What is Spousal Support or Alimony?
In Michigan, the terms “spousal support” and “alimony” are often used interchangeably.
They are essentially the same thing, however Michigan courts and statutes will most often use the term “spousal support.” The basic concept is that if a lower-earning party is largely dependent on the income of a higher-earning party, the court may award spousal support to allow the lower-earning party to maintain the quality of life they had experienced during the course of the marriage. There are many factors that can be used to determine the exact amount of a spousal support, however the main factors are usually the disparity of income between the parties and the length of the marriage. If a court chooses to award spousal support, it will usually do so for a specified term of years. Spousal support usually ends automatically if the receiver of the support gets remarried. A Michigan court will look to eleven factors when deciding if and how much spousal support should be ordered.
The eleven factors are as follows:
- The conduct and past relations of the parties
- How many years the parties have been married
- What abilities the parties have to gain/maintain meaningful employment
- The source of money that the parties receive and how the parties’ property has been divided
- How old the parties are
- The ability of the parties to pay spousal support
- The parties’ present situation
- The needs of the parties
- The health of the parties
- The standard of living that the parties have enjoyed during the course of the marriage
- Any other general principles of equity or fairness that the court should consider
Michigan is what is referred to as a “no-fault divorce state.” That does not necessarily mean that a court will not consider the fault of the parties when deciding whether or not to award spousal support. To the contrary, Michigan courts can consider the previous conduct of the parties when deciding the issue of spousal support.
Is There a Rigid Formula that Michigan Courts Use When Deciding How Much Alimony to Award?
Michigan courts are not required to apply a rigid formula when deciding the length and amount of a spousal support award. In contrast, child support is decided by a rigid formula which is published by the State of Michigan. Michigan courts are required to consider the very unique circumstances of each marriage when considering spousal support. Therefore, Michigan courts have no formulaic constraints when awarding spousal support. However, as a practical matter, most Michigan courts will apply a methodology. There are two private companies that have created software tools which are used to prognosticate spousal support. The first is software published by Springfield publications. The second is a software tool called MarginSoft. Similar to child support guidelines, these software tools will produce a suggested spousal support figure after the entry of numerous unique variables. Many Michigan judges will use these private company software tools to guide them in awarding spousal support. Most qualified Michigan divorce attorneys will have also purchased these softwares to advise their clients of the spousal support possibilities. While these software tools are not exact and are certainly not binding on the court, in general they will give a divorce client a fairly accurate estimate of a potential spousal support award.
Once the Court Orders Spousal Support, Can It Be Modified at a Later Time?
If a divorce case goes all the way through trial, then a Michigan court can only order non-modifiable spousal support. What this means is that, even after one party has been paying spousal support for a period of time after the divorce is final, either party can ask the court to modify the spousal support based on a change in circumstances of one or both of the parties. For instance, if the party who was ordered to pay spousal support loses their job, they can then petition the court for a downward modification of spousal support.
How Does Spousal Support Work in Relationship to Income Taxes?
As a general rule, IRS code sections 71 and 215 state that spousal support shall be treated as a deduction to the party who is paying the support, and as income to the party who is receiving the support. As an example, If a party earns $62,000 annually and is also ordered to pay spousal support of $1,000 per month ($12,000 per year) then that party will pay income taxes based upon earning $50,000 annually, not $62,000. On the other hand, the party receiving the spousal support will be required to declare the receipt of spousal support as additional income. As an example, if a party is earning $30,000 annually and then also receives $1,000 per month in spousal support ($12,000 per year) then they will pay income taxes on $42,000 of annual income.
Be aware that spousal support is treated as either a deduction or as income received in the vast majority of divorce cases. However, to be sure, the IRS has specific rules that must be followed. Just because the word “spousal support” or “alimony” appears in your judgment does not automatically mean it meets the IRS’s requirements.
The IRS requirements are as follows:
- The payments must be made in cash (e.g. providing a car is not deductible)
- The payments must be to a spouse or on behalf of a spouse
- The payments must be made pursuant to a divorce or separate maintenance instrument
- The payments must not be designated as non-qualifying by the payor or non-taxable to the recipient
- Spouses may not be members of the same household
- The payment must terminate at the recipient spouse’s death
- Spouses may not file a joint return
- The payment cannot constitute child support
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