Understanding the numbers by calculating maintenance.

There are many areas to evaluate with your attorney when entertaining a divorce.  Calculating maintenance is one of them.  In January 2015 stricter guidelines on this topic were enforced. Over the next few weeks, we’ll present a few examples to help you simply understand  the numbers.

Maintenance, commonly known as alimony or spousal support, refers to support payments made by one ex-spouse to another following a divorce.  Sometimes, a court will even order one spouse to pay maintenance to the other while a divorce is pending.  On January 1, 2015, stricter guidelines went into effect for the calculation of maintenance for those parties with a combined gross income of less than $250,000 per year.

 Calculating Maintenance (Combined Gross Income of Less than $250,000 per year)

Amount

A court must first determine whether maintenance is appropriate pursuant to certain statutory factors, including, but not limited to, the income, needs and earnings capacities of the parties, the standard of living established during the marriage and the length of the marriage.

Once the court makes such a determination, it uses the formula below to determine the amount of maintenance:

30% of the payor’s gross income

–          20% of the payee’s gross income

Maintenance Amount

There is one major caveat: the calculated maintenance amount, when added to the payee’s gross income, cannot result in the payee receiving more than 40% of the parties’ combined gross income.  If it does, maintenance will be capped at an amount that equals 40% of the parties’ combined gross income minus the payee’s gross income.  Let’s look at one example.

Example 1 – Party A earns $100,000 per year and Party B earns $20,000 per year.  Applying the formula results in the following:

$30,000 (30% of Party A’s gross income)

–          $4,000 (20% of Party B’s gross income)

$26,000

The calculated annual maintenance amount would be $26,000.  However, does an award of $26,000, when added to Party B’s gross income of $20,000, result in Party B receiving more than 40% of the parties’ combined gross income?  No.  See below:

Total to be received by Party B:

$20,000 (Party B’s gross income)

+          $26,000 (calculated maintenance amount)

$46,000

Parties’ combined gross income:

$100,000 (Party A’s gross income)

+          $20,000 (Party B’s gross income)

$120,000

40% of the parties’ combined gross income: 40% of $120,000 = $48,000

$46,000, the total to be received by Party B, does not exceed $48,000, or 40% of the parties’ combined gross income.  As a result, the maintenance amount will be $26,000 per year.

 

In the next few weeks, we’ll present another example in which Party A earns $100k and Party B earns $40k.

Talk to your attorney and make sure you understand the numbers.

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