What is Rehabilitative Alimony?

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Alimony (also referred to as spousal support) is the money that one partner is ordered to pay the other during and after a divorce. There are multiple types of alimony, including rehabilitative, temporary, permanent, and reimbursement. The laws regarding alimony vary among states, but for the most part, alimony is paid by the financial earner in the marriage to the spouse who cannot support himself or herself outside of the marriage.

What is Rehabilitative Alimony?

Rehabilitative alimony is support paid from one spouse to the other for a temporary, fixed period—or until a specific set of circumstances or conditions are met. Often, rehabilitative alimony is paid from a working spouse to one who has given up his or her job to stay at home and take care of the children. The timeline for these payments is determined by the receiving spouse’s plan for financial independence. This plan may include education or job training for the spouse to reenter the workforce. In other words, rehabilitative alimony can be ordered for a period of years.

The payment of rehabilitative alimony is subject to change, depending on the circumstances of both the payer and the receiver. The timeline for payment may change unexpectedly if, for example, the payer loses his or her job, becomes disabled, or retires. In this instance, it may not be possible for the paying spouse to continue giving money to the receiving spouse. Payments can also stop if the receiving spouse gets a job, the children go to school or turn 18, or the spouse remarries.

Who is entitled to rehabilitative alimony?

Rehabilitative alimony is granted to the spouse who has willingly given up a career or needs time to become self-supporting. Having given up work to raise children or care for an aging parent during the marriage are circumstances in which rehabilitative alimony may be given. This situation allows the spouse to maintain the standard of living experienced during the marriage until he or she can be self-supporting.

What are the factors for calculating alimony payments?

While the factors determining the length and amount of rehabilitative alimony payments vary from state to state, relevant conditions for most states include the length of the marriage, the ages of the children, and the education and job experience of the receiving spouse. These factors determine the earning power of the receiving spouse, as well as the ability and timeframe for the receiver to gain financial independence.

If a timeline can be worked out between both parties, rehabilitative alimony may be paid until the specified period ends or circumstances change (causing the need for a review of the terms of alimony payments). If an arrangement cannot be reached by a written agreement between the spouses, a family law judge will determine whether or not alimony is owed from one partner to the other (and how much). Your age, ability to enter the workforce, and physical and emotional health are other factors that can determine the length and amount of rehabilitative alimony you receive.

How does rehabilitative alimony affect my taxes?

Taxes are a crucial part of financial planning after a divorce. If you are the receiver of rehabilitative alimony, the payments you receive are taxed as income. But if you are the paying spouse, rehabilitative alimony is tax-deductible. All alimony must be paid in cash. Services and property transfers do not count toward alimony payments. However, rehabilitative alimony can include payments made to a third party on behalf of the receiving spouse. For example, tuition can count toward alimony payments.

Final thoughts

Rehabilitative alimony is a short-term way to help a spouse who has given up his or her career  become financially independent and self-supporting. When coming up with a timeline for the payments of rehabilitative alimony, it is important for the receiving spouse to have a financial plan, so you can support yourself after the payments end. Your budget for incorporating rehabilitative alimony will need to include the decrease and the end of payment, as well as the potential for circumstances to change.

Alimony can be emotionally difficult if the payer is reluctant or the receiver does not have a plan. Talk to your lawyer about the laws regarding alimony in your state, especially how it is calculated and the reasons why it may change. In some cases, rehabilitative alimony may be paired with other types of spousal support.

Shawn Leamon, MBA, CDFA

Dallas, Texas

Shawn C. H. Leamon is Managing Partner of LaGrande Global, a firm that helps successful families manage large financial transitions like divorce, inheritance and selling a business.

He earned his Bachelor of Arts from Dartmouth College, double majoring in Economics and Philosophy, and his Masters in Business Administration at Spain’s IE Business School.

Before founding LaGrande Global, Shawn helped manage $1.1 billion in client assets at Bernstein Global Wealth Management. He also worked as a credit research analyst at J.P. Morgan. He is a Certified Divorce Financial Analyst, and he has been an advisor to numerous high-stakes divorce cases.

Shawn is the author of two well-received finance books: Managing Private Wealth: Principles, and Divorce and Your Money: The No-Nonsense Guide, both published in 2016.

In his spare time, Shawn is an ultra-endurance athlete and has competed in events as long as 24 hours. He is an Eagle Scout and a member of the Alumni Board of Greenhill School.