There are two types of Spousal Support: Temporary Spousal Support and Long Term Spousal Support.
Temporary Spousal Support can be better understood as “band-aid orders.” If a person cuts themselves and need stitches but they are not in the hospital yet, they clean up the wound, wrap it up the best as they can and then they eventually end up at the hospital where they can get proper care. Temporary Spousal Support is intended to help one spouse financially as much as possible until the court figures a proper solution. The court generally determines Temporary Spousal Support with the same computer program to calculate Guideline Child Support.
In California there is no such thing as Guidelines Spousal Support but nevertheless the case the law says that the judge has lot of discretion in deciding how to award Spousal Support.
“Generally speaking the point of Temporary Spousal Support is to keep status quo, i.e. keeping everything under control until such time that we complete discovery and we settle the case, until we get to trial. ”
The other way the other judges look at it is all Temporary Spousal Support is intended to meet the needs of the supported party on a temporary basis based somewhat upon their marital standard of living. That being said most judges use a computer program. The same program that tells the judge what is the guideline statewide number to pay monthly month for child support also recommends a Temporary Spousal Support amount. Generally over 90% of the time judges will just use the number that is in the computer system.
Therefore this suggests the way one can influence the final number is through the inputs for the program. Temporary Spousal Support, assuming the court more often than not will be using the Ex-Spouse or Dissomaster software to arrive at this number, is really going to be influenced primarily by the income that you put for each side, the property tax expense deduction, the interest deduction on a home, etc…There is a section of the program that requires the entry of the tax benefits that either party may have. The more tax benefits somebody has then the more they pay.
For example if a spouse earns $250,000 yearly you plug in the gross amount into the program and in the background the computer program is hypothetically calculating what is the Net Amount the person gets if they make. Due to the fact that the software performs Net Disposal Income calculations in the background, a tax deduction will lower their income. If they are able to write off the interest they pay on their mortgage and they get a deduction for property taxes that they pay, then this reduces their taxable income. Therefore it reduces their tax liability and there’s more in their pocket at the end of the day.
When you plug in a spouse income at $250,000 a year as gross income and then you put in all deduction on their side: 100% of the property taxes, you put on his side, 100% mortgage interest expense on their side, it will bumped up the amount of Spousal Support to pay because the program is bumping up their net disposable income due to having more tax benefits and paying less in taxes.
Besides tax deductions there are other factors. There are different ways in running those deduction because remember this is the middle of the divorce and we are running numbers based on today.
In the middle of the divorce, you have to ask yourself, for this next tax return? That is an import factor because you have to tell the Spousal Support computer program whether they are filing jointly, married, separately, as single people? They’re not single yet they may be filing single and again because it has to do with the deductions, it impacts the spousal support. The more tax benefits, the more spousal support to pay. Hence it is always an argument: what is their tax final filing status?
Further down with the program asks about deductions, so there may be a fight about who will get the deductions or on whose side to put the property taxes. Let’s assume for a moment an attorney puts the deductions on husband side because they represent the wife and they want to increase the Temporary Spousal Support amount. Great, but then the attorney that the husband needs to make sure that there’s something in the judge’s order that says because we put all the deductions on husband side, he is actually going to get them when he files his tax return for the next taxable year. So if we’re going to hypothetically assume 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 tax benefit one they turn around to file the tax return. The attorney will ask the judge to ensure the court gives that benefit to the guy, not just some hypothetical calculation. The same as true if you put it all on the wife sides so that you can reduce the amount of support that the husband pays, then to be fair you have to then ensure she gets those deductions on her return.
Here’s the next point, let say you have a spouse who doesn’t work and the other spouse works. Well the first spouse having no income, deductions mean nothing to them. If you have zero income then you have no income to reduce. So then the argument sometimes the attorney for receiver of Spousal Support makes is they do not want the deductions and they do not benefit them. Their client makes no money, however it is a benefit to the other guy, so put all the money on their side.
Then you flip it, what if the seeker of Spousal Support wants the house, now they own a home that has property taxes, and they pay interest on the mortgage. So the other way to decide whose side to deductions on is, who wants the house? Who is going to get the house? What if husband is living in the house and wife isn’t and he’s going to get the house? OK, maybe they put all the deductions on his side. However what if husband agrees the wife will get the house that they live in? Well then, she’s going to get the deductions.
Then there’s other point, who is actually paying the mortgage and the interest? Maybe that is the person who should get the benefit, if one spouse is paying spousal support, for the mortgage, the property taxes, they are going to want to be the one getting credit for these things.
This is generally how we Temporary spousal Support is affected if the judge uses the computer program.
Family Support is different from 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 and under one scenario you have a separate number of Child Support and a separate number for Spousal Support, then in another scenario you run different calculations and you 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 if they want more money it would make sense to agree the Family Support. The problem with Family Support is that, it is unallocated as to which part is Child Support and what part is Spousal Support. The reason that is a problem is Family Support is not deductible on the tax return. Spousal support is deductible, so the payor deducts it on their tax return. This means if you agree to the Family Support of $5000 a month, you may be asking for problems because later, after months of paying, when you get to the end of the case you still need to go back to the first payment you made for Family Support and fight about how much of the $5000 is Child Support and how much is Spousal Support. That is because of the spouse paying Family Support is going to want to take the benefits and the person who receives it is likely to say, “Wait a second, I didn’t know this whole time that I was supposed to pay taxes from some portion of the Family Support and I never file the tax return because I have no income. I was getting Family Support. So what are you telling me? I now have to go, basically tell the IRS that I didn’t pay the taxes I was supposed to pay them and pay penalties, etc?. No! I don’t want to do that, and I didn’t not keep any money to be able to pay the taxes, that’s not fair. I don’t want to do it.” That’s the problem with Family Support.
Long term Spousal Support is Spousal Support that either is in Settlement Agreement or one a judge orders at trial. Temporarily Spousal Support is ordered somewhere 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. We do not have a formula for long term support, it is basically a balancing of different factors with Family Code Section 4320. The law basically says that the judge must consider each one of those factors but it is up to the judge to decide how much weight to put on each factor. They do not have to treat every single factor equally, they only need to consider each of them. It’s a balancing task and there is no concrete way of putting the numbers into a computer program and get a result. In fact the law specifically says it is an abuse of discretion for a judge at the time of the trial to order Spousal Support long term based on what the computer program says. Therefore technically they are not suppose to look at the program. They are supposed to balance these factors.
What are the factors?
The income of each spouse is one. Their Earning capacity is another, that is, if one doesn’t work or works part time or is underemployed the court can still consider what they could make, if they were working, or working full time, or working at a job that meets their skills. The court can even say “we don’t care that you are not working, we cannot force you to work but, we can still ran the calculation based on a hypothetical income that you should be making or that you’re choosing to not make as much as you could.” For example there is the famous case of the 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, before you pay your mortgage and your bills. Therefore I am going to run your income based on hypothetical calculation.” This known as Imputation of Income, it goes back to Earning Capacity. How about the younger couple who’s getting divorce? One spouse is highly educated but they 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 back to work or get some kind of education, 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 are married. However they are not entitled to live beyond their marital standard of living. Note Marital Standard of Living is cut off at the Date of Separation, the Marital Standard of Living is generally the description of someone’s lifestyle: did they have a middle class, luxurious, middle class, standard lifestyle.
They can consider how big their house was, the kind of cars they drove, the kind of birthday parties they had for their kids, the types of designer purses they purchased, where they shopped, where they ate, whether they had multiple cars and the latest cars, did they have servants, or import tiles from Italy to make their house in the Newport Coast. Did they have a 11,ooo sq ft house and more.
Then we have forensic accountants or lawyers in some cases to actually mathematically calculate what the Marital Standard of Living was and there are two ways to do it: an income approach and an expense approach. Using the income approach we look at the gross income that flows into the family for the last 3 years, maybe up to 5 years before the date of separation to try and capture a sample of their lifestyle during this time.
The best and easiest way is to look at their tax return because we assume they are true. We gather their tax return for the past two to five years of your 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. Example if the average is $100,000 and let’s say there is a wife, a husband and their two children. First we divide the 100k by 12 months of the year. Assuming kids do not 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 be a total of three. We can now divide the $100,000 by (12 months * 3 adults), which gives us roughly $2,777 per person per month, which becomes the maximum share of the income for the Spousal Support seeker on average. 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 follow up with the fact 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 seekor can earn. For example the attorney could tell the judge she can at least earn $1,000 a month, so really the maximum amount their client should be paying is the $2,777 minus $1,000 each month.
Now there could to be all sort of arguments about why the kids are being arbitrarily counted as half an adult in terms of expenses. Another argument will be the amount of years we should average. There is no law that says we should go back five, or three, or 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 their date of marriage until their 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 will probably 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. The accountant will do a cash flow calculation retroactive. So far example if the Date of Separation is 2015, they would take their tax return for 2015 and they will 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.
The above is the income approach.
The other option is the expense approach. It is very expensive because they have to go through every receipts, credit cards statements, bank statements. They are literally going to track every dollar the couple has spent over the past few years of their marriage. Note what they spend is Net Income, hence if we are going to do an expense calculation, these are assumed to be numbers after taxes are paid. When they are doing an income approach on the other hand they will be performing calculations based on numbers before they pay taxes and Spousal Support is paid gross. They are being paid the gross amount and they pay their own taxes on it. So if they are going to use an expense approach they will need to adjust the income up. So what that means is once they agree on how much per month they are 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. By consequence we now have to find out what the receiver’s tax rate is and most likely both sides will disagree on what that taxable rate is. They are going to fight about that because they do not even know what property each party will, which affects their taxable rate.
There are several other factors.
Age and health are two other factors, and they make sense. If someone is 70 years old we cannot expect them to go back to work and we cannot 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 should be.
Another factor is the Assets and Liability of each side. 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 because they have to first find how much each party ended up with.
Another factor is Tax Consequence.
Balance of Hardship is a factor as well. Balance of Hardship is the balance of fairness, that is after all these factors the judge can look at the case and ask whether the court is being fair to both parties. The judge will 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 also ask “This spouse has passed the age of retirement with very little, yet the other has lots of property?, etc…” That is to say Balance of Hardship is a way to find whether the Court is being fair to both sides.
Length of Marriage is another factor. In California if you have been married for less than 10 years you have a short term marriage. In such 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 8 years, you will pay/receive Spousal Support for about four years “presumptively.” If you marriage lasted more than 10 years, it is considered a Long Term Marriage and there is no rule for how long your will pay/receive Spousal Support. That is not to say it is indefinite. If the person who receives Spousal gets remarried, or one spouse passes away, or “until further order of the court.” This means it is not a lifetime/permanent Spousal Support . The last part means it is on either side to come back to Court if they want changes made to the order. That is after the judge makes the order, if they do not 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, meaning 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.
There are more factors and if you have questions about Spousal Support, you can contact one of your attorneys and we will answer your questions. We offer a free consultation without obligation to anyone seeking legal representation.
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