- Divorce Settlement
- Spousal Support
- Attorney’s Fees
- Business Valuation
- Child Support
- Child Custody
- Domestic Violence
- Divorce Planning
- Legal Costs
- Modifications Of Orders
- Prenuptial Agreements
- Paternity Actions
- Visitation Rights
- Post-nuptial Agreements
- Property Division
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There are two types of Spousal Support: Temporary Spousal Support and Long Term Spousal Support.
Temporary Spousal Support
Temporary Spousal Support can be better understood as “band-aid orders.” If a person cuts themselves and need stitches but are not in the hospital yet, they clean up the wound, wrap it up, and eventually go to a hospital to seek proper care. Temporary Spousal Support is intended to financially help one spouse until the court decides upon a proper solution. The court generally determines Temporary Spousal Support with the same computer program used to calculate Guideline Child Support.
In California, there is no such thing as Guideline Spousal Support, but relevant case law states that the judge has lot of discretion in deciding how to award support. In general: the point of Temporary Spousal Support is to help maintain the status quo. That is, to keep everything under control until we complete discovery and settle the case or until we get to trial.
Judges also look at Temporary Spousal Support as intended to temporarily meet the needs of the supported party based on the marital standard of living as generated by a computer program. The same program that generates the guideline statewide number for monthly child support also recommends a monthly amount for Temporary Spousal Support. Generally, most judges will only use the number recommended by the computer program.
This suggests that one can influence the final amount with numbers entered the program. Assuming the court will most likely be using Ex-Spouse or Dissomaster software, the number will be primarily influenced by income entered for each side, property tax deduction, and interest deduction on a home, etc. A section of the program also requires the entry of tax benefits that either party might have. The more tax benefits a party has, the more they will pay.
For example, if a spouse earns $250,000 a year, you would enter the gross amount into the program, and, in the background, the computer program is calculating the net amount the person would earn. Because the software performs Net Disposal Income calculations in the background, a tax deduction will lower their income. If they write off mortgage interest and claim a property tax deduction, this reduces their taxable income and tax liability, which means there’s more money in their pocket at the end of the day.
Let’s assume an attorney puts the deductions on the husband’s side because she represents the wife and wants to increase the Temporary Spousal Support amount. In that case, the husband’s attorney needs to make sure the court order states that because all the deductions are entered on the husband’s side, he is going to get those deductions when he files his tax return for the next taxable year. If we’re going to assume that someone will get a tax benefit and they’re going to pay more support because of it, then we also need to ensure that they actually get the tax benefit when they file their tax return. The same holds true if you enter all the deductions on the wife’s side to reduce the amount of temporary support the husband pays. To be fair, you have to ensure that the wife gets those deductions on her tax return.
Here’s another point: let’s say you have a spouse who doesn’t work and the other spouse works. Since the first spouse has no income, tax deductions don’t matter to them. If you have zero income, then you have no income to reduce. So the attorney for the receiver of Spousal Support would argue that they do not want the deductions because their client makes no money, but it is a benefit to the spouse who does have an income, so put all the deductions on their side.
Then you flip it: let’s assume the Spousal Support seeker wants the house, so now they will own a home with property taxes, and they will pay interest on the mortgage. So the other way to decide whose side to put the deductions on is: who is going to get the house? Let’s assume the husband is living in the house, and the wife isn’t, and he’s going to get the house. So all the deductions are put on his side. However, if the husband agrees that the wife will get the house, then she will get the deductions.
Another factor is: who is paying the mortgage and interest? If one spouse is paying spousal support, the mortgage, and property taxes, that spouse will want to get credit for these things. This is generally how Temporary Spousal Support is affected if the computer program is used by the court.
Family Support is different than Child Support or Spousal Support. Family Support is a way to get more support to the supported party. It bumps up the number. If you run the computer program, in one scenario you might have one number for Child Support and a separate number for Spousal Support, and in another scenario, you run different calculations and get the Family Support amount. That Family Support number will generally be higher than the Child Support and Spousal Support numbers combined.
One may assume that if they want more money, it would make sense to agree to Family Support. The problem with Family Support, however, is that it is unallocated as to what part is Child Support and what part is Spousal Support. So the problem with Family Support is that it is not deductible on tax returns. Spousal Support is deductible, so the payor deducts it on their tax return. This means that if you agree to pay Family Support of $5000 a month, you may be asking for problems later, because, after months of paying, when you get to the end of the case, you need to go back to the first payment you made for Family Support and determine how much of the $5,000 is Child Support and how much is Spousal Support.
The spouse paying Family Support is going to want to claim the tax benefits and the person who receives support will likely say, “Wait a second, I didn’t know that I was supposed to pay taxes on some part of the Family Support and I never file a tax return because I have no income. I was getting Family Support. So what are you telling me? I now have to tell the IRS that I didn’t pay the taxes I was supposed to pay on the Family Support and pay penalties, etc? No! I don’t want to do that, and I didn’t keep any money to pay the taxes! I don’t want to do it.” So that’s the problem with Family Support.
Long Term Spousal Support
Long term Spousal Support is Spousal Support that is either agreed to in a Settlement Agreement or ordered by a judge at trial. Temporarily Spousal Support is ordered sometime between the beginning of the case and before it ends. Anything that is from the Date of Settlement or doesn’t settle and goes to trial is Long Term Spousal Support.
In California, Long Term Spousal Support is based on Family Code Section 4320. There is no a set formula for long term support. It is determined by various factors listed in Family Code Section 4320. The law basically says that the judge must consider each of these factors, but it is up to the judge to decide how much weight to give each one. It’s a balancing task and there is no concrete way of entering the factors into a computer program to get a result. In fact, the law specifically says that it is an abuse of discretion for a judge, at the time of trial, to order long term spousal support based on the computer program. Instead, the judge must balance each factor.
What are the factors?
The income of each spouse is one factor. Earning capacity is another. That is, if one party doesn’t work, only works part time, or is underemployed, the court can consider what they could earn if they were working, working full time, or working at a job that meets their skills. The court can say, “we don’t care that you are not working, and we cannot force you to work, but, we can run a calculation based on a hypothetical income that you should be making or that you’re choosing to not make.”
For example, there is the famous case of a doctor who decided to be a priest. He is going through a divorce, he somehow finds God in the midst of this moment, and he wants to be a priest. The judge said, “No problem! You’ll be whatever you decide to be but I’m going to look at your income. You decided to become a priest, great, but your obligation to your spouse and your child is the highest obligation that you have before you pay your rent and your bills. Therefore, I am going to run your income based on a hypothetical calculation.”
This is known as Imputation of Income and it goes back to Earning Capacity. How about a younger couple who’s getting divorce? One spouse is highly educated but stayed home to raise the children. They are under 50, maybe they have degree, at least a high school degree. The court is going to expect them to go to work or get some kind of education or training to freshen up and join the workforce.
The Marital Standard of Living is another factor. The law says the person who will get Spousal Support is entitled to live at, or maybe below, the standard at which they lived when they were married. However, they are not entitled to live beyond their marital standard of living. Note: Marital Standard of Living ends at the Date of Separation, and the Marital Standard of Living is generally the description of someone’s lifestyle, e.g. — did they have a middle class, luxurious middle class, or standard lifestyle?
They can consider how expensive their house was, the cars they drove, the kind of birthday parties they had for their kids, the designer purses they purchased, where they shopped and ate, whether they had multiple cars and the latest cars, did they have servants, or import tiles from Italy for their 12,000 square foot mansion in Newport Coast?
Forensic accountants or lawyers can mathematically calculate the Marital Standard of Living with two methods: an Income Approach and an Expense Approach.
With the income approach, we look at the gross income of the family for the past three, or maybe five years, before the date of separation to try to capture a sample of their lifestyle during this time. The best, and most accurate, way to do this is to look at tax returns because we assume they are true. We gather their tax returns for a certain number of years during the marriage, add up the income, and divide the total by the same amount of years to get the average. Then we let look at how many people lived on that average.
For example, if the average is $100,000 a year, and there is a wife, a husband, and two children, we first divide the $100k by 12 months. Assuming kids don’t spend as much as adults, a fair division would be to count each child as half of an adult, hence two children will account for one adult and two adults spouses will equal a total of three. We can now divide the $100,000 by 12 months and 3 adults, which is roughly $2,777 per person per month, which becomes the maximum average share of the income for the Spousal Support seeker.
The attorney will advise the judge that the person is entitled to no more than this amount per month based on their standard of living. However, the attorney can also argue that the person is expected to work at some point and the maximum amount should be offset by the amount of money the Spousal Support seeker can earn. For example, the attorney could argue that she can earn $1,000 a month, so the maximum amount their client should be paying each month is $2,777 minus $1,000 for a total of $1,777.
Now, there could to be all sorts of arguments about why the kids are being arbitrarily counted as half an adult in terms of expenses. And another argument will be the amount of years we should average. There is no law that says we should go back three, five, ten years, or one year. It is whatever amount of time the court finds sufficient to capture the standard of living. For most people, if you chart their income from the date of marriage to the date of separation, it is usually a straight line going up.
The attorney representing the person seeking Spousal Support will want to average just the past few years. The attorney representing the person paying Spousal Support will want to go as far back as possible to reduce the average. Furthermore, the attorney representing the seeker might want to argue that the other party is not being truthful on their tax return and they will want to present a different number supplied by their accountant based on marital standard of living.
In this case, an accountant will do a retroactive cash flow calculation. So, far example, if the Date of Separation is 2015, they would take their tax return for 2015 and adjust it for what is supposedly the real income. They will do the same for 2014 and 2013 and now they can find the average income based on those numbers and suggest a different number for Spousal Support. This is the Income Approach.
The Expense Approach is the other option. It is very time consuming and expensive because they have to go through receipts, credit card statements, bank statements, etc. They have to track every dollar the couple has spent over the past few years of their marriage. What they spend is Net Income. Thus, if we do an expense calculation, these are assumed to be numbers after taxes are paid.
With an income approach, on the other hand, we perform calculations based on numbers before they pay taxes and Spousal Support is paid gross. They are being paid the gross amount and they will pay their own taxes on it. So, if they are going to use an expense approach, they will need to adjust the income up. This means that once they agree on how much per month they were spending, they have to bump it up to a higher number hypothetically calculated, i.e. — based on the receiver’s taxable rate, how much support would be needed (gross) in order to end up with that number. As a consequence, we now have to determine what the receiver’s tax rate is and both sides will most likely disagree on what that taxable rate is because they don’t yet know what property each party will have which will affect their taxable rate.
Additional Spousal Support Factors
Age and health are additional factors. If someone is 70 years old, we can’t expect them to go back to work and argue Earning Capacity for them. What if they are paraplegic or have a medical condition that prevents them from working? The judge will consider these factors when determining the amount and length of Spousal Support. Another factor is the Assets and Liability of each party and what each party ends up with after the divorce. The judge will not rule on long term Spousal Support until they have ruled on the Division of Assets.
Balance of Hardship is a factor, as well. After all these factors are considered, the judge can ask whether the court is being fair to both parties. The judge can ask questions such as, “If I make this spouse pay this much, what will that do to them? What are their expenses? Do they have kids from another marriage? Are they going to be left with enough to pay for the bare necessities of life such as rent?” On the other side they will ask, “This spouse has passed the age of retirement with very little, yet the other has lots of property, etc.” Balance of Hardship is a way to ensure that the court is being fair to both sides.
Length of Marriage is another factor. In California, you have a short term marriage if you have been married for less than 10 years. In this case, the law presumes the length of time you will be paying or receiving Spousal Support is about half the length of the marriage. Therefore, if you were married for eight years, you will presumptively pay or receive Spousal Support for about four years.
If your marriage lasted more than 10 years, it is considered a long term marriage and there is no rule for how long your will pay or receive Spousal Support. That is not to say that it is indefinite. It can end if the person who receives Spousal gets remarried, or one spouse passes away, or “until further order of the court.” This means that it is not lifetime/permanent Spousal Support. Either side can go back to court if they want changes made to the order. If they don’t do anything and they are both alive and the receiver of spousal support is not remarried, everything remains the same.
Another factor is a Gavron Warning, which means the receiver of spousal support is expected to be self sufficient within a certain amount of time. Under a short term marriage, reasonable amount of time is defined as half of the length of marriage.