Alimony: Getting the Best Deal

When negotiating for maintenance, be sure to look at the big picture. For instance, Ann Parsons didn't want to sell her house under any circumstances. Her lawyer told her that if her case were decided by a judge, the judge would order the house sold and would order her husband to pay her support. Ann's husband had a checkered job history, although he was well paid when he did work. Ann decided that rather than take any support, she would keep the house and get a job to pay the bills.

It wouldn't have been the right deal for everyone, but for Ann, it was. She decided what she really wanted was the house and looked at the big picture. She couldn't rely on her husband to pay her support, and the house would give her income when and if she was ever ready to sell it.

All situations are different, of course, and negotiating the terms of maintenance will vary from one couple to the next. However, as you go about cutting your own deal, make sure to follow these general guidelines:

• The deft negotiator will first figure out what he or she really wants and will cast a cold eye on the reality of the situation. Do you want to stay home with the kids or go back to work? Do you want the house or your share of the cash from its sale? Will your spouse be responsible enough to meet his or her obligations? Don't hold out for promises you know your spouse probably will not live up to.

• If you decide you want support above all else, you must determine your expenses, including recurring expenses and one-time costs due to the divorce. Will you have to move and have cable, telephone, and electricity installed? Or are you staying put, but you need some replacement furniture?

  Make a detailed list of these one-time and recurring expenses. Then, make a list of all income and savings. Look at your checks and credit card bills from the previous 12 months and get an average of your monthly expenses. You should, by the way, come to terms with the fact that you might need to use some of the savings for your one-time expenses.

  After you determine the monthly expenses, calculate your shortfall. Is the shortfall a sum you can realistically expect to receive from your spouse? If so, great. (Remember, you might have to pay taxes on the money, so subtract that from your spouse's payments.)

  If you know your spouse can't pay that much, look at your list again. Is there any place where you can compromise? Is there any way you can add to your income?

• You don't have to be Donald Trump to know that, when making a deal, you never present your bottom-line figure right away. Maybe you've played enough mind games with your spouse to last a lifetime, but you must play one more to get a fair shake. Start high (or low if you're the one who has to pay), and gradually move down (or up).

• If you're going to pay, avoid a deal that requires you to reveal your income every year. Of course, if you do have to reveal your income, make sure it's a mutual obligation, so you can see what your ex is making, too!

• Make sure that the duration of the alimony has a limited timeframe, if you are paying.

• Make sure you can afford to pay or accept what you're about to agree to. However guilty, angry, or in love with someone else you might be, do not agree to something you cannot afford.

• Consider using a lawyer to negotiate alimony. Even if you and your spouse have worked out everything, this area is usually so fraught with emotion that it is not a bad idea to let someone else handle it. If you have allocated limited funds for unbundled legal services, consider spending some of them here.

A Word of Warning

Make sure that spousal support payments are not crafted to end when a child comes of age. In general, the Internal Revenue Service will view such payments as disguised child support and might disallow the tax deduction for them. That is because the recipient spouse does not have to count that money as income (though the paying spouse doesn't get to deduct the payment from his or her taxable income). Although this might be good for the recipient (who now won't be taxed on the support), it is bad for the paying partner (who will now be unable to deduct the payments from his or her income), and it can wreak havoc on a deal.

In addition, reworking an agreement after it's been in place for a while can present a sticky problem because the IRS might go back to recharacterize what is taxable and what is not taxable. Presumably, the receiving spouse has been paying the taxes. You would now have to amend your returns and seek a refund. It is better to draft your agreement correctly the first time.

When Circumstances Change

We all know that life is a roller-coaster. One moment, you're flying high, on top of the world; the next, your world has been shattered to a thousand bits. Economies can crumble; companies can fold; real estate values can soar or plummet based on world events or the fates.

The roller-coaster is one reason why it might be best, in some states, to see a judge when negotiating spousal support. In a few states, if a judge decides your case, you will have an easier time changing a support award than if you and your spouse sign off on the payment in a separate agreement.

Why is that? According to the law in these states, when you sign an agreement, judges will assume that you thought of all the possible things that might happen in the future and that you accounted for them in the agreement. For example, if you were to pay support at the rate of $300 a week for five years, the agreement could have provided that if you lost your job, you would no longer have to make payments. If you didn't provide for that and you do lose your job, you can ask a judge to allow you to stop making the payments—but the judge might point out that you had your chance to include that in the agreement and now it's just too late.

When a judge decides your case after a trial, on the other hand, he or she does not account for future possibilities. The decision is based solely upon what the judge has heard in court. Therefore, if you or your spouse lose a job some years down the road, you'll have an easier time, in these states, convincing the judge to make a change than if you had signed an agreement.

Bottom line? Try to account for all possibilities when you sign an agreement, and always consult with an attorney.

Excerpted from The Complete Idiot's Guide to Surviving Divorce © 2002 by BookEnds, LLC. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.

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