How to Minimize Your Alimony Obligation in a Divorce
Alimony in Florida is based upon need and ability to pay. In other words, the court must determine (1) if the spouse requesting alimony has a need and (2) if the spouse paying alimony has the ability to do so. Need is determined by looking at the standard of living during the marriage and the financial resources available to each party, along with other relevant factors. A court usually does this by reviewing the financial affidavits and hearing testimony of the parties. However, the court must evaluate all sources of income available to the parties when evaluating whether alimony is appropriate. The failure to make the necessary arguments regarding income could result in a spouse paying an overstated alimony obligation.
1. Include income from all sources when calculating the spouse’s need.
In offsetting the need of the spouse requesting alimony, you must calculate all income, including the income from assets that will be distributed to that spouse. Pursuant to section 61.046(8), Florida Statutes income means “any form of payment to an individual, regardless of source, including, but not limited to: wages, salary, commissions and bonuses, compensation as an independent contractor, worker’s compensation, disability benefits, annuity and retirement benefits, pensions, dividends, interest, royalties, trusts, and any other payments, made by any person, private entity, federal or state government, or any unit of local government. United States Department of Veterans Affairs disability benefits and unemployment compensation, as defined in chapter 443, are excluded from this definition of income except for purposes of establishing an amount of support.”
This includes payments received from interest-generating retirement accounts. Adelberg v. Adelberg, 142 So. 3d 895, 899 (Fla. 4th DCA 2014); Niederman v. Niederman, 60 So. 3d 544, 547 (Fla. 4th DCA 2011). Income from retirement accounts can also be imputed to the spouse when determining alimony, if the principal of the account will not be invaded. For example, if a 401K has $100,000 and historically receives a 5% rate of return annually, then the spouse requesting alimony must reduce their need by $5000 annually or $416.66 per month. Many attorneys overlook this offset when determining the need of the spouse requesting alimony. While the amount of the offset will vary depending on the assets of the parties, this offset could significantly impact the alimony obligation.
2. Use Net Income When Calculating Alimony
When calculating the paying spouse’s ability to pay alimony, the trial court must use net income, not gross income. Attorneys and judges often fail to use net income when calculating alimony, which leads to alimony awards, which are grossly overstated. Given that the legal standard for alimony is ability to pay, net income is a much better measure of an individual’s ability to pay. Appellate courts have repeatedly held that alimony should be based on the net income of the payor. This was upheld by Kingsbury v. Kingsbury, 116 So. 3d 473 (Fla. 1st DCA 2013) and Topel v. Topel, 152 So. 3d 863, (Fla. 5th DCA 2014)(holding that the ability to pay alimony should be based on the party’s net income.).
3. Impute Income to Your Spouse
Income should always be imputed to an individual who is able-bodied and capable of working. Even if the spouse has not worked in ten or twenty years, it would be legal error for the trial court to fail to impute some level of income to that individual. Imputing income essentially means that the trial court makes a finding that based on the individual’s work history, education, training, and life experience they should be able to produce some level of income by joining the work force. When calculating alimony and child support, the court will pretend that the spouse is making this amount of income. This will offset any alimony obligation. For example, if your spouse has a monthly need for alimony of $3,500 per month and that spouse is imputed income of $36,000 per year, the spouse’s monthly need for alimony would be reduced by $3,000. In some cases it may be necessary to retain a vocational evaluator to evaluate the spouse requesting alimony and provide an expert opinion as to how much income should be imputed.Click to Calculate Estimated Alimony Payments for Florida
After considering all sources of income available to the requesting spouse and the ability of the paying spouse to pay alimony the court will determine an alimony amount sufficient to meet the needs of the requesting spouse, which the paying spouse is able to afford based upon his or her net income.