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Maintenance
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State law A payment, other than equitable distribution
or child support, to a former spouseEnds upon death of former spouseMay ends upon remarriage and/or
cohabitation depending on agreementFederal tax law
Different requirements than under state lawImportant because of tax consequences
Colorado Maintenance Law (C.R.S. 14-110-114)
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Permanent/Long Term May Be Awarded ONLY IF:
Lacks sufficient property to provide for reasonable needs, ANDIs unable to support self through appropriate
employment, OR Is custodian of child whose condition or
circumstances prevent employment outside of home
Definitions
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“Reasonable Needs” – depends on particular facts and circumstances of parties marriage.
“Appropriate Employment”- depends on parties economic circumstances and reasonable expectations established during the marriage.
Statutory Maintenance Factors
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1. Actual need and ability to pay (financial resources avail)
2. Length of the marriage3. Age, physical and emotional health of parties4. Standard of living during the marriage5. Earning capacities, educational levels, vocational
skills and employability 6. Ability of paying spouse to meet own needs while
paying maintenance7. Parental responsibilities for children8. Time and expense to acquire education and training
to enable party to find appropriate employment.
Other Maintenance Factors
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9. Tax Effects
10. Present Circumstances are controlling rather than historical
11. However historical may be consider to impute income
12. Duration of Maintenance Award1. Continuing or for definite period of time2. Incremental reductions ok if basis3. Expectation of retirement benefits ok to reduce 4. Improper speculation about future NOT allowed
10. Any other factors which the court may deem relevant
The Practical Problems In Determining Maintenance
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No formula approach like child support or “rules of thumb” Except “temporary maintenance”
“Standards” have little place in the law of domestic relations
The law grants judges great discretion – rarely overturned on appeal
Maintenance Issues
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Permanent vs. TemporaryRehabilitative v.
ReimbursementRetirementCohabitation / RemarriageChanges CircumstancesTaxability
Pre-Decred Maintenance(C.R.S. 14-110-114(2))
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Combined Annual Income < $75,000/yrRebuttable Presumption for pre-decree
supportCalculation
(40% of higher earners gross income –50% of lower earners gross income)
“Courts shall deviate if “inequitable or unjust”TEMPORARY MAINTENANCE ONLY
“Income” defined
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From every source (Same as Child Support)Salaries, wages, tips (all), commissions, indep
contractor payments, bonuses, dividends, severance, pensions, royalties, rents, interest, trust income, annuities, capital gains, moneys from self employment for personal use, social security, workers comp, unemployment, disability, PI case, monetary gifts, prizes, ptsp distributions, reimbursed expenses from work if significant and reduce personal living expenses, alimony received, overtime if required by employer
Self Employment – Income after “ordinary business expenses” – must be real business expense
Lots of Rules and tests here – but no clear line to follow
Subtract maintenance or support paid to prior marriage or children if through court order.
Not Income
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Child Support ReceivedMeans tested assistance – SSI, food
stamps, Colorado Work ProgramsIncome from additional jobs from 40+ week
employment
Pre-decree Maintenance Example
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Spouse A Spouse B5000/mo 2400/mo40% = $2000/mo 50% = $1200/mo
$2000 – $1200 = $800/mo – presumptive Temporary award
Permanent Maintenance
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Awarded in long term marriagesLong term marriages can be as short as
10 yearsTypically 10-15 year marriages in the gray zoneVery fact dependent
Permanent alimony can end/be modifiedSubstantial change of circumstances, e.g.,
retirement, disability of either party
Cohabitation
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Depends on terms of agreementRemarriage ends permanent and
limited duration alimonyCohabitation not sufficient by itself to
reduce Depends on facts
How close to marriageHow much support provided
Tax Considerations
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Alimony is deductible from income for the paying spouse and taxable to receiving spouse
Requirements areWritten divorce or separation instrumentSpouses cannot live together after divorceCash (or cash equivalents)Marriage relationshipMust file separate tax returnsMust terminate at deathMust not be child support
May be deemed child support if terminates or reduces as a result of a child contingencye.g., reduction of alimony on child’s 18th birthday
Review by tax professional may be warranted
Alimony Recapture–IRC 71(f)
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Intended to prevent front loading of maintenance OR conversion of property settlement payments into deductible alimony.
If Alimony decreases or terminates during first three calendar years, some recapture (loss of deduction) – talk to accountant.
