Spousal Support - Maintenance

1. Spousal Support - Maintenance Scott Baroway Mediation Partners 720-889-2808 Baroway@gmail.com

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3. Maintenance • State law • A payment, other than equitable distribution or child support, to a former spouse • Ends upon death of former spouse • May ends upon remarriage and/or cohabitation depending on agreement • Federal tax law • Different requirements than under state law • Important because of tax consequences

4. Colorado Maintenance Law (C.R.S. 14-110-114) Permanent/Long Term May Be Awarded ONLY IF: • Lacks sufficient property to provide for reasonable needs, AND • Is unable to support self through appropriate employment, OR • Is custodian of child whose condition or circumstances prevent employment outside of home

5. Definitions • “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.

6. Statutory Maintenance Factors 1. Actual need and ability to pay (financial resources avail) 2. Length of the marriage 3. Age, physical and emotional health of parties 4. Standard of living during the marriage 5. Earning capacities, educational levels, vocational skills and employability 6. Ability of paying spouse to meet own needs while paying maintenance 7. Parental responsibilities for children 8. Time and expense to acquire education and training to enable party to find appropriate employment.

7. Other Maintenance Factors • Tax Effects • Present Circumstances are controlling rather than historical • However historical may be consider to impute income • Duration of Maintenance Award • Continuing or for definite period of time • Incremental reductions ok if basis • Expectation of retirement benefits ok to reduce • Improper speculation about future NOT allowed 10. Any other factors which the court may deem relevant

8. The Practical Problems In Determining Maintenance • 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

9. Maintenance Issues • Permanent vs. Temporary • Rehabilitative v. Reimbursement • Retirement • Cohabitation / Remarriage • Changes Circumstances • Taxability

10. Pre-Decred Maintenance(C.R.S. 14-110-114(2)) • Combined Annual Income < $75,000/yr • Rebuttable Presumption for pre-decree support • Calculation (40% of higher earners gross income – 50% of lower earners gross income) “Courts shall deviate if “inequitable or unjust” TEMPORARY MAINTENANCE ONLY

11. “Income” defined • 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.

12. Not Income • Child Support Received • Means tested assistance – SSI, food stamps, Colorado Work Programs • Income from additional jobs from 40+ week employment

13. Pre-decree Maintenance Example • Spouse A Spouse B 5000/mo 2400/mo 40% = $2000/mo 50% = $1200/mo $2000 – $1200 = $800/mo – presumptive Temporary award

14. Permanent Maintenance • Awarded in long term marriages • Long term marriages can be as short as 10 years • Typically 10-15 year marriages in the gray zone • Very fact dependent • Permanent alimony can end/be modified • Substantial change of circumstances, e.g., retirement, disability of either party

15. Cohabitation • Depends on terms of agreement • Remarriage ends permanent and limited duration alimony • Cohabitation not sufficient by itself to reduce • Depends on facts How close to marriage How much support provided

16. Tax Considerations • Alimony is deductible from income for the paying spouse and taxable to receiving spouse • Requirements are • Written divorce or separation instrument • Spouses cannot live together after divorce • Cash (or cash equivalents) • Marriage relationship • Must file separate tax returns • Must terminate at death • Must not be child support • May be deemed child support if terminates or reduces as a result of a child contingency • e.g., reduction of alimony on child’s 18th birthday • Review by tax professional may be warranted

17. Alimony Recapture–IRC 71(f) • 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.