Fourth in our topics to discuss is alimony. In addition to everything else you need to think of, another important consideration when getting divorced is alimony.
You first need to decide if your case is an alimony case. You can do that by answering these questions:
- Does one of you earn substantially more than the other?
- Are there economic needs of one party that are not being met by her income?
Alimony is determined based on the needs of one party for support and the ability of the other to pay.
The reverse of child support; alimony reduces the payor’s taxable income and is taxable to the recipient.
If you have children, the child support guidelines will apply to the first $250,000 of income, however, you can agree to allocate the support payment between alimony and child support to get the maximum tax benefit for the family unit.
When deciding, you should also consider:
- Timing of payments
- When and why there can be increases
- If there is bonus income involved how alimony can or should be paid from the bonus, it is usual and I think, sensible, to set a percentage for alimony to be paid from the bonus on an ‘if and when received’ basis.
- Reductions and termination.
One of the real problems with alimony is that the Courts still lack the power to set an end date although there is legislation pending to give them that authority.