By guest author: Rosemarie Moeller
There has been much discussion in recent weeks about the legal implications the new alimony bill will have on current and future cases. However, changes to the law which impact the tenure and certainty of alimony are particularly detrimental to the payee spouse, increasing their need to understand the longer term implications of the settlement before signing a Property Settlement Agreement.
Consider the major components of the bill – Permanent alimony has been eliminated; there is a limitation on the duration of alimony for marriages of less than 20 years; more clarity around modification or termination of alimony upon retirement; the potential for retroactive relief in cases of changes circumstances; and potential of suspension or termination of alimony in cases of cohabitation – all of these threaten the income stream that the payee spouse needs to maintain a suitable lifestyle.
Merely obtaining an alimony settlement that meets the expenses necessary to allow the payee spouse to remain in the marital residence doesn’t set the payee spouse up for success in the longer term of what happens when the stream of alimony ends. What this means in financial terms is that the money is going to run out at some point and payee spouses have to plan for that eventuality.
Consider the demise of a 15 year marriage which involves a payee spouse, in their mid-30’s with three school age children who will not be attending college for at least another 8 years. Let’s say this spouse has been getting pendete lite support for the 2 year period during the divorce process. At most, the payee spouse will be awarded 15 years of alimony which can now be reduced by the pendete lite support if any, paid during a divorce proceeding. So in this case, by the time alimony ends, this payee will only be their late 40’s, too young to retire and perhaps out of the workforce too long to obtain gainful employment that will enable them to support themselves.
The duration of alimony is even threatened in marriages of over 20 years by the retirement or loss of employment of the payor spouse. What does the payee spouses financial life look like in the circumstance where the payor retires at normal retirement age of about 67? So a 50 year old who has been married for 30 years with emancipated children may have to plan for a change in their income about 17 years after their divorce. This is a challenging task when mortality tables expect that individual to live for another 30 years in retirement.
Another threat to post marital lifestyle is the prospect of alimony being suspended or terminated if the obligee spouse cohabits with another person. “Cohabit” is defined as involving a “mutually supportive, intimate personal relationship in which a couple has undertaken duties and privileges that are commonly associated with marriage or civil union but does not necessarily maintain a single common household.” Dating is defined as: “a process whereby two people meet socially for companionship, beyond the level of friendship, or with the aim of each assessing the other’s suitability as a partner in an intimate relationship or marriage”. Not a huge distinction between the two with the only remedy being that alimony will end either for a period of time or permanently as a result.
The bill makes significant changes to the alimony laws which are effective immediately upon signing and is applicable to current and future cases. Decisions made during this settlement period will affect the payee spouse for many years to come. The decisions need to be made in the context of long term planning which allocates alimony to both the short and long term needs of the payee spouse. Financial planning during the divorce process will give the payee spouse the guidance they need to make informed decisions that are pivotal to their post marital lifestyle and allow the payee spouse the confidence to sign the settlement having some indication of its longer term impact under various scenarios.
Rosemarie Moeller CFP®, CLU©, CFDP is Managing Director of Freedom Divorce Advisors a division of AEPG® Wealth Strategies located in Warren, NJ. She specializes in matters related to divorce. She can be reached at firstname.lastname@example.org or (908) 727 3594.