Alimony – What Can I Expect?

There are, unfortunately, no exact rules for the determination of the amount of alimony. Rules of thumb have emerged and tend to be used but it is difficult to calculate, on day one of your divorce, what you will get/pay.

The rule of thumb in NJ is 1/3 of the difference in incomes of the parties. This rule of thumb will arrive at a fairly close number if both spouses are working. You earn $300K and your spouse earns $100K so alimony would be around $66K. Issues arrive in this calculation if you have a non-working spouse or if your income is not stable (bonus/stock option based or contract employment).

If your spouse is not working or is only working part time you need to start to make assumptions. The non-working spouse will in most cases be expected to work to support themselves and the family. The parties need to determine a “deemed” income for the non working spouse. This is an assumed amount of income the non-working spouse could earn. This is where folks can get stuck.

The non-working spouse, particularly if they have been out of the workforce for many years, is now facing the daunting task of getting a job and will be reluctant to agree to anything more than minimum wage ($20K). The paying side will say their spouse has a Masters degree in history (for example) and suggest that they can teach at a university and earn $60K. If your spouse has been working part time, their deemed income could be the part time rate of pay at full time hours, but is that doable if there are small children at home and they are bearing the bulk of the during the week parenting?

To get through this try a step up in deemed income – $0 for the first 6 months, then $20K for the next 12 months and then $30/40K thereafter. This will allow the non-working spouse to see the possibility of meeting this level of income and will give the paying spouse a pre-determined period of time where they are paying.

Another thing to think about is the dollars you are dealing with in the example above. The difference between $0 and $20K is only $550 per month then for each $10K increase in deemed income it is only $275 per month. The cost in legal fees to negotiate will likely be more than the amount of the payments.

Another issue in determining alimony is variability in income. Just because the paying spouse earned a bonus of $200K last year does not mean he will do so this year or the next. Putting them in a position where they have to pay 90% of their gross base income will not work for the paying party. A suggestion here is to have a contingent portion of alimony; if the paying spouse earns the $200K in bonus he pays $61K of it in alimony, it he only earns $100K he pays $33K.

This may make it more difficult for the receiving spouse to pay their expenses in year one, particularly if an agreement is reached after the current year’s bonus has been paid so again perhaps a phase in will work; paying spouse pays $X more for the next few months until the bonus is received then alimony reduces to the negotiated rate.

The point I am trying to make here it that there is more than one way to get this done and that you need to think about two issues; how can I quickly get this settled so I stop paying legal fees and so that I can get on with my life. A few months of restricted cash flow is a small price to pay to have this off our shoulders.

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