A reader recently wrote to NJ.com, asking if he could use a lump sum to pay off his alimony commitment to his ex-wife. Financial planners weighed in with formulas, calculators and other advice, including the possible tax implications.
Nobody suggested consulting a New Jersey divorce attorney, or even mentioned making such an arrangement legally binding. Tax planners did note alimony is a tax-deductible expense for the payer and counts as taxable income for the spouse receiving the benefits.
However, that will not be true starting next year. As CNBC reported, the Tax Cut and Jobs Act of 2018 will turn more than 75 years of tax law on its head. Come Jan. 1, 2019, alimony will no longer be deductible for the payer, and taxes do not need to be paid on it by the recipient. While the change is not retroactive or expected to impact existing alimony agreements, there is some question whether having an agreement modified could trigger the new tax implications.
Beyond taxes, the reader’s question highlights a number of important issues involving spousal support. But in New Jersey, it’s the legally subjective nature of determining payments and the long-term obligation (or dependent relationship) that is a common consequence of some arrangements, which have major implications for both parties in a divorce.
Determining New Jersey Spousal Support
While New Jersey law uses a formula to determine child support, there is no set formula when it comes to determining alimony payments. Experienced divorce lawyers in East Brunswick know the terms and duration of an alimony agreement can have a significant impact on both parties for years to come.
Spousal support can be an emotionally-charged issue. As Fatherly magazine notes, variable income or job loss can have a significant impact (both positively and negatively), on a spouse’s ability to pay. Factors the court will review in determining alimony include the equitable distribution of assets in the divorce. In some cases, there can be some give and take, as a spouse accepts reduced benefits in exchange for a greater share of assets in the divorce. In other cases, monthly benefits will be vital as a spouse seeks to make a fresh start.
N.J.S.A. 2A:34-23(b), outlines statutory factors the court considers when determining spousal support, which include:
- Duration of marriage
- Standard of living during union
- Financial need and ability to pay
- Earning capacity
- Age and health of parties
- Parental responsibilities
- Financial history of marriage
- The equitable distribution of property
- Nature of temporary alimony being paid
Types and Duration of Alimony in New Jersey
Open durational alimony was known as permanent alimony prior to New Jersey law changing in 2014. Under the new alimony statute, Open Durational alimony is awarded in long-term marriages, which are defined as 20 years or longer. N.J.S.A. 2A:34-23(b) also states the term of alimony payments for limited-duration alimony shall not exceed the length of the marriage.
Under New Jersey law, a spouse at significant economic disadvantage may also be awarded temporary alimony while a divorce is pending. Known as pendent lite (or, “during litigation,”) these temporary support measures are meant to preserve the status quo, or to keep things the same, during a divorce.
Other types of alimony include rehabilitative, which aims to assist a spouse in job training to re-enter the workforce, and reimbursement alimony, which aims to reimburse a spouse for financial contributions made toward the career and training of the other spouse during a marriage.
Parties can request modification of alimony support upon change in circumstances, such as re-marriage or retirement. However, courts do not take modification of support orders lightly, and so it’s important that your East Brunswick divorce attorney secures a fair agreement from the start.
Call Rozin|Golinder Law, LLC today for a free and confidential consultation so you can determine what the best course of action is for your case.