenance is not needed.

In Colorado, there are some legislative guidelines on maintenance in Section 14-10-114 of the Colorado Revised Statutes. The factors to be included in a decision made by the Court about maintenance include:

  • The financial resources of the party seeking maintenance, including marital property apportioned to such party, and the party’s ability to meet his or her needs independently, including the extent to which there is a provision for child support;
  • The time necessary to acquire sufficient education or training to enable the party seeking maintenance to find appropriate employment and that party’s future earning capacity;
  • The standard of living established during the marriage;
  • The duration of the marriage;
  • The age and the physical and emotional condition of the spouse seeking maintenance; and
  • The ability of the spouse from whom maintenance is sought to meet his or her needs while meeting those of the spouse seeking maintenance.

In mediation, you should also take these factors into account.

Temporary maintenance is sometimes awarded or agreed to for a period of time before the final decree. This is necessary when one of the parties does not have sufficient income or means to support him/herself. If the parties’ combined income is greater than $75,000, then the Court is guided to use the above factors when considering a temporary maintenance order. If the combined incomes are less than $75,000, then a guideline formula used for establishing temporary maintenance is:

40% higher income party’s monthly adjusted income
less 50% of the lower income party’s monthly adjusted income.

Incomes are adjusted for maintenance and child support already actually being paid pursuant to a court order. This temporary maintenance formula is not to be used by the Court for permanent order maintenance awards.

Note:  new Colorado Legislation on Spousal Maintenance went into effect January 1, 2014.  The new legislation provides additional guidance to the Courts on making maintenance awards.  The Courts are instructed to confirm that non-represented parties are aware of the law when approving maintenance agreements made by the parties.  The law includes a formula for maintenance for the Court to consider, as well as a indication of length of maintenance, which is basically half the period of the marriage.  Most importantly, there are still the many factors that are to be taken into account which should drive the Court’s decision which means that you cannot count on the Court to follow the formula.  Also, be aware that the formula is not presumptive, meaning that the Court is supposed to look at all the factors, of which the formula is only one.

Maintenance can be modifiable or non modifiable by the Court. If modifiable, you, or the court, can agree to change the level of maintenance. If non modifiable, then it is a contract that cannot be changed by the court.

Lump Sum Payment.  Sometimes parties will agree to a maintenance amount and then determine the net present value, taking into account the tax effect, so that a lump sum payment can be made rather than payments over time.

Taxation Issues Maintenance is taxable to the person receiving maintenance and is a reduction of taxable gross income to the person paying maintenance. To claim payments as maintenance for tax purposes, there must be a divorce or separation agreement between the parties or a court order, the agreement does not specify the payments as not alimony, the parties are not filing a joint income tax return, the payments is in cash, there is no liability to make a payment after the death of the recipient spouse, the payment is not considered as child support, and the parties are not living in the same household. For more information see IRS Publication 504.

Maintenance payments should not be used as a substitution for a property settlement. To counter this, the IRS created the recapture rule, which states that during the first three years, if maintenance reduces by more than $15,000 per year, then the excess tax that should have been paid can be “recaptured” by the IRS as income tax.

Maintenance payments are also not supposed to be used as a substitute for child support, which is not taxable to the recipient. If maintenance payments are scheduled to stop or reduce at a time that is linked to a child related event, such as graduation from high school, graduation from college, or emancipation, then the IRS can reclaim from the parties the tax that was not paid by the payor as a result of the payments being labeled as maintenance.

Insurance Issues

Typically, life insurance, and sometimes disability insurance, on the person paying maintenance is put into place to protect the stream of maintenance payments should the unexpected happen. When considering life or disability insurance, get several disability and life insurance quotes to compare. While term insurance is often suggested, it might be useful to check on whole or universal life policies as as way to insure the payments but also to have some investment value.

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