If you are going through a divorce, you might be feeling anxious about how to deal with spousal maintenance. Spousal maintenance, also known as alimony, is a payment that one spouse makes to the other after the divorce to help them maintain a similar standard of living as they had during the marriage. The amount and duration of spousal maintenance depend on various factors, such as the length of the marriage, the income and assets of each spouse, the age and health of each spouse, and the earning potential of each spouse.

The stereotypical spousal maintenance case is where one spouse stayed home with the kids while the other spent a decade or more advancing their career and now that there is a divorce the stay-at-home parent is going to fall off a financial cliff (because they have little or no income potential) unless the career spouse helps them out financially.

While it may be tempting to rush through negotiations and reach a quick agreement, taking a methodical approach to budgeting and comparing incomes and expenses can save you time, money, and potential regrets down the line, especially when figuring out spousal maintenance.

The Pitfalls of Cutting Corners:

When faced with the daunting prospect of divorce negotiations, it’s only natural to want to expedite the process. However, hastily reaching an agreement without delving into the intricacies of your financial situation can prove to be penny wise and pound foolish. By avoiding the necessary work and disregarding a comprehensive assessment of incomes and expenses, you risk making uninformed decisions that may later backfire.

Fear as a Driving Force:

One of the main reasons individuals may be inclined to cut corners is the fear of what their spouse might ask for in terms of spousal maintenance. This fear often leads to a desire for a quick resolution, even if it means sacrificing a thorough understanding of your or their financial situation. However, succumbing to this fear can be counterproductive and end up costing you more time, money, and emotional energy in the long run.

The Benefits of Methodical Budgeting:

Who wants to create a budget?  Hardly anyone!  But ask any Family Law Attorney and they will tell you that budgets are the key to figuring out spousal maintenance.  Engaging in methodical budgeting and comparing incomes and expenses can yield numerous advantages during divorce negotiations.

Let’s take a closer look at some of the key benefits:

  1. Informed Decision-Making: By thoroughly understanding your financial circumstances, you gain the ability to make informed decisions regarding spousal maintenance. This ensures that any agreement reached is fair and reasonable, taking into account both parties’ needs and financial capabilities.
  2. Transparency and Trust: Demonstrating a commitment to a methodical approach fosters an atmosphere of transparency and trust during negotiations. By openly discussing and analyzing the financial aspects of the divorce, both parties are more likely to feel heard and respected, leading to a higher likelihood of reaching an amicable agreement.
  3. Long-Term Financial Stability: Rushing through negotiations without a comprehensive understanding of your financial situation may result in an unsustainable spousal maintenance arrangement. Taking the time to carefully evaluate incomes, expenses, and future financial prospects enables you to create a plan that promotes long-term financial stability for both parties involved.
  4. Minimized Legal Costs: While investing time and effort in methodical budgeting may seem time-consuming at first, it can significantly reduce overall legal costs. By proactively addressing financial concerns during negotiations, you reduce the need for repeated revisions and potentially costly legal interventions down the line.

Divorce negotiations are rarely easy, but by embracing a methodical approach to budgeting and comparing incomes and expenses, you can pave the way for a smoother and more satisfactory resolution. Rather than succumbing to the fear of what your spouse may ask for in spousal maintenance, investing the time and effort to fully understand the financial landscape can lead to a fair and reasonable agreement that benefits both parties in the long run. So, take a deep breath, roll up your sleeves, and embark on the journey towards a well-informed and amicable divorce settlement. Your future financial stability is worth the extra effort.

You should consult with a lawyer who can advise you on your legal rights and obligations regarding spousal maintenance. You should also consider working with a financial planner or Certified Divorce Financial Analyst (CDFA) who can help you create a realistic budget and plan for your future. You should also seek emotional support from your friends, family, or a therapist who can help you cope with the stress and anxiety of the divorce process.

By making informed and rational decisions about spousal maintenance, you can achieve a fair and reasonable outcome that respects both your and your spouse’s interests. You can also avoid unnecessary conflicts and drama that can prolong and complicate the divorce process. And most importantly, you can protect your well-being and happiness after the divorce.  Remember, being penny wise and pound foolish rarely pays off in the complex realm of divorce negotiations.

Carl Arnold is an experienced family law attorney and mediator. He currently focuses his practice on Family Law Mediation (including child-inclusive mediation), Collaborative Divorce and Custody Evaluations. His office is in Northfield, Minnesota and he works with people from all over the state using Zoom. Carl has been a long-time member of the Collaborative Law Institute.

Attorney/Mediator, Arnold Law and Mediation LLC, carl@arnoldlawmediation.com

144560286When contemplating the pros and cons of getting divorced, I doubt anyone ever puts in the pros column “easier to claim Social Security Spousal Benefits”. Some people may not even realize that they can get Social Security spousal benefits based on their ex-spouse’s work record. Below are some of the basics of claiming spousal benefits after divorce. Social Security spousal benefits, whether married or divorced, are calculated to be 50% of the spouse’s Primary Insurance Amount (PIA) at their Full Retirement Age (FRA). That is 50% of the benefit amount the ex-spouse would receive if they applied for benefits sometime after their 66th birthday (currently). In order to be eligible to claim spousal benefits on an ex-spouse’s work record, one has to be over age 62 and so does the ex-spouse. The marriage has to have lasted at least 10 years and one has to be divorced for 2 years. Finally, one cannot have remarried and it doesn’t matter if the ex-spouse has remarried. The advantage of being divorced and claiming spousal benefits is that the ex-spouse does not need to be receiving benefits. Married couples have to undertake some complicated paperwork machinations if one spouse wants to claim spousal benefits while the other spouse continues to work. A divorced person doesn’t even need to interact with their ex-spouse to claim benefits based on that person’s work record. One has to provide the ex-spouse’s social security number, a marriage certificate and a divorce decree to claim spousal benefits. The ramifications of claiming spousal benefits prior to your own FRA should be thoroughly understood before applying early. The same reductions in benefits that affect anyone applying for benefits before their FRA also apply to spousal benefits. For example, an ex-spouse claiming spousal benefits as early as possible – age 62, will have their benefit reduced by approximately 25%. Instead of receiving 50% of their ex-spouse’s PIA, they will receive approximately 35% of that benefit. Another important consequence of applying before one’s own FRA is that social security actually awards benefits based on one’s own work record. If the spousal benefit is greater than one’s own benefit, social security adds the difference to one’s own benefit instead of solely awarding spousal benefits. There is a misconception that one can claim spousal benefits prior to their FRA, let their own benefits continue to grow and switch to their own benefit later. Since social security is actually awarding one’s own benefit for a claim prior FRA, this strategy not possible. The good news is that one can do the switching strategy after their FRA. We have helped divorced working women who have reached full retirement age claim spousal benefits based their ex-husband’s work record. They can receive spousal benefits beginning at their FRA until age 70, while their own benefits continue to grow. By delaying claiming their own benefits until age 70, social security automatically increases their benefits 8% for each year they delay past their FRA. Continuing to work may increase their benefit even further. An additional advantage of waiting to claim benefits until after one’s FRA is that benefits will not be reduced if still working. Anyone claiming benefits prior to their FRA and earning over $15,000 in W-2 income from a job will likely see their benefits reduced. After one’s FRA, one can work without a reduction in benefit and as already mentioned may see their benefit increase. Social Security is a complex program, so whether divorced or married, it is best to meet with a financial advisor to discuss when to take social security before applying for benefits.
175383921In my last post “Getting Unmarried: Gray Divorces”  I wrote about the increasing number of divorces for those over the age of fifty. Also of note was how Gray Divorces have many of the same foundational issues as any divorce although there are some distinct differences. Regardless of the issues, a trained financial neutral plays a critical role in the collaborative process. Money matters can be a bed rock of tension in divorce cases.  Financial issues are often cited as a major reason for marriage breakups. A financial neutral assists couples in navigating their finances. They help with the two major financial components in divorce. One is the balance sheet (list of all assets and liabilities), and two the cash flow and support. So what does a financial neutral actually do you ask.  First and foremost a financial neutral is just that – an impartial expert on financial issues. They remain unattached to any particular outcome. A good financial neutral can be worth their weight in gold when it comes to helping couples navigate money issues in divorce. Financial neutrals help a couple gather and identify the financial information needed. I often hear from spouses the detail involved in gathering the financial information is something they have never experienced. The reason for this is all assets and liabilities, each and every one, is separately noted in the final decree so as to leave no doubt who gets what and who is responsible for what. Independent third party written documentation is needed to support each asset and liability. This information gathering is a part of the process that can’t be short circuited. Having said this, when information gathering is completed by a financial neutral it can save spouses a considerable sum. Think about it. You are paying one professional, the financial neutral, to complete this process vs. each spouse providing the same information to each of their attorneys who in a non-collaborative divorce will have to review and assimilate  all the information provided, ask questions of their clients, and then likely have to converse with the other spouse’s attorney. Financial neutrals can assimilate and organize this information in a streamlined manner with the couple’s cooperation. Usually financial neutral hourly rates are less and sometimes significantly less than attorney rates. Once all financial information is collected and organized the financial neutral creates a marital balance sheet listing each and every asset and liability. The marital balance sheet forms the basis for discussion as to how each asset and liability is allocated between spouses. In the collaborative divorce process, couples make their own decisions about asset and liability allocations to each spouse.   Couples must ultimately reach agreements on the balance sheet. The financial neutral along with each spouse’s attorney helps facilitate these discussions. The alternative in more traditional litigated divorce cases is someone else, a judge, makes decisions for the couple since they are not able to agree on their own. Financial neutrals help spouse’s asses their ability to meet their reasonable living expenses (cash flow). This part of the process includes analyzing income sources and estimating future living expenses. Generally spouses are asked to complete some sort of budget template. In my experience both as a financial neutral and a financial planner, I find most people do not care for the term budget. I do a fair amount of public speaking and when I ask people what they think of when they hear the word budget it usually has a negative impression like restrictive or confining. I have attempted to remove the word budget from my vocabulary as a result and replaced it with cash flow or spending guide.  Budgets tend to be backward looking while the words cash flow and spending guide are future oriented. Assessing income and expenses (cash flow) provides each spouse with a realistic look at their financial security moving forward. Financial security is the number one goal I hear that each spouse wants to achieve. No one has ever told me they want financial insecurity. A realistic look at cash flow for each spouse is critical to providing the financial security they seek. Here is a phrase I have used when having cash flow discussions. If your outgo is greater than your income, then your upkeep may be your downfall. Think about that for a moment. Better yet remember it, as it will serve you well no matter your financial stage in life. Yes the balance sheet with its listing of all assets and liabilities and the cash flow and support pieces form the two financial pillars of every divorce. Sometimes the financial issues can become very emotionally charged. A well-trained experienced collaborative financial professional along with the help of other collaborative team members can help keep spouses on track. I encourage couples to the extent possible to look at these decisions as business decisions. It’s easier said than done but in the end it usually is a business decision. I am a firm believer that each spouse and their family are far more important than any numbers on a balance sheet or cash flow report. In my book and in my work people always come first before numbers. There are other important financial issues a financial neutral can assist with. Watch for part II of “Getting Unmarried: Money and Divorce.” There I will talk about marital and non-marital property, analyzing tax implications of various scenarios for child support and/or spousal maintenance; analyzing property and business interests, debt pay off scenarios, and comparing pros and cons of using one asset over another. Is a collaborative divorce process right for you? If you or someone you know may be looking for a divorce alternative without court click on this link to learn more:  www.collaborativelaw.org
Resolution is in your handA recent article in Time Magazine called The End of Alimony discusses some of the potentially unfair and unrealistic outcomes that can result from the current family legal system. The example highlighted in the article discusses a second wife having potential responsibility to her new husband’s ex-wife for alimony payments. The article looks at both sides of the equation – the new wife having unforeseen and unwanted obligations and the first wife having financial struggles and dependence on this additional source of income. It is no doubt a complicated issue. Many issues in divorce are complicated. The challenge in court cases is often to balance the rights of the participants with the need for efficiency and structure in the law. Courts do not always have the time and resources to give every case the attention it needs to find unique and realistic resolutions. Unfortunately, there are rarely one-size-fits-all resolutions. Collaborative law provides an alternative. In divorce, the collaborative law process provides for unique outcomes that are tailored to the individual situation of the couple. A good collaborative team can gather the information needed and then take a 360 degree look at resolutions to take unforeseen circumstances into account. Where the courts may have formulaic outcomes in mind, collaboration can lead to outcomes that can change as circumstances change. Alimony or spousal maintenance, for example, does not necessarily need to end upon remarriage (as the law often presumes). Perhaps the parties agree to look at the realities of new partnerships and see if there are ways to find resolutions that take everyone’s interests into account? The resolutions may not be perfect, but they are reached together with all stakeholders at the table.
First vs. Second Wife Wow, the phrase “First vs. Second Wives” makes me cringe.  There is so much wrong with it, or at least so much to dislike or be uncomfortable about. Let me count the ways (Keep in mind that this is in the context of Spousal Maintenance). It implies that there will be another wife after the first, which is a fair assumption, but still.  It implies that the first and second wives will be at odds with each other over money, which is unfortunate and sad to think about.  It implies that the husband, at least in his first marriage, is the breadwinner. In our culture of perceived independence and self-sufficiency, it may strike us as dependent and therefore inconsistent with current cultural standards. It uncomfortably reminds us that many spouses, most likely the wife and often for good reasons, give up career and educational advancement, and so their future financial independence and self-sufficiency, to stay at home with children for the benefit of the greater family. Then, if they divorce, they are in big financial trouble without consistent and lengthy financial support from their ex. I’ve seen many couples divorce where the breadwinner doesn’t want to or just won’t acknowledge the homemaker’s non-financial contribution to the family and opportunity cost of being out of the workforce or taking a lower-paying, more flexible job.  I’ve also seen many cases where the homemaker never left home after the kids were older, when it would have been more appropriate to find employment, because re-entering the job market was likely the original marital intent. There is an interesting article in Time magazine’s May 27, 2013 edition titled “The End of Alimony” and a short radio segment, along eerily similar lines, on NPR titled “Alimony Till Death Do Us Part? Nay Say Some Ex-Spouses.”  The basic premise of each is that there is growing momentum (but I’m not aware of any such movement in Minnesota) to limit Alimony court awards, or what we in Minnesota call “Spousal Maintenance.” The irony cited is that while ex-husbands used to be the only ones against Alimony, now second wives are also organizing to do away with Alimony, which their husband’s are paying to their ex-wives.  The result, it is argued, makes for a pretty large constituency which legislators ignore at their own political peril. There is no Spousal Maintenance calculator in Minnesota.  Instead it is a case-by-case, facts-and-circumstances analysis. One of the hardest, and grayest, part of the law in divorce is Spousal Maintenance.  It often feels like pulling teeth to get a higher-earning spouse to even acknowledge that the lesser earning spouse has any reasonable financial need.  Striking a balance to reach a fair outcome is the key. Traditionally trained attorneys, in my opinion, often do a terrible job addressing Spousal Maintenance.  Just bringing it up is likely to start a battle that is out of proportion to the reasonableness of the request. That’s why Spousal Maintenance is a great issue to address with a Collaborative Divorce, because at the beginning of a Collaborative Divorce the attorneys and other professionals help the spouses identify their financial resources and shortfalls by analyzing their budgets in relation to their incomes.  They also help the lower earning spouse explore their future career options (including going back to school) and therefore their reasonable financial need.  The answer is not usually “yes” or “no”, in black and white.  The initial answer is almost always “let’s evaluate this”, which is appropriate given the complexity of the question and the importance of the answer.
MoneySpousal maintenance, or alimony, is one of the most difficult issues in divorce. How much? How long? Can it be modified? These are the questions that must be answered by divorcing couples. Faced with having to support two households rather than one, money is usually tight. Both parties wonder if they’ll have enough, creating fear all around. Clients ask me, “What would a judge do in my case?” The Minnesota spousal maintenance statute instructs the court to “consider “all relevant factors, including” and lists eight such factors. Predicting how a particular judge will apply the statute in a particular case is impossible. Looking at previous decisions in other cases involving the issue of spousal maintenance can also prove frustrating. Few cases are actually decided by the courts, and the facts in every case are unique, making comparison difficult. Minnesota is not alone in its lack of guidance on this issue. A recent article in the Wall Street Journal reported that several states are currently considering proposals to amend alimony laws. Some of the proposed changes include creating formulas to determine the amount and duration of spousal support. Others call for an end to permanent alimony altogether. While consistency and predictability are admirable goals, I question whether new legislation will produce fairer outcomes. Asking a judge to apply the law can be frightening. Having to live with a third-party’s decision can create resentment. So how can divorcing couples resolve this difficult issue without giving up control of the outcome? The Collaborative divorce process uses interest-based negotiation to guide discussion of spousal maintenance. A financial neutral (hired jointly by the parties) guides them, using the following steps:
  1. Help both parties identify their goals and interests
  2. Gather all relevant information regarding income and budgets
  3. Generate settlement options
  4. Evaluate settlement options
  5. Put the agreement into writing
The Collaborative process requires full disclosure of all financial information by both spouses and encourages honest, respectful discussion. Because both parties have actively participated in the creation of their support agreement, they can move forward with less fear and resentment. This process represents the best way I have found for divorcing couples to resolve this challenging issue. To learn more, visit the Collaborative Law Institute of Minnesota website.
KL1A0028When someone mentions divorce, where does your mind go?  Do the words “fight,” “bitter,” or “vicious” come up?  How about terms like, “teamwork,” “goals,” or “considerate?”  It’s interesting to an experienced divorce lawyer how often the expectations include the former terms, and how often, in Collaborative Divorce, the reality includes the latter concepts.

I was reminded of this recently when a client I represented in a Collaborative divorce five years ago sent me a note.  I have always remembered him because of the great shift in his attitude toward his wife by the time the case was over.  When we began his divorce, he stated in an early meeting that the couple’s property should be divided in his favor, since he had always earned more than his wife (which is NOT the way the law looks at it).  The statement was not well-received, either by his wife OR her attorney.

The couple had been married more than 30 years.  As the case drew to a close, it became obvious that her job at a prominent Minnesota corporation, her debt-free house, and the even division of their property and substantial retirement assets would provide for her just fine.  The only question left was spousal maintenance.  We often see a spouse who doesn’t need financial assistance waiving maintenance—in fact, often the couple mutually agree to take jurisdiction over maintenance away from the court altogether, for all time.  When I asked whether she had given any thought to waiving maintenance, she glanced at her veteran lawyer, then shyly said she would waive it.  In the next instant, we were all stunned to hear my nuts-and-bolts, cut-and-dried, professional engineer client say, in a voice of genuine warmth, “I don’t think you should do that.  You never know.  You might need it some day.”

Approaching the end of their marriage as a family-centered problem-solving exercise, rather than a combat, allowed this wife to give up a claim I would have assumed she would keep.  And it allowed her husband to decline her offer, in the interest of her potential long-term welfare, a gesture no one would have predicted.  Their mutual trust of each other, reaffirmed during their weeks of working together, ultimately allowed them both to make decisions that considered each other’s welfare as much as their own.