EP 12: What You Need to Know About Spousal Support, Also Called Alimony or Maintenance

Welcome to the twelfth episode of Divorce and Your Money Podcast. Your host, Shawn Leamon, MBA and a Certified Divorce Analyst, discusses the issue of spousal support, which is also called maintenance or alimony.

Alimony is the support that is paid to a spouse following a divorce. It usually becomes a factor when one spouse was the primary wage earner in the marriage, while the other earned or worked little. Alimony ensures that a spouse has some financial security in case of a divorce. Five different types of spousal support apply: temporary support, permanent support, rehabilitative support, lump sum, and reimbursement support.

Temporary support is provided during divorce proceedings that are not yet finalized. The purpose is to ensure that both spouses are able to live and cover their day-to-day needs while the divorce process is in progress. An agreement can be made by your attorneys to determine a reasonable amount that you will either pay or receive.

Permanent support is what most people think of when they consider alimony. It is the long-term support that one spouse will have to pay the other.

Rehabilitative support is a unique form of payment that often doesn’t apply. It is only paid for a certain period of time when an ex-spouse is attending school or receiving job training. This type of alimony will cover the costs if one ex-spouse is not yet back on their feet and starting to earn a living.

Lump sum support is when you receive or pay one large sum of money instead of ongoing payments. Spouses choose this option when they don’t really want to deal with each other and just want to finalize the divorce.

Reimbursement support is when you reimburse a spouse who received reimbursement for education expenses during the marriage. If you paid their bills while they attended college, you can request reimbursement once they are employed.

Each state has different rules regarding how alimony is calculated. All of them have a formula for this process, which isn’t necessarily consistent or simple. Online calculators are available to give you an approximate idea of how much you will receive or have to pay.

Some of the key points involved in determining what spousal support you will either pay or receive include financial status, living conditions and lifestyle, earning potential, age, health, and length of marriage. Tax implications are important to consider, which differs from child support, and is sometimes the primary source of income for some people after divorce. If you are receiving spousal support, it will be taxed like regular income, depending on where you live. If you are the one paying, you will get tax benefits and deductions, depending on your state. You will also need a financial expert or an accountant to guide you through the process.

It is one of the last items to be finalized in a divorce settlement. It is also subject to considerable negotiations and often becomes a contentious issue.  Be sure you understand the implications of what you are paying or receiving.

Key Learning Points

  • Alimony is support that is paid to a spouse following a divorce.
  • Alimony, spousal support, and maintenance are all the same thing.
  • The purpose of alimony is to ensure that a spouse can be provided for financially.
  • Five types of spousal support apply: Temporary, Permanent, Rehabilitative, Lump Sum, and Reimbursement.
  • Tax implications apply whether you give or receive alimony, depending on your state.

Thank you for listening to the Divorce and Your Money Podcast. We hope the show helps you through one of the most difficult periods of your life. Shawn Leamon is also the author of Divorce and Your Money: The No Nonsense Guide. One-on-one divorce coaching services are available at www.divorceandyourmoney.com.

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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.