Alimony – To Pay or Not To Pay?

Next to child custody, alimony is the most hotly contested issue if you are divorcing in Utah.  Why? Because there is no formula or calculator to determine the amount of alimony.  Instead, alimony is based on multiple factors, which can be highly subjective.  In Utah, the primary purposes of alimony are (1) to get the parties as close as possible to the same standard of living that existed during the marriage; (2) to equalize the standards of living of each party; and (3) to prevent the recipient spouse from becoming a public charge.”[1]  Alimony is not fashioned to provide for only the basic needs of the recipient spouse but should consider the parties’ standard of living enjoyed during the marriage as closely as possible.[2]  While this calculation may seem relatively easy, there is broad discretion when figuring out a recipient spouse’s needs and how long alimony should be paid.

The Utah legislature has identified seven factors[3] that must be considered when determining whether to award alimony with the primary three factors, often referred to as the “Jones factors,” requiring the examination of “(i) the financial condition and needs of the recipient spouse, (ii) the recipient’s earning capacity or ability to produce income; and (iii) the ability of the payor spouse to provide support.”[4]  To determine these factors, each spouse must complete a court-approved Financial Declaration that includes among other things, a monthly budget of expenses.  Certain financial documentation must also be exchanged including income verification documents, bank statements, and credit card statements.

 

Calculating the Needs of the Recipient Spouse and Payor Spouse’s Ability to Pay

It is common that a spouse’s circumstances will be different after the couple separates. For instance, one spouse may move in with his or her parents to avoid incurring any additional housing costs during the pendency of the divorce proceeding.  However, when calculating alimony, a couple is to look to the standard of living prior to separation rather than after separation.  The standard of living is based on the monthly expenditures.  So it is important for each spouse to be thorough when preparing their monthly budget.  It is advisable to review bank and credit card statements from the 6 to 12 months prior to your separation.  However, in most cases, a divorcing couple is not going to be able to maintain the standard of living during the marriage because there simply will not be enough money to go around.  In that situation, calculating alimony then turns to equalizing the standards of living between the parties so that each party has close to the same cash flow each month.

Each spouse needs to complete a budget to determine how much each spouse needs to live.  The spouses’ budgets will likely be different based on the expenses that the spouse will have post-divorce or the amount of time the children will be with each parent.  It is possible that one spouse will agree to be responsible for paying the marital debt after divorce.  That will obviously increase that spouse’s monthly expenses and decrease the other spouse’s expenses.  When completing the budget, it is important to include all expenses.  The court-approved Financial Declaration form is not an exhaustive list of expenses.  For instance, you will want to include such things as travel, grooming, pet expenses, gym memberships, tax preparation/accounting fees, etc.  These categories are missing from the court-approved Financial Declaration form but should be added if these are expenses incurred during the marriage.

If an expense was incurred during the marriage but will no longer exist after the divorce or the expense will be reduced in the future then that expense should be eliminated or adjusted in your monthly budget.  Many expenses will need to be adjusted.  For instance, if you are not the spouse that provides health insurance, it will be important for you to get quotes on how much your health insurance will be post-divorce since you will not be able to remain on your spouse’s health insurance.  If you have an older vehicle that will likely need to be replaced in the near future then you will likely want to include a reasonable amount for a future loan payment to replace that vehicle.  You will want to include student loan payments.  Student loans are typically the responsibility of the spouse that acquired the loan, regardless of whether it was incurred during the marriage to pay for family expenses.  If you typically contributed to retirement and other savings plans, those expenses can also be considered.

When determining future housing expenses, each party should do the research to determine what that amount will be since it will likely change.  If one spouse intends to keep the marital residence but will be required to buy out the other spouse’s interest, the mortgage payment will go up.  Or if you intend to sell your home, you will want to figure out what funds you will have for a down payment, the home price range that you can afford, and the amount of your mortgage payment.  There is a wide range of mortgage calculators that you can use to help with this process.  Also, depending upon the amount of time the children are spending with each parent, budgets for each parent may be different.  Lastly, if the budgets are contested, it will be critical to gather the financial documentation to support the amount of claimed expenses.

Depending upon the complexity of your situation, you might want to consider hiring a forensic accountant or certified divorce financial advisor to help review your financial records and create your budget.  Accurately creating your budget can feel overwhelming but it is one of the most important tasks to complete in your divorce.

 

Determining Incomes

Determining the incomes of each spouse can be relatively simple if you both worked during your marriage but there are a few principles that are often misunderstood.  The  Utah child support statute provides that child support is based on a 40-hour workweek.  However, if a spouse has historically worked overtime or received bonuses then that additional income should be included when calculating that spouse’s gross monthly income.

If the recipient spouse remained home to be a full-time caretaker for the children but is capable of working, then that spouse will likely be imputed income.  The question that must be answered is what is that spouse capable of earning?  Any income imputation is based on education, work history, occupation qualifications, employment opportunities, and the prevailing earnings for persons of similar backgrounds in the community.[5]

Determining incomes for a spouse who is self-employed can also be a challenge since the income reported on tax returns is undoubtedly less than what the actual gross income is.  For the self-employed, gross income is “calculated by subtracting the necessary expenses required for self-employment of business operation from gross receipts.”[6]  However, when calculating the necessary expenses, you want to make sure that you are not double-counting that expense.  Many expenses are commonly used for both business and personal purposes.  For instance, if a car loan or cellphone is paid by the business then that same expense should not be included in the self-employed spouse’s personal monthly budget.  Another approach, which was adopted in the Miner case, is to divide the expense in half applying one half of the expense as a reasonable business expense and the other half considered a personal expense.  Determining whether an expense is a necessary business expense or a personal expense is based on whether that expense is “necessary to allow the business to operate at a reasonable level.”[7]

 

How Long Should Alimony Be Awarded

Once alimony is calculated then the length of alimony must be determined.  The Utah “legislature has set an outer boundary on the length of alimony awards, mandating that, in the absence of extenuating circumstances, alimony may not be ordered for a duration longer than the number of years that the marriage existed.  But there is no inner boundary on the length of an alimony award.”[8]  Alimony can be paid for a shorter period of time, or the alimony award may taper off gradually.  This is often referred to as “rehabilitative alimony.”  “Rehabilitative alimony is a remedy intended to ease the recipient spouse’s financial adjustment period.”[9]  This is often considered appropriate “where the recipient spouse is of an age and in possession of employment skills that make self-sufficiency likely.”[10]  Rehabilitative alimony may be awarded to allow sufficient time for the recipient spouse to return to college and earn a higher degree.  Thus, increasing that spouse’s earning capacity and ability to provide for his or her own monthly needs.  Alimony also terminates upon the remarriage or cohabitation of the recipient spouse and the death of either spouse.

 

Conclusion

Determining alimony is a complicated issue.  If you have more questions, feel free to contact Diana Telfer or other Clyde Snow family law practitioners at (801)322-2516.

 

[1] See Rule v. Rule, 2017 UT App 137, ¶ 14, 402 P.3d 153.
[2] Id.
[3]
[4] Miner v. Miner, 2021 UT App 77, ¶ 16.
[5] Vanderzon v. Vanderzon, 2017 UT App 150, ¶ 63 (quoting Utah Code § 78B-12-203(7)(b).
[6] Utah Code § 78B-12-203(4).
[7] Barrani v. Barrani, 2014 UT App 204, ¶¶ 15-16, 334 P.3d 994.)
[8] Miner, 2017 UT App 77, ¶ 91 (quotation simplified).
[9] Id. At ¶ 92.
[10] Id.