In December, I worked with a client who had the option to finalize his divorce in 2018 or wait until the new year. He chose to settle the case before Christmas because there was a major change coming to spousal support in any agreement or order dated after January 1, 2019.
So what is different about Washington spousal support in 2019? As of January 1, 2019 spousal support will longer be tax deductible. The spouse paying support will also pay the taxes. Prior to 2019 spousal support was tax deductible. Going forward we’ll need to calculate support in a whole new way.
If you’re trying to determine how much spousal support you should pay as part of a Washington divorce or legal separation you’ve come to the right place. This article covers topics like how to calculate support today, why the pre-2019 support rules still matter, when to use spousal support, and how long payments should last.
- What Is Spousal Support
- Maintenance: 2018 vs. Today
- Should You Ask For Maintenance
- Washington’s Maintenance Formula
- Determining A Fair Duration
- Modifying Or Terminating Maintenance
Spousal support, often referred to as alimony or in Washington State, spousal maintenance, is the legal award of payment from one spouse to the other for a set period of time. Maintenance can be agreed to or ordered by a court as part of a divorce, legal separation, or invalidity proceeding.
In Washington, maintenance has three main purposes. First, it can be used to provide for the financial health of a spouse after separation. Second, it can be used to give a spouse the resources to seek education and training, enabling that spouse to be financially independent. Third, it can be used as a tool to achieve a fair property division. In this third case, future support payments are used to offset asset transfers in the divorce or legal separation.
Keep in mind that there is no right to spousal maintenance. Unlike say child support, which is always awarded, spousal maintenance is awarded on a case-by-case basis.
There are five common types of spousal support.
Temporary support is used at the outset of a divorce or legal separation. It is meant to maintain the status quo for the family before the case is resolved. Prospective clients of mine are often worried about how they will pay bills if they file for divorce. Temporary support is the best tool to help them during the early stages of the divorce.
Rehabilitative support is used to fund training, schooling, or certifications for a spouse to earn an income. For example, money can be allocated for college tuition. Courts are more likely to award this form of maintenance when a spouse shows commitment to a program and can demonstrate the benefits.
Compensatory support is awarded to compensate a spouse who has sacrificed earning potential to support the other. For example, a spouse may have stayed home with the children while the other continued to work. The stay at home spouse will be disadvantaged in the job market and will not be able to earn nearly as much as the spouse who has been employed throughout the marriage. Therefore they are entitled to compensatory support.
Disability Support is used if a spouse is unable to support themselves due to disability. For example, a spouse could be ill or have be an accident, which presents them from working full time if at all. In these situations, a court will take into account the length of the marriage, the severity of the disability, funds available for support and the age of the parties.
Support via property settlement is used to balance out the property division. If one spouse receives more property than the other, they can agree to make payments to the other spouse to even out the division. This form of support is common when parties want to avoid transaction fees from sales or if a large asset has sentimental value, like a family cabin, and they prefer not to sell.
Like I said, the main difference about maintenance today is it is not tax deductible. The spouse making payments will pay taxes on that income even though it is transferred to their ex-spouse. The spouse receiving support will receive the money tax-free.
Since the spouse making payments is typically the higher earner, collectively more money should go to taxes. The bad news is that with more money going to taxes, the dollar value of new spousal support payments should decrease when compared to agreements in 2018.
One thing to know is that any maintenance agreement or divorce decree finalized before 2019 is not affected by the tax changes. Those agreements are grandfathered into the old tax rules. In those scenarios, the payer of support may choose to deduct the payments from gross income and the spouse receiving the support will pay taxes on the amount.
Spousal maintenance is not automatic or required, so should you request it? To determine if you are eligible for support, answer two questions. First, can you show a need for financial support? Second, does your spouse have the means to pay?
A financial need for support can be established numerous ways. For example, if you stayed home with the children and sacrificed career opportunities during the marriage you could show a need. The court will sometimes use support to give a spouse a chance to return to school and get the education necessary to obtain employment.
Also, medical issues can create a need. For example, if you struggle with chronic migraines you may not be able to work full time. An inability to work may be enough to establish a need for support.
Last, age may come into play. If you are near the age of retirement, then it may be more difficult to make significant progress with your career and earn a living income. The inability to establish yourself in a profession later in life could create a requirement for spousal support.
Of course you need to show that your spouse has the ability to pay. A court will see if one spouse makes considerably more than the other. Courts will also take into account if a spouse is nearing retirement and how that will affect the financial resources available.
Alternatively, if a spouse has considerable expenses it may be the case that they are unable to make spousal support payments and still support themselves. Every situation is unique.
Most people are surprised to hear that Washington does not have a formula to calculate spousal support. That being said, in 2018 the Washington State Bar Association’s family law training materials recommended using a formula provided by the American Academy of Matrimonial Lawyers (AAML).
The AAML is a nationwide organization of top family law attorneys. The organization assigned a commission to examine various approaches to determining spousal support throughout the country. After comparing calculations in multiple jurisdictions, the commission created a spousal support formula.
The AAML’s formulaic approach could be used to benchmark the length of time and the value of spousal maintenance. Because of the changes to the tax law that formula is no longer viable, but luckily we can look to how another state is adapting to the change.
In 2018, the State of Illinois used that same recommended AAML formula to determine spousal support. If you’re curious here’s that 2018 AAML formula:
Support = (Payor’s Gross Income * 30%) – (Payee’s Gross Income * 20%)
FYI: Support, when added to payee’s gross income, could not exceed 40% of the spouse’s combined gross income.
In 2019, Illinois changed its spousal support formula to this:
Support = (1/3) Payor’s Net Annual Income – (1/4) Payee’s Net Annual Income
FYI: Support, when added to Payee’s net income, cannot exceed 40% of the spouse’s net annual income
Since Illinois enacted this into law after using the same formula recommended by the Washington Bar Association I think it’s reasonable to follow their lead and use this formula to calculate your own maintenance payments in Washington.
Here’s an example of the new formula in action that you can use to ballpark what you should pay. First you’ll determine the amount of eligible maintenance. Then compare that payment against the 40% limit. In this example, Jane has agreed to pay support to John.
Jane’s Net Annual Income is $85,000
John’s Net Annual Income is $50,000
Amount of Eligible Maintenance
Jane’s Annual Net Income x (1/3) – John’s Net Annual Income x (1/4)
$85,000 x (1/3) = $28,333.33
$50,000 x (1/4) = $12,500
$28,333.33 – $12,5000 = $15,833.33
Determine the 40% Limit
(Jane’s Net Income + John’s Net Income) x 40% – John’s Net Income
($85,000 + $50,000) x 40% = $54,000
$54,000 – $50,000 = $4,000
In this example, the eligible maintenance is $15,833.33, but the 40% limit is less, totaling $4,000. Because the limit is less than the eligible amount, the limit applies. So John is only eligible for $4,000 in support per year.
The 40% limit kicks in any time it is less than eligible maintenance. Conversely, if the 40% limit had been, say $16,000, John would be eligible for the full maintenance amount of $15,833.33 per year because eligible maintenance is less than the limit.
Now that you’ve determined a dollar value you need to agree to a length of time.
If you speak to a Washington attorney, most will tell you to expect a 3 to 1 rule. Meaning for every three years of marriage you can expect to pay one year of spousal support. Of course every situation is unique, so you may be more comfortable agreeing to a time period based on a formula.
The previously mentioned AAML formula also included an easy way to determine duration of payment. Simply multiply the marriage length by the marriage length multiplier below.
Duration = Length of Marriage in Years * Marriage Length Multiplier
- Marriage Length Multiplier
- 0-3 years = .3
- 3-10 = .5
- 10-20 years = .75
- 20+ years = Permanent Spousal Support
Using the above values, say John and Jane were married for 12 years. The marriage falls in the 10-20 year window, so the multiplier is .75.
Duration = 12 years x .75 = 9 years
Alternatively, if the marriage had been for 5 years, the multiplier would be .5, since it falls within 3-10 years.
Duration = 5 years x .5 = 2.5 years
Washington courts differ from the AAML when it comes to permanent spousal support. Any marriage that’s lasted 25 years will likely trigger indefinite maintenance. The court will try to keep the parties in similar financial positions for the rest of their lives.
Maintenance can be modified if the financial situation of a party changes. This goes for both parties. For example, if the paying spouse has an injury, which prevents them from working, they can reduce maintenance. The receiving spouse may ask for additional maintenance if the same happens to them. However, this is not a simple process and the change in circumstances needs to be significant.
In order to adjust maintenance, there has to be an existing order in place. You won’t be able to ask for it down the road if it’s not awarded at the time of the divorce.
Also, you may agree that maintenance cannot be changed no matter the circumstances. Parties sometimes to agree to this to prevent the chance of further litigation or when maintenance is used to offset an asset imbalance during property division.
Maintenance will automatically end if a recipient is remarried. It will also end if either party dies. It’s often smart to purchase life insurance for the benefit of the spouse receiving maintenance.
Hopefully you now have a good grasp of how spousal maintenance works in Washington. If you have questions or would like more information about how Truce Law can help you, please call me at 206.409.4086 or send us an email.