After we have identified, valued and distributed marital assets and liabilities, the last step in equitable distribution is to award alimony, if necessary. If the property division is large, an alimony agreement or award is less likely. Unlike child support, there are no preset guidelines to help attorneys and judges determine alimony, so this is yet another place where having high quality counsel is essential.
Alimony comes in several flavors that we will talk about in a few minutes, but the basic characteristic are the amount, duration, modifiability, whether it survives death and/or remarriage and the tax consequences of the award. Permanent alimony is paid from one spouse to the other and continues until the death of either party or the remarriage of the recipient. It is deductible from the income of the person paying and includable as income to the person receiving it. The factors considered for an alimony award are called the “Armstrong Factors.” You can read more about these on our website, but they are pretty logical things such as the length of the marriage, the income, ages and health of the parties to name a few.
Permanent alimony is by no means extinct, but it is becoming much rarer because we want to reduce permanent sources of potential conflict for people who were once married. If circumstances change, permanent alimony awards can be increased, reduced or eliminated altogether. Permanent alimony awards invite future conflict and we usually try to avoid them- regardless of who we represent.
Lump Sum alimony is usually used to create a fair or equitable property division. True lump sum alimony is not taxable to the recipient or deductible for the person paying. It is a fixed amount that is not modifiable and is payable regardless of death or remarriage. The most common use of lump sum alimony is to balance equities in property settlements when an asset, such as a business, is not liquid. For example, if I own a laundry mat worth $200,000.00 and is also my sole source of income, it would not make sense to liquidate the business just because of a divorce. The court may order or I may agree to pay my wife $200,000.00 to represent her interest in the business. I may have to get a loan for this amount or I may have the opportunity to pay her out over time. It may not have to be $200,000.00 if I can transfer assets to her that she can keep. For example, maybe I keep the business and she keeps a $100k retirement account and then I pay her an additional $100k over the next 5 years. Does that make sense? Lump sum alimony is a tool to create equity.
Lump sum alimony can also be the preferred form of alimony because it is certain. For example, a case may be a classic permanent alimony case, but the paying spouse may prefer to pay lump sum alimony so he knows exactly what he is going to pay and for how long. Permanent alimony is more risky. The same holds true for a wife who may be receiving alimony. She may want to hedge against the possibility that her payments would end upon remarriage or could be modified in the future, so she would choose to seek lump sum alimony because it is certain.
Rehabilitative alimony is a little newer tool the courts are using to create equity. The idea of rehabilitative alimony is to give a spouse some money for a relatively short duration of time while they are taking the necessary steps to re-enter the workforce. We have typically avoided rehabilitative alimony because the definition has seemed to be less concrete than some of the more traditional forms of alimony. I can say the same thing for reimbursement alimony, which is awarded to a spouse who supported the other through school or whose contribution cannot be recognized through property division. While still very different, reimbursement alimony is more like lump sum alimony and rehab alimony is more like permanent alimony.
Hybrid alimony is probably the most common these days in Mississippi. It is a blending or hybrid of the characteristics of alimony, usually created by smart lawyers or judges trying to accomplish certain goals.